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TMI Blog2012 (8) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... of which the same has been incurred and not as overhead expenses - AY 08-09 - Held that:- It is undisputed that plot in question for which the expenditure has been incurred was sold during AY 2006- 07 and no provision what so ever has been provided for future obligation on account of sale of the said property. Transaction has been completed and profit has already been booked during AY 2006-07. Hence, in absence of any legal or contractual obligation to incur any further expenditure the said expenses cannot be allowed as a revenue expenditure during the impugned assessment year. Dis-allowance u/s 40(a)(ia) on account of non-deduction of TDS from Audit fees - Held that:- Though assessee contended that TDS on audit fees was made on the basis of the bills issued by the Auditors subsequently, however, no proof for this has been produced by the assessee either before the AO or before the CIT(A) and even before us. Hence, dis-allowance upheld. - ITA NO.56/PN/2012 - - - Dated:- 28-6-2012 - Shri Shailendra Kumar Yadav And Shri R.K. Panda JJ. Appellant by : Sri Nilesh Khandelwal Respondent by : Sri Adarsh Kumar Modi, CIT ORDER PER R.K. PANDA, AM : This appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion projects. According to the AO since the project completion method of accounts is followed the interest identifiable with the project should be allowed only in the year when the project is completed and the income from that project is offered for taxation. According to him the provisions have no application on the cost of assets to the assessee which is governed by the provisions of section 43(1) of the Act. He accordingly rejected the claim of the assessee. 5. Before the CIT(A) it was submitted that the assessee is not covered by the rigours of accounting standard 7 to 16 as the concept of actual cost as held by the AO is not applicable to the case since the entire expenditure is treated as stock in hand and not capital asset. It was submitted that the assessee had incurred approximately Rs. 83,47,761/- as interest on the opening balances of loans on which there is no finding given by the AO. It was submitted that the department in earlier years has accepted that the debit on account of interest on the opening loan amount is deductible in the year in which it has been incurred and that the AO has not made out any case to show that the interest cost has been incurred for a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41 he submitted that the interest has to be allowed as revenue expenditure. 8. Learned DR on the other hand heavily relied on the orders of the AO and the CIT(A). Referring to the disclosure of accounting policies by the assessee in the audited accounts, (a copy of which is placed at Paper Book 45 and 46) he submitted that in Item No. 3 the assessee has shown project wise revenue recognition. Referring to the said item he submitted that the assessee has shown six projects and has stated that all costs relatable to the individual projects are shown under work-in-progress since the firm follows completion contract method of accounting. During the year only the Vantage point project has been completed and all other projects are under construction. He submitted that the assessee is having substantial work in progress and substantial advances. Therefore, by debiting the entire interest expenditure during the construction period as revenue expenditure the assessee is deferring the tax payment. 9. As regards the decision of the Pune Bench of the Tribunal in the case of Thakker Developers (Supra) he submitted that the facts in that case are different from the facts of the case be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butable to the same are debited to the Wakad Account. In general, revenue is recognized, when the following events occur : A. Significant Risks related to real estate have been transferred to buyer. In case of real estate Sales, Price risk is generally considered to be one of the most significant risks. B. The buyer has a legal right to sell or transfer his interest in the property, without any condition or subject to only such conditions, which do not materially affect his right or benefit in the property. From the above, we find out of the six projects only in case of 1 project, namely Vantage point the assessee has booked revenue and the remaining 5 projects are under progress. Since the assessee follows project completion method and recognises revenue on completion of contract method and all costs relatable to individual project is shown as work in progress, therefore, we are of the considered opinion that the interest attributable to the project should be allowed only in that year when the project is completed and the income from that project is offered for taxation. Since in the instant case the assessee has completed only 1 project, i.e. Vantage point, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. 13. Before the CIT(A) it was submitted that the AO has not doubted the reasonableness of the expenditure and there is no dispute regarding the incurrence of the expenses. It was submitted that the said expenses were incurred towards the allotment of rights for construction of road on a plot at Survey No. 1, Baner and towards development charges to PMC for sanction of building plans in accordance with the terms of agreement dated 26-12-2005. The sale of the plot has been recognised in the financial year 2005-06 relevant to A.Y. 2006-07 and the profits from this have been taxed in that year. However, the expenses in respect to the sale has crystallised in the A.Y. 2008-09 and hence could not be estimated or provided at the time of sale of the plot. It was contended that the AO has disallowed the expenses as the profit or losses earned from the transaction was not shown in the profit and loss account of the year. It was submitted that the expenses incurred are in ordinary course of business and for the purpose of business and the same is of revenue in nature and hence allowable u/s.37 of the Income Tax Act. 14. However, the learned CIT(A) was not convinced with the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r land sold in Financial Year 2005-06. There is nothing on record to show that such payment is legal or contractual or due to any court order or by any legal process. If the assessee has paid any extra amounts to the persons, then the same has to go out of its capital but cannot be claimed as an expenditure in the impugned assessment year. 17. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decision cited before us. There is no dispute to the fact that the plot in question for which the expenditure has been incurred was sold during Financial Year 2005-06 relevant to assessment year 2006- 07. There is also no dispute to the fact that no provision what so ever has been provided by the assessee for any expenditure or future obligation on account of sale of the said property. The transaction has been completed and profit has already been booked during Financial Year 2005-06 relevant to assessment year 2006-07. Under these circumstances and in absence of any legal or contractual obligation on the part of the assessee to incur any further ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd provisions of the Act and facts prevailing in the case. The appellant be granted just and proper relief in this respect. 20. Facts of the case, in brief are that the AO disallowed audit fee of Rs. 10,11,240/- debited by the assessee in the profit and loss account on the ground that no tax has been deducted on the said amount and therefore provisions of section 40(a)(ia) are applicable. In appeal the learned CIT(A) upheld the action of the AO for which the assessee is in appeal before us. 21. The learned counsel for the assessee submitted that since no Auditors were appointed, therefore, only provision was made. The appointment of Auditors was done after the completion of the accounting period, i.e. April 2007 to March 2008. He submitted that the TDS was deducted after receipt of the bills from the Auditors. He submitted that consequential relief may be granted in subsequent years by giving suitable directions to the AO. The learned DR on the other submitted that the assessee can claim audit fees in subsequent years as per law. 22. After hearing both the sides we find the AO disallowed the claim of audit fees of Rs. 10,11,240/- on the ground that the assessee had not ded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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