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TMI Blog2015 (11) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... ni, A. M. This is an appeal by the department against the order dated 24.05.2012 of the ld. CIT(A)-XIII, New Delhi. 2. The only effective ground raised in this appeal reads as under: Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of ₹ 3,71,92,193/- made by the Assessing Officer by treating the revenue expenditure as pre operative expenses which needs to be capitalized? 3. Facts of the case in brief are that the assessee was incorporated on 09.04.2007 and was engaged in Real Estates Business. The assessee filed its e-return of income declaring loss of ₹ 3,71,92,193/- on 25.09.2009. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee was mainly engaged in development of housing project at Panchkula and had not started income recognition because the project was at very initial stage. The AO further observed that the assessee had shown income of ₹ 1,50,898/- which was mainly because of liability return back and there was no income on account of business activity. However, in the expenditure side the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state development at Village Bhagwanpur, Tehsil Kalka, District Panchkula. For the purpose, the Company has filed an application with the State Authorities on September 04, 2007 for grant of license for setting up of an integrated residential township on 136.89 acres. Subsequently, the State Government on September 26, 2007 published notification in official gazette under section 4 of The Land Acquisition Act, 1894 notifying their intention to acquire the specified land for the purpose of development of residential area. Land measuring 26 acres forming part of the Company's above project got covered under the Government's land acquisition notification. Since the Company had applied for license for development of township prior to the date of government notification, the Company filed its objection under Section 5A of the Land Acquisition Act, 1894 on behalf of the land owning company for release of 27 acres of land from the land acquisition proceedings in line with the conditions given in State Government's Memo No. 6/30- 2007/2TCP dated October 26, 2007 regarding government policy for release of land from acquisition proceedings. The management is confident that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other expenses ₹ 3,36,68,287/- was containing Advertising Publicity Expenses amounting to ₹ 2,84,87,958/- relating to publicize the marketing campaign of its new project launched at Panchkula and the assessee had incurred expenses on advertisement in newspaper, printing of banners etc. We further wish to submit that the company is in the business of real estate and that whenever a new project is launched it is necessary to publicize the project aggressively and intensively and Advertisement and Publicity Expenses were incurred to publicize the marketing campaign of its new project. You will kindly appreciate that there is no dispute about the fact that the business had commenced during the year in which development rights for the land were acquired and development work started and all expenses incurred after the commencement of business are allowable. Keeping in view the nature of expenses and commercial expediency of the business, you will kindly appreciate that all expenses have been incurred wholly and exclusively for the purpose of business and are allowable as revenue expenditure. 5. The reliance was placed on the following case laws: CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts on 172.46 acres of land for the purpose of real estate development at village Bhagwanpur, Tehsil Kalka, District Panchkula. Further, the company has already filed an application on September 04, 2007 with the State Authorities for grant of license for setting up of an integrated residential township on 136.89 acres and approval for the same was published in Official Gazette on 26.09.2007. Further appellant has placed on record copy of audited annual accounts for the year ending 31.03.2009. Schedule-5 (inventory) of the Balance Sheet which contained the details of inventory evidencing the fact that the project is already in progress and the appellant has commenced its business. The appellant has spent ₹ 268.34 crores on purchasing various inventories which is shown as work in progress at Schedule-5 page 11 of the paper book. The description of Schedule-5 shows that appellant has undertaken various activities on the land acquired like land development survey expenses, procuring of development rights, brokerage expenses, project management expenses etc. All these expenses prove that business activities of the appellant has already started during the year and expenses incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the expenses incurred were capital in nature and were not allowable as revenue expenditure. Therefore, the ld. CIT(A) was not justified in deleting the addition made by the AO. 10. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the issue under consideration is squarely covered by the judgment of the Hon ble Jurisdictional High Court in the case of CIT Vs Dhoomketu Builders and Development Pvt. Ltd. (2014) 368 ITR 680 (Del). 11. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the AO accepted the incurring of expenditure for business purpose, his only objection was that those expenses were capital in nature and not revenue in nature as claimed by the assessee, on the basis that the commercial activity of the assessee did not commence. In the instant case it is an admitted fact that the assessee company was incorporated on 09.04.2007 and it acquired development rights on 172.46 acres of land for the purpose of Real Estates Development at Village Bhagwanpur ..... 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