Section 35AD of the Income-tax Act, 1961—Business expenditure—Once the conditions of section 35AD are fulfilled, the section, per se, not requiring any specific date of operation, the deduction thereunder cannot be disallowed.

Facts: Assessee is aggrieved by the order of CIT (A) in not granting deduction claimed by the assessee Company under section 35AD.

Held, that provisions of section 35AD contain conditions which require to be satisfied before the assessee becomes entitled to deduction. These conditions are that the expenditure should have been incurred prior to the commencement of the operation; that the amount should be capitalized in the books of account on the date of commencement of the operations; that the unit is not set up by splitting up, or the reconstruction of a business already in existence; and that the unit is not set up by the transfer, to the specified business, of machinery or plant previously used for any purpose. The last two conditions have not been challenged as being relevant to the dispute under consideration. The "specified business" has also not been disputed to be that of building and operating a new hotel of a two-star or above category, in keeping with the provisions of section 35AD(5)(aa). Then, the incurrence of expenditure for the construction of The Gateway Hotel by the assessee has also not been disputed as having been done prior to the commencement of the operations of the business. Further, neither of the authorities below has made out that the amount was not capitalized in the books of account of the assessee. It is, thus, seen that none of the conditions of provisions of section 35AD has been violated at the hands of the assessee and hence, deduction allowed to assessee. - BENARES HOTELS LTD. V/s DY. CIT - [2020] 181 ITD 486 (ITAT-VARANASI)