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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

Meru Hotels Pvt Ltd builds a new three-star hotel and claims a full deduction of Rs. 4 crore capital expenditure under section 46 in the year incurred. Which statement about its related conditions follows from the Act?

Once the deduction under section 46(1) is claimed and allowed, no Chapter VIII-C deduction can be claimed for that specified business in the same or any other tax year. Double deduction under other sections is barred, and land and split-up businesses are excluded.

  1. AIt may also claim a deduction for the same expenditure under any other section in a later year
  2. BIt cannot claim a deduction under Chapter VIII-C for that specified business in the same or any other tax yearCorrect
  3. CThe deduction remains valid even if the business was set up by splitting up an existing business
  4. DThe deduction is available on the cost of land bought for the hotel

Explanation

Section 46(4) bars Chapter VIII-C deductions for the specified business once a deduction under section 46(1) is claimed and allowed. Section 46(5) bars double deduction, section 46(3)(a) denies relief to split-up businesses, and land is excluded from capital expenditure.

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