The ACIT, Circle-5(2), Ahmedabad V. M/s. River View Hotels, Ahmedabad

ITA 1799/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8157 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASHUNDHARA UPMANYU
• Assessee Lawyers: P M PATEL
• Keywords: Depreciation; Capital expenditure
• Section: 10AA; 32; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .. , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO.1799/AHD/2016 ( / ASSESSMENT YEAR : 2012-13) THE ACIT CIRCLE-5(2) AHMEDABAD / VS. M/S.RIVER VIEW HOTELS RIVER VIEW BUILDING NEHRU BRIDGE WEST END CORNER NAVRANGPURA AHMEDABAD & ./ ./ PAN/GIR NO. : AAGFR 6981 B ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &), / APPELLANT BY : MS.VASHUNDHARA UPMANYU, CIT-DR *+&)-, / RESPONDENT BY : SHRI P.M. PATEL, AR .-/ / DATE OF HEARING 23/04/2018 0123-/ / DATE OF PRONOUNCEMENT 06/06/2018 / O R D E R PER MS. MADHUMITA ROY JM: THE INSTANT APPEAL FILED BY THE REVENUE IS DIREC TED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), A HMEDABAD-5 [CIT(A) IN SHORT] DATED 21/04/2016 ARISING OUT OF THE ASSESSMENT ORDER ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 2 - UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINA FTER REFERRED TO AS 'THE ACT') DATED 27.03.2015 FOR THE ASSESSMENT YE AR (AY) 2012-13. 2. THE SOLE GROUND HAS BEEN RAISED BY THE REVENUE I N ITS APPEAL READS AS UNDER:- (1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.6,30,72,180/- MADE ON ACCOUNT OF DIS ALLOWANCE OF DEDUCTION U/S.35AD AS THE ASSESSEE FIRM DOES NOT FU LFILL THE CRITERIA TO AVAIL THE DEDUCTION U/S.35AD OF THE I.T.ACT. 3. THE SHORT FACTS OF THE CASE ARE THAT THE AS SESSEE-FIRM IS ENGAGED IN THE BUSINESS OF HOTEL. THE YEAR UNDER SCRUTINY WAS THE FIRST YEAR OF COMMENCEMENT OF ITS HOTEL BUSINESS. DURING THE YEA R UNDER SCRUTINY, IT HAD ACHIEVED TURNOVER OF RS.52,81,068/- AND HAD BUS INESS LOSS OF RS.3,02,96,276/-. THE ASSESSEE HAS CLAIMED DEDUCTI ON U/S.35AD OF THE ACT. IT IS RELEVANT TO MENTION THAT THE ASSESSEE HAS COMMENCED ITS OPERATION OF BUSINESS W.E.F. 17.11.2011 UNDER THE B RAND NAME ALWAYS RIVER VIEW HOTEL. THE ASSESSEE THEREAFTER APPLIED FOR CATEGORIZATION AS THREE-STAR HOTEL BEFORE THE MINISTRY OF TOURISM UND ER THE AEGIS OF GOVERNMENT OF INDIA ON 07.06.2013. SUCH CLASSIFIC ATION AS A THREE-STAR HOTEL, WAS AWARDED BY A LETTER DATED 24.09.2013 IS SUED UNDER THE SIGNATURE OF THE REGIONAL DIRECTOR, MINISTRY OF TOU RISM FOR THE PERIOD OF 11.09.2013 TO 10.09.2018. ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 3 - 4. THE AO REJECTED THE CLAIM OF DEDUCTION AS MADE B Y THE ASSESSEE ON THE PREMISE THAT THE STAR CERTIFICATE ISSUED BY THE TOURISM DEPARTMENT DATED 24.09.2013 IS BEYOND AY 2012-13. 5. THE LD.CIT(A) ALLOWED THE APPEAL PREFERRED BY TH E ASSESSEE AGAINST SUCH ORDER ALLOWING THE DEDUCTION AS PRAYED FOR BY THE ASSESSEE UNDER S.35AD OF THE ACT ON 21.04.2016. 