9911796707
TMI Blog2017 (1) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of assessment proceedings the Assessing Officer noted that the assessee has debited an amount of Rs. 9,00,195/- under the head "other expenses" which includes an amount of Rs. 4,70,990/- paid to partners as interest and salary for the earlier years. The details of the above amount is as under : Interest to partners for A.Y. 2005-06 : 3,70,990/- Salary to partners for A.Y. 2005-06 : 50,000/- Salary to partners for A.Y. 2006-07 : 50,000/- He therefore asked the assessee to explain the reasons for claiming expenses of earlier years as mentioned above in the year under consideration. In response to the same the assessee filed the following explanation : "As per provisions of Act in case of inadequate profit or no profit, salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect net profit can be ascertained only on completion of project. In the initial period the builder has to incur only expenditure for purchase of land, construction material, labour charges, architect fees, administrative expenses etc. The builder goes on booking the expenses and the expenses are shown in the form of current assets in the balance sheet. When the flats/apartments etc are sold proportionate cost of construction sold flats/apartments are debited to the profit and loss account. Profit is ascertained and distributed among the partners after payment of all taxes and Government dues. In the present case, the assessee has accounted for interest to partners and salary to partners during earlier years, i.e. A.Y. 2005-06 and 2006-07 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is observed that, appellant has shown working progress in the balance sheet and sale of the flats and cost of flats in profit and loss account. As far as revenue recognition is concerned the year in which flat/asset are sold in that year profit/loss is accounted for. The appellant has already claimed or