9911796707
TMI Blog2006 (1) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and during the relevant time it was engaged in the business of developing a township named and styled as Ardee City in Gurgaon. The learned Assessing Officer found that the only activity carried out by the assessee was for acquisition of further land for the project. The learned Assessing Officer found that the assessee claimed deduction of various expenses aggregating to Rs. 5,83,501. Those expenses were reduced by a receipt of Rs. 82,481 called marketing and publicity charges. The assessee was required to show as to how the loss could be claimed when the sale of the assessee's construction had not commenced. The assessee argued that it had incurred expenditure to set up the colony and such expenses were capitalized. However, the items of expenditure of revenue nature having no bearing on assessee's business were claimed and required to be allowed as revenue expenditure. The learned Assessing Officer did not find this explanation of the assessee to be satisfactory. There was no real receipt of Rs. 82,481 on account of marketing and publicity charges and the same was merely a book entry as per MOU entered among group companies. In any case the expenditure incurred by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of brokerage expenses of Rs. 66,55,850 claimed by the assessee. However, no separate addition on this account was made as this disallowance was found to be covered by the addition of Rs. 1,31,31,392. Similarly, the Assessing Officer disallowed a sum of Rs. 5,10,000 out of advertisement expenses of Rs. 15,40,870, but he made an addition of Rs. 1,70,000 only because the balance amount of Rs. 3,40,000 was covered by the addition of Rs. 1,31,31,392 already made. The learned Assessing Officer made part disallowance of brokerage on the ground that even confirmation of the receipts of commission paid by the assessee and the details of services rendered by the parties were not filed. Many of these amounts had not actually been paid but were shown outstanding in the books of account. The learned Assessing Officer, therefore, made disallowance of Rs. 31,58,100 by way of part disallowance as computed at pages 9 and 10 of the assessment order. Out of the sum of Rs. 15,40,817 claimed as deduction by the assessee on account of advertisement, the learned Assessing Officer found that a sum of Rs. 5 lakhs was claimed as payment to M/s. India Home but out of that a sum of Rs. 3,40,000 had been sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had maintained duly audited books of account. In any case the assessee had not claimed deduction of this amount in computation of income for assessment year 1997-98. He, therefore, deleted the disallowance of Rs. 1.25 crores. Aggrieved by these deletions, revenue is in appeal before us. 8. During the course of hearing before us the learned DR argued that the assessee had not offered for assessment any of its business receipts on the ground of project completion method of accounting being followed by it. That being so the assessee was not justified in claiming deduction of any expenditure. In relation to specific disallowances made by the learned Assessing Officer for assessment year 1997-98 the learned D.R. argued that the assessee had brought no material on record as to any services rendered by the payees. The learned CIT (Appeals) was not justified in allowing deduction on the ground only that the assessee had maintained audited books of account. 9. The learned authorized representative of the assessee pointed out that receipts of marketing and publicity charges amounting to Rs. 82,482 had been offered for assessment. It was, therefore, not correct to say that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that such expenditure was not directly related to the business carried out by the assessee. There is no such concept as direct expenses or indirect expenses for the purpose of deduction under section 37. The requirement of the provision is that the expenditure should be incurred wholly and exclusively for the purpose of the business of the assessee and the expenditure should not be of capital nature. Under the provisions of section 145 the assessee is required to follow a proper method of accounting so that the assessee's income could properly be deduced, failing that the Assessing Officer is entitled to compute the assessee's income on another basis. As the assessee himself postponed computation of income or loss from the business being carried out by him to a subsequent assessment year, we see no justification or basis at all for assessee's claim of deduction of any expenditure. If in the perception of the assessee certain expenditure did not pertain to the income from the business, that expenditure cannot be said to have been incurred wholly and exclusively for the purpose of the assessee's business. We see no force in the contention of the assessee that receipts to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for assessment by the assessee. ITA No. 1952 (Delhi)/2001 - Assessment year 1997-98 12. Ground of appeal No. 1 is directed against the learned CIT (Appeals) allowing the assessee deduction of a sum of Rs. 31.58 lakhs as brokerage. Ground of appeal No. 2 is directed against the order of the learned CIT (Appeals) allowing the assessee deduction of a sum of Rs. 5,10,000 on account of advertisement. We set aside the order of the learned CIT (Appeals) in relation to both these grounds and restore the matter to the file of the Assessing Officer with the remarks that the expenditure can be allowed only to the extent that the same is incurred on behalf of other associate companies from whom marketing and publicity charges have been offered for assessment. 13. Ground of appeal No. 3 is directed against the learned CIT (Appeals) allowing the deduction of Rs. 1.25 crores as advertisement expenditure for setting up of a colony. We find that this ground is not correctly conceived. The learned CIT (Appeals) has not allowed deduction of any expenditure to the assessee in this behalf, in the first instance. He has only held that no part of work-in-progress can be disallowed and assessed for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