6. AGAINST THE SAID ORDER DATED 21.4.2016 PASSED BY THE CIT(A), THE REVENUE HAS COME UP IN APPEAL BEFORE US. 7. THE LD.AR RELIED UPON THE ORDER PASSED BY THE CI T(A) AND ALSO REITERATED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A ) AND PRAYED FOR DEDUCTION AS MENTIONED HEREINABOVE U/S.35AD OF THE ACT. ON THE OTHER HAND, THE LD.DR VEHEMENTLY OBJECTED T O THE SUBMISSION MADE BY THE LD.AR AND RELIED UPON THE OR DER PASSED BY THE AO IN DISALLOWING THE DEDUCTION CLAIMED BY THE ASSE SSEE. 8. WE HAVE HEARD BOTH THE PARTIES. WE HAVE ALSO PE RUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE ORDERS OF THE LD.CIT(A) AND LD.AO AS WELL. THE AO REJECTED THE CLAIM OF THE ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 4 - ASSESSEE SINCE THE STAR CERTIFICATE ISSUED BY THE T OURISM DEPARTMENT DATED 21.09.2013 IS BEYOND AY 2012-13. 9. THE MOOT QUESTION IN THIS CASE IS THIS THAT AS T O WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.35AD AS PRAYE D FOR. SECTION 35AD OF THE ACT WHICH READS AS FOLLOWS:- DEDUCTION IN RESPECT OF EXPENDITURE ON SPECIFIED BU SINESS. 35AD. (1) AN ASSESSEE SHALL BE ALLOWED A DEDUCTION IN RE SPECT OF THE WHOLE OF ANY EXPENDITURE OF CAPITAL NATURE INCURRED, WHOLLY AND EXCLUSIVELY, FOR THE PURPOSES OF ANY SPECIFIED BUSINESS CARRIED ON BY HIM DURING THE PREVIOUS YEAR IN WHICH SUCH EXPENDITURE IS INCURRED BY HIM : PROVIDED THAT THE EXPENDITURE INCURRED, WHOLLY AND EXCLUSIVE LY, FOR THE PURPOSES OF ANY SPECIFIED BUSINESS, SHALL BE ALLOWED AS DEDUCTI ON DURING THE PREVIOUS YEAR IN WHICH HE COMMENCES OPERATIONS OF HIS SPECIFIED BUSI NESS, IF ( A ) THE EXPENDITURE IS INCURRED PRIOR TO THE COMMENCEME NT OF ITS OPERATIONS; AND ( B ) THE AMOUNT IS CAPITALISED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE ON THE DATE OF COMMENCEMENT OF ITS OPERATIONS. (1A) [***] (2) THIS SECTION APPLIES TO THE SPECIFIED BUSINESS WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : ( I ) IT IS NOT SET UP BY SPLITTING UP, OR THE RECONSTRUC TION, OF A BUSINESS ALREADY IN EXISTENCE; ( II ) IT IS NOT SET UP BY THE TRANSFER TO THE SPECIFIED BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE; ( III ) WHERE THE BUSINESS IS OF THE NATURE REFERRED TO IN SUB-CLAUSE ( III ) OF CLAUSE ( C ) OF SUB-SECTION (8), SUCH BUSINESS, ( A ) IS OWNED BY A COMPANY FORMED AND REGISTERED IN INDIA UNDER THE COMPANIES ACT, 1956 (1 OF 1956) OR BY A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR A CORPOR ATION ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT; ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 5 - ( B ) HAS BEEN APPROVED BY THE PETROLEUM AND NATURAL GAS REGULATORY BOARD ESTABLISHED UNDER SUB- SECTION (1) OF SECTION 3 OF THE PETROLEUM AND NATURAL GAS REGULATORY BOARD ACT, 2006 (19 OF 2 006) AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE IN THIS BEHALF; ( C ) HAS MADE NOT LESS THAN [SUCH PROPORTION OF ITS TOTAL PIPELINE CAPACITY AS SPECIFIED BY REGULATIONS MADE BY THE PETROLEUM A ND NATURAL GAS REGULATORY BOARD ESTABLISHED UNDER SUB- SECTION (1) OF SECTION 3 OF THE PETROLEUM AND NATURAL GAS REGULATORY