2024 (2) TMI 1165 - AT - Income Tax

Disallowance of Advertisement and business promotion expense - addition made as such expenses were not incurred for earning revenue during the year - HELD THAT - In our view this is not a valid reason having regard to the nature of assessee s business and the method of accounting followed by it. These expenses have necessarily to be incurred for the purpose of marketing and selling of flats. It is not the case of the Revenue that the said expenses have not been incurred for the purposes of assessee s business. Genuineness of the said expenses have also not been doubted by the Revenue. The assessee s case is that it has followed Accounting Standards in respect of its project and the same has not been disputed by the Revenue authorities. For the reasons set out above and following the decision of Somnath Buildtech 2022 (11) TMI 250 - DELHI HIGH COURT we allow Grounds of the assessee and direct the Ld. AO to delete the impugned disallowances. Denial of credit of TDS as appearing in Form 26AS - HELD THAT - This needs verification. We, therefore, direct the Ld. AO to verify the assessee s claim. If found to be correct, he should take remedial action and allow appropriate relief to the assessee. Appeal of the assessee is allowed.

Summary

Issues involved:
The judgment involves issues related to the assessment of total income, disallowance of expenses, charging of interest, initiation of penalty proceedings, and denial of credit of TDS.

Assessment of Total Income:
The appeal was against the order assessing the total income of the assessee at INR 63,88,750, contrary to the returned loss of INR 5,10,67,809, based on directions from the Dispute Resolution Panel for the Assessment Year 2014-15.

Disallowance of Expenses - Advertisement and Business Promotion, Brokerage:
The Assessing Officer disallowed advertisement and business promotion expenses of INR 5,12,89,562 and brokerage expenses of INR 61,67,000, considering them as project expenses not incurred for earning revenue during the year. The Dispute Resolution Panel upheld these disallowances.

Arguments and Rulings:
The assessee, a real estate developer, followed the Percentage Completion Method of accounting and did not book revenue due to project completion being only 0.14%. The expenses were claimed for marketing and selling flats, not solely for the project. The Tribunal found the expenses necessary for the business and in compliance with Accounting Standards. Citing relevant case laws, the Tribunal dismissed the Revenue's contention and allowed the appeal to delete the disallowances.

Denial of Credit of TDS:
Ground No. 4 related to the denial of credit of TDS as per Form 26AS. The Tribunal directed the Assessing Officer to verify the claim and provide relief if found correct.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of disallowances of expenses and verification of TDS credit. The judgment was pronounced on 21st February 2024.