Whether the costs incurred for securing the contract would have to be claimed in the year of incurrence or in the year in which contract is secured.

Manual - ICDS III : Construction Contracts

As per ICDS such costs should not be claimed as a deduction in the year of incurrence as the same represents amount due from customers. The ICDS provides that such costs are in the nature of an asset and should be characterised as work-in-progress. Since the reference is to the amount due from the customer, in any case the requirement of the probability of recovery is implied. To illustrate, an instance could be of advance payment in December 2017 to an agency for installing wireless routers in common area of a residential project. The installation work is to be undertaken during June 2018. The payment to the agency cannot be claimed as a part of the construction costs in the  return of income for A Y 2018-19 as the same  relates to a work which would be undertaken in the subsequent financial year.

Dated: 25-8-2017