BOARD ACT, 20 06 (19 OF 2006)] AVAILABLE FOR USE ON COMMON CARRIER BASIS BY ANY PERSON OTHER THAN THE ASSESSEE OR AN ASSOCIATED PERSON; AND ( D ) FULFILS ANY OTHER CONDITION AS MAY BE PRESCRIBED; [ ( IV ) WHERE THE BUSINESS IS OF THE NATURE REFERRED TO IN SUB-CLAUSE ( XIV ) OF CLAUSE ( C ) OF SUB-SECTION (8), SUCH BUSINESS, ( A ) IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A C ONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR CORPORAT ION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL O R STATE ACT; ( B ) ENTITY REFERRED TO IN SUB-CLAUSE ( A ) HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT O R A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR DEVELOPIN G OR OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAININ G, A NEW INFRASTRUCTURE FACILITY. ] [(3) WHERE A DEDUCTION UNDER THIS SECTION IS CLAIME D AND ALLOWED IN RESPECT OF THE SPECIFIED BUSINESS FOR ANY ASSESSMENT YEAR, NO DEDU CTION SHALL BE ALLOWED UNDER THE PROVISIONS OF 33 [ SECTION 10AA AND] CHAPTER VI-A UNDER THE HEADING 'C. DEDUCTIONS IN RESPECT OF CERTAIN INCOMES' IN RELATION TO SUCH SPECIFIED BUSINESS FOR THE SAME OR ANY OTHER ASSESSMENT YEAR.] (4) NO DEDUCTION IN RESPECT OF THE EXPENDITURE REFE RRED TO IN SUB-SECTION (1) SHALL BE ALLOWED TO THE ASSESSEE UNDER ANY OTHER SECTION IN ANY PREVIOUS YEAR OR UNDER THIS SECTION IN ANY OTHER PREVIOUS YEAR. (5) THE PROVISIONS OF THIS SECTION SHALL APPLY TO T HE SPECIFIED BUSINESS REFERRED TO IN SUB-SECTION (2) IF IT COMMENCES ITS OPERATIONS, ( A ) ON OR AFTER THE 1ST DAY OF APRIL, 2007, WHERE THE S PECIFIED BU SINESS IS IN THE NATURE OF LAYING AND OPERATING A CROSS- COUNTRY NATURAL GAS PIPELINE NETWORK FOR DISTRIBUTION, INCLUDING STORAGE FACILITIES BEIN G AN INTEGRAL PART OF SUCH NETWORK; [***] ON OR AFTER THE 1ST DAY OF APRIL, 2010, WHERE THE S PECIFIED BUSINESS IS IN THE ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 6 - [( AA ) NATURE OF BUILDING AND OPERATING A NEW HOTEL OF TWO - STAR OR ABOVE CATEGORY AS CLASSIFIED BY THE CENTRAL GOVERNMENT; ( AB ) ON OR AFTER THE 1ST DAY OF APRIL, 2010, WHERE THE S PE CIFIED BUSINESS IS IN THE NATURE OF BUILDING AND OPERATING A NEW HOSPITAL WIT H AT LEAST ONE HUNDRED BEDS FOR PATIENTS; ( AC ) ON OR AFTER THE 1ST DAY OF APRIL, 2010, WHERE THE S PECIFIED BUSINESS IS IN THE NATURE OF DEVELOPING AND BUILDING A HOUSING PROJEC T UNDER A SCHEME FOR SLUM REDEVELOPMENT OR REHABILITATION FRAMED BY THE CENTR AL GOVERNMENT OR A STATE GOVERNMENT, AS THE CASE MAY BE, AND WHICH IS NOTIFI ED BY THE BOARD IN THIS BEHALF IN ACCORDANCE WITH THE GUIDELINES AS MAY BE PRESCRIBED; [***]] [( AD ) ON OR AFTER THE 1ST DAY OF APRIL, 2011, WHERE THE S PECIFIED BUSINESS IS IN THE NATURE OF DEVELOPING AND BUILDING A HOUSING PROJECT UNDER A SCHEME FOR AFFORDABLE HOUSING FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT, AS THE CASE MAY BE, AND NOTIFIED BY THE BOARD IN TH IS BEHALF IN ACCORDANCE WITH THE GUIDELINES AS MAY BE PRESCRIBED; ( AE ) ON OR AFTER THE 1ST DAY OF APRIL, 2011, IN A NEW PL ANT OR IN A NEWLY INSTALLED CAPACITY IN AN EXISTING PLANT FOR PRODUCTION OF FER TILIZER; [***]] [( AF ) ON OR AFTER THE 1ST DAY OF APRIL, 2012, WHERE THE S PECIFIED BUSINESS IS IN THE NATURE OF SETTING UP AND OPERATING AN INLAND CONTAI NER DEPOT OR A CONTAINER FREIGHT STATION NOTIFIED OR APPROVED UNDER THE CUST OMS ACT, 1962 (52 OF 1962); ( AG ) ON OR AFTER THE 1ST DAY OF APRIL, 2012, WHERE THE S PECIFIED BUSINESS IS IN THE NATURE OF BEE-KEEPING AND PRODUCTION OF HONEY AND B EESWAX; ( AH ) ON OR AFTER THE 1ST DAY OF APRIL, 2012, WHERE THE SPECIFIED BUS INESS IS IN THE NATURE OF SETTING UP AND OPERATING A WAREHOUSING FA CILITY FOR STORAGE OF SUGAR; [***]] [( AI ) ON OR AFTER THE 1ST DAY OF APRIL, 2014, WHERE THE SPECIFIED BUSINESS IS IN THE NATURE OF LAYING AND OPERATING A SLURRY PIPELINE FO R THE TRANSPORTATION OF IRON ORE; ( AJ ) ON OR AFTER THE 1ST DAY OF APRIL, 2014, WHERE THE S PECIFIED BUSINESS IS IN THE NATURE OF SETTING UP AND OPERATING A SEMI- CONDUCTOR WAFER FABRICATION MANUFACTURING UNIT, AND WHICH IS NOTIFIED BY THE BO ARD IN ACCORDANCE WITH SUCH GUIDELINES AS MAY BE PRESCRIBED ; [***]] [ ( AK ) ON OR AFTER THE 1ST DAY OF APRIL, 2017, WHERE THE S PECIFIED BUSINESS IS IN THE NATURE OF DEVELOPING OR OPERATING AND MAINTAINING O R DEVELOPING, OPERATING AND MAINTAINING, ANY INFRASTRUCTURE FACILITY; AND] ( B ) ON OR AFTER THE 1ST DAY OF APRIL, 2009, IN ALL OTHE R CASES NOT FALLING UNDER [ANY ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 7 - OF THE ABOVE CLAUSES]. (6) THE ASSESSEE CARRYING ON THE BUSINESS OF THE NA TURE REFERRED TO IN CLAUSE ( A ) OF SUB-SECTION (5) SHALL BE ALLOWED, IN ADDITION TO DE DUCTION UNDER SUB-SECTION (1), A FURTHER DEDUCTION IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2010, OF AN AMOUNT IN RESPECT OF EXPENDITURE OF CAPITAL NATURE INCURRED DURING ANY EARLIER PREVIOUS YEAR, IF ( A ) THE BUSINESS REFERRED TO IN CLAUSE ( A ) OF SUB- SECTION (5) HAS COMMENCED ITS OPERATION AT ANY TIME DURING THE PERIOD BEGINNING O N OR AFTER THE 1ST DAY OF APRIL, 2007 AND ENDING ON THE 31ST DAY OF MARCH, 20 09; AND ( B ) NO DEDUCTION FOR SUCH AMOUNT HAS BEE N ALLOWED OR IS ALLOWABLE TO THE ASSESSEE IN ANY EARLIER PREVIOUS YEAR. [(6A) WHERE THE ASSESSEE BUILDS A HOTEL OF TWO-STAR OR ABOVE CATEGORY AS CLASSIFIED BY THE CENTRAL GOVERNMENT AND SUBSEQUENTLY, WHILE C ONTINUING TO OWN THE HOTEL, TRANSFERS THE OPERATION THEREOF TO ANOTHER PERSON, THE ASSESSEE SHALL BE DEEMED TO BE CARRYING ON THE SPECIFIED BUSINESS REFERRED TO IN S UB-CLAUSE ( IV ) OF CLAUSE ( C ) OF SUB- SECTION (8).] (7) THE PROVISIONS CONTAINED IN SUB-SECTION (6) OF SECTION 80A AND THE PROVISIONS OF SUB-SECTIONS (7) AND (10) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPLY TO THIS SECTION IN RESPECT OF GOODS OR SERVICES OR ASSETS H ELD FOR THE PURPOSES OF THE SPECIFIED BUSINESS. [(7A) ANY ASSET IN RESPECT OF WHICH A DEDUCTION IS CLAIMED AND ALLOWED UNDER THIS SECTION SHALL BE USED ONLY FOR THE SPECIFIED BUSINE SS, FOR A PERIOD OF EIGHT YEARS BEGINNING WITH THE PREVIOUS YEAR IN WHICH SUCH ASSE T IS ACQUIRED OR CONSTRUCTED. (7B) WHERE ANY ASSET, IN RESPECT OF WHICH A DEDUCTI ON IS CLAIMED AND ALLOWED UNDER THIS SECTION, IS USED FOR A PURPOSE OTHER THAN THE SPECIFIED BUSINESS DURING THE PERIOD SPECIFIED IN SUB-SECTION (7A), OTHERWISE THAN BY WA Y OF A MODE REFERRED TO IN CLAUSE ( VII ) OF SECTION 28 , THE TOTAL AMOUNT OF DEDUCTION SO CLAIMED AND ALLO WED IN ONE OR MORE PREVIOUS YEARS, AS REDUCED BY THE AMOUNT OF DE PRECIATION ALLOWABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32 , AS IF NO DEDUCTION UNDER THIS SECTION WAS ALLOWED, SHALL BE DEEMED TO BE THE INCOME OF TH E ASSESSEE CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF THE PREVIOUS YEAR IN WHICH THE ASSET IS SO USED. (7C) NOTHING CONTAINED IN SUB-SECTION (7B) SHALL AP PLY TO A COMPANY WHICH HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986) , DURING THE PERIOD SPECIFIED IN SUB-SECTION (7A).] (8) FOR THE PURPOSES OF THIS SECTION, ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 8 - ( A ) AN 'ASSOCIATED PERSON', IN RELATION TO THE ASSESSEE , MEANS A PERSON, ( I ) WHO PARTICIPATES, DIRECTLY OR INDIRECTLY, OR THROUG H ONE OR MORE INTERMEDIARIES IN THE MANAGE MENT OR CONTROL OR CAPITAL OF THE ASSESSEE; ( II ) WHO HOLDS, DIRECTLY OR INDIRECTLY, SHARES CARRYING NOT LESS THAN TWENTY-SIX PER CENT OF THE VOTING POWER IN THE CAPI TAL OF THE ASSESSEE; ( III ) WHO APPOINTS MORE THAN HALF OF THE BOARD OF DIRECTO RS OR MEMBERS OF THE GOVERNING BOARD, OR ONE OR MORE EXECUTIVE DIREC TORS OR EXECUTIVE MEMBERS OF THE GOVERNING BOARD OF THE ASSESSEE; OR ( IV ) WHO GUARANTEES NOT LESS THAN TEN PER CENT OF THE TO TAL BORROWINGS OF THE ASSESSEE; ( B ) 'COLD CHAIN FACILITY' MEANS A CHAIN OF FACILITIES FOR STORAGE OR TRANSPOR TATION OF AGRICULTURAL AND FOREST PRODUCE, MEAT AND MEAT PROD UCTS, POULTRY, MARINE AND DAIRY PRODUCTS, PRODUCTS OF HORTICULTURE, FLORICULT URE AND APICULTURE AND PROCESSED FOOD ITEMS UNDER SCIENTIFICALLY CO NTROLLED CONDITIONS INCLUDING REFRIGERATION AND OTHER FACILITIES NECESSARY FOR TH E PRESERVATION OF SUCH PRODUCE; [ ( BA ) 'INFRASTRUCTURE FACILITY' MEANS ( I ) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; ( II ) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVI TIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; ( III ) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, IRR IGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAG EMENT SYSTEM; ( IV ) A PORT, AIRPORT, INLAND WATERWAY, INLAND PORT OR NA VIGATIONAL CHANNEL IN THE SEA; ] ( C ) 'SPECIFIED BUSINESS' MEANS ANY ONE OR MORE OF THE F OLLOWING BUSINESS, NAMELY : ( I ) SETTING UP AND OPERATING A COLD CHAIN FACILITY; ( II ) SETTING UP AND OPERATING A WAREHOUSING FACILITY FOR STORAGE OF AGRICULTURAL PRODUCE; ( III ) LAYING AND OPERATING A CROSS- COUNTRY NATURAL GAS OR CRUDE OR PETROLEUM OIL PIPELINE NETWORK FOR DISTRIBUTION, IN CLUDING STORAGE FACILITIES BEING AN INTEGRAL PART OF SUCH NETWORK; [( IV ) BUILDING AND OPERATING, ANYWHERE IN INDIA, A [HOTEL] OF TWO- STAR OR ABOVE CATEGORY AS CLASSIFIED BY THE CENTRAL GOVERNM ENT; ( V ) BUILDING AND OPERATING, ANYWHERE IN INDIA, A [HOSPITAL] WITH AT LEAST ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 9 - ONE HUNDRED BEDS FOR PATIENTS; ( VI ) DEVELOPING AND BUILDING A HOUSING PROJECT UNDER A S CHEME FOR SLUM REDEVELOPMENT OR REHABILITATION FRAMED BY THE CENTR AL GOVERNMENT OR A STATE GOVERNMENT, A S THE CASE MAY BE, AND NOTIFIED BY THE BOARD IN THIS BEHALF IN ACCORDANCE WITH THE GUIDELINES AS MAY BE PRESCRIBED;] [( VII ) DEVELOPING AND BUILDING A HOUSING PROJECT UNDER A S CHEME FOR AFFORDABLE HOUSING FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT, AS THE CASE MAY BE, AND NOTIFIED BY THE BOARD IN THIS BEHALF IN ACCORDANCE WITH THE GUIDELINES AS MAY BE PRESCRIBED ; ( VIII ) PRODUCTION OF FERTILIZER IN INDIA;] [( IX ) SETTING UP AND OPERATING AN INLAND CONTAINER DEPOT OR A CONTAINER FREIGHT STATION NOTIFIED OR APPROVED UNDER THE CUST OMS ACT, 1962 (52 OF 1962); ( X ) BEE-KEEPING AND PRODUCTION OF HONEY AND BEESWAX; ( XI ) SETTING UP AND OPERATING A WAREHOUSING FACILITY FOR STORAGE OF SUGAR;] [( XII ) LAYING AND OPERATING A SLURRY PIPELINE FOR THE TRAN SPORTATION OF IRON ORE; ( XIII ) SETTING UP AND OPERATING A SEMI- CONDUCTOR WAFER FABRICATION MANUFACTURING UNIT NOTIFIED BY THE BOARD IN ACCORDA NCE WITH SUCH GUIDELINES AS MAY BE PRESCRIBED ;] [ ( XIV ) DEVELOPING OR MAINTAINING AND OPERATING OR DEVELOPI NG, MAINTAINING AND OPERATING A NEW INFRASTRUCTURE FACILITY;] ( D ) ANY MACHINERY OR PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OTHER THAN THE ASSESSEE SHALL NOT BE REGARDED AS MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE, IF ( I ) SUCH MACHINERY OR PLANT WAS NOT, AT ANY TIME PRIOR TO THE DATE OF THE INSTALLATION BY THE ASSESSEE, USED IN INDIA; ( II ) SUCH MACHINERY OR PLANT IS IMPORTED INTO INDIA FROM ANY COUNTRY OUTSIDE INDIA; AND ( III ) NO DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPECT OF SUCH MACHINERY OR PLANT HAS BEEN ALLOWED OR IS ALLOWABLE UNDER THE PR OVISIONS OF THIS ACT IN COMPUTING THE TOTAL INCOME OF ANY PERSON FOR ANY PERIOD PRIOR TO THE DATE OF INSTALLATION OF THE MACHINERY OR PLA NT BY THE ASSESSEE; ( E ) WHERE IN THE CASE OF A SPECIFIED BUSINESS, ANY MACH INERY OR PLANT OR ANY PART THEREOF PREVIOUSLY USED FOR ANY PURPOSE IS TRANSFER RED TO THE SPECIFIED BUSINESS ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 10 - AND THE TOTAL VALUE OF THE MACHINERY OR PLANT OR PA RT SO TRANSFERRED DOES NOT EXCEED TWENTY PER C ENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT US ED IN SUCH BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE ( II ) OF SUB- SECTION (2), THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH; ( F ) ANY EXPENDITURE OF CAPITAL NATURE SHALL NOT INCLUDE [ ANY EXPENDITURE IN RESPECT OF WHICH THE PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR AN ACCOUNT PAYEE BANK DRAFT OR USE OF ELECTRONIC C LEARING SYSTEM THROUGH A BANK ACCOUNT, EXCEEDS TEN THOUSAND RUPEES OR ] ANY EXPENDITURE INCURRED ON THE ACQUISITION OF ANY LAND OR GOODWILL OR FINANCIAL INSTRUMENT.] 10. THE ASSESSEE IN ORDER TO AVAIL THE BENEFIT OF S ECTION 35AD OF THE ACT HAS TO FULFILL THE CONDITIONS BEING (I) EXPENDI TURE INCURRED PRIOR TO COMMENCEMENT OF ITS OPERATION AND (II) THE AMOUNT I S CAPITALIZED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE ON THE DATE OF IT S OPERATION. THE ADMITTED FACTS ARE THIS THAT - (A) FIRST APPLICATION WAS MADE TO THE INDIAN TOURIS M DEPARTMENT, MUMBAI ALONG WITH APPLICATION FEES OF RS.8000/- AND BY DD NO.6222292 DATED 16.08.2011. (B) FURTHER ONLINE APPLICATION/COMPLIANCE VIDES OU R LETTER DATED 23.04.2012. (C) INDIAN TOURISM DET. VIDE THE LETTER DATED 29.0 5.2012, INFORMED FURTHER COMPLIANCE IN RESPECT OF CLASSIFIC ATION OF OUR HOTEL UNDER 3 STAR CATEGORIES. (D) THEREAFTER THE ASSESSEE FIRM ADDRESSED LETTER TO TOURISM DEPT. VIDE LETTER DATED 07.06.2013 IN COMPLIANCE OF THEIR LETTER AND ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 11 - REQUESTING TO GRANT 3 STAR CATEGORY TO THE ASSESSEE FIRM FROM THE DATE OF OPERATION. (E) THE INDIAN TOURISM DEPT. CARRIED OUT INSPECTION OF OUR HOTEL ON 16.08.2013 FOR CLASSIFICATION UNDER 3 STAR CATEGORI ES. (F) AFTER OBSERVING ALL FORMALITIES AND PROCEDURES THE TOURISM DEPT. OF INDIA ISSUED 3 STAR CATEGORY CERTIFICATES FOR FIVE YEARS. (G) IN SPITE OF OUR REPEATED REQUEST AND PERSONAL F OLLOW UP WITH TOURISM DEPT. THEY ISSUED CERTIFICATE OF 3 STAR CAT EGORY W.E.F. 11.09.2013 AND VALID UPTO 10.09.2018 THERE IS NO PROCEDURE TO ISSUE THE STAR RATING CE RTIFICATE FROM THE DATE OF APPLICATION RETROSPECTIVELY AND IS ISSUED ON AND FROM THE DATE OF SIGNING OF THE CERTIFICATE BUT IT ALSO DOES NOT MEA N THAT THE HOTEL WAS OPERATED FOR LOWER THAN THREE STAR CATEGORY FROM TH E DATE OF APPLICATION TILL THE ISSUANCE OF THREE-STAR RATED CERTIFICATE. NATURALLY, IN ORDER TO GET THE CERTIFICATE, THE ASSESSEE HAS DESIGNED THE HOTE L ROOMS AND ALL OTHER AMENITIES ACCORDING TO THE TERMS AND CONDITIONS SPE CIFIED FOR THREE-STAR HOTEL. AS PER PROVISIONS OF SECTION 35AD, THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ANY SPECI FIED BUSINESS SHALL BE ALLOWED AS DEDUCTION DURING THE PREVIOUS YEAR IN WH ICH HE COMMENCES OPERATIONS. ACCORDINGLY, THE ASSESSEE-FIRM COMMENC ED ITS SPECIFIED ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 12 - BUSINESS DURING THE PREVIOUS YEAR RELEVANT TO AY 20 12-13 AND THUS IT CLAIMED ENTIRE CAPITAL EXPENDITURE AS DEDUCTION U/S .35AD IN AY 2012-13. CLAUSE (IV) (C) OF SUB-SECTION (8) OF SECTION 35AD OF THE ACT STIPULATES THAT BUILDING AND OPERATIVE ANYWHERE IN INDIA A HOTEL OF TWO- STAR OR ABOVE CATEGORY AS CLASSIFIED BY THE CENTRAL GOVERNMENT. THERE IS NO SUCH TIME LIMIT OF OBTAINING STAR CERTIFICATE IS PRESCRIBED IN THE ABOVE CLAUSE. THE ONLY REQUIREMENT IS TO BUILD AN OPERATION OF TWO OR MORE STAR HOTEL CLASSIFIED BY CENTRAL GOVERNMENT. THE AO MISCONSTRUED THE SAID CLAUSE AND OBSERVED THAT IN ORDER TO AVAI L THE BENEFIT OF A THREE STAR CATEGORY HOTEL, THE ASSESSEE WAS REQUIRED TO B E CLASSIFIED AS A THREE- STAR CATEGORY HOTEL IN THE YEAR OF OPERATION AS THE BENEFIT OF THIS CAN ONLY BE GIVEN TO A TWO AND ABOVE STAR HOTELS. AS THE AS SESSEE DOES NOT FULFILL THIS CRITERIA, DEDUCTION CLAIMED BY THE ASSESSEE IS HEREBY WITHDRAWN. THE LD.CIT(A), ON THE OTHER HAND, ALLOWED THE APPE AL PREFERRED BY THE ASSESSEE AGAINST THE SAID ORDER DATED 27/03/201 5. AS PER THE PROVISIONS OF SECTION, ANY CAPITAL EXPENDITURE INCU RRED BY THE ASSESSEE PRIOR TO THE COMMENCEMENT OF OPERATIONS OF THE NEW UNIT SHALL BE ALLOWED AS DEDUCTION IN THE PREVIOUS YEAR IN WHICH THE ASSESSEE COMMENCES THE OPERATION OF OFFICES AS NEW SPECIFIED BUSINESS IF THE ASSESSEE HAS CAPITALIZED THE AMOUNT OF EXPENDITURE IN ITS BOOKS OF ACCOUNTS ON THE DATE OF COMMENCEMENT OF OPERATION O F THE SPECIFIED BUSINESS WHICH IS PRESENT IN THE CASE IN HAND. FUR THERMORE, THE ASSESSEE ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 13 - COMMENCED ITS BUSINESS ON 17.11.2011 AND HE APPLIED FOR THE STAR CLASSIFICATION CERTIFICATE ON 07.06.2013 WHICH WAS GRANTED BY THE CONCERNED DEPARTMENT ON 24.09.2013 WITH EFFECT FROM 11.09.2013 TILL 10.09.2018. IN FACT, THE APPLICATION WAS MADE BY T HE ASSESSEE IN DUE TIME, INSPECTION WAS CONDUCTED BY THE CONCERNED DEP ARTMENT AND ULTIMATELY CERTIFICATE WAS ISSUED. THERE IS NO FAU LT ON THE PART OF THE ASSESSEE TO APPLY AND/OR OBTAIN THE SAID CERTIFICAT E SO FAR DELAY IS CONCERNED NOR THERE ANY TIME LIMIT SPECIFIED FOR OB TAINING SUCH CERTIFICATE IN THIS STATUTE. THE ASSESSEE THUS FULFILLS THE C RITERION PRESCRIBED UNDER THE STATUTE AND IS ENTITLED TO DEDUCTION ON CAPITAL EXPENDITURE INCURRED BY HIM PRIOR TO THE COMMENCEMENT OF ITS OPERATION AND THEREFORE WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) AND THUS WE UPHOLD THE SAME. REVENUES APPEAL ON THIS GROUND STANDS DISMI SSED. CONSEQUENTLY, ADDITION/DISALLOWANCE MADE BY THE AO IS HEREBY DELE TED. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 06 /06/2018 SD/- SD/- .. () ( ) ( N.K. BILLAIYA ) (MS.MAD HUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED / 05 /2018 7/..,. ../ T.C. NAIR, SR. PS PRONOUNCED ON 6/6/18 SD/- SD/- (AS) (MR) AM JM ITA NO. 1799/AHD/2016 ACIT VS. RIVER VIEW HOTELS ASST.YEAR 2012-13 - 14 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. 8 9 / CONCERNED CIT 4. 9 ( ) / THE CIT(A)-AHMEDABAD-5 5. :;<* 8 , /83 , / DR, ITAT, AHMEDABAD 6. <>?@. / GUARD FILE. / BY ORDER, +:* //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..02.5.2018 (DICTATION-PAD 15- PAGES ATTACHED AT THE END OF THIS APPEAL- FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 02.5.2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.6.6.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6.6.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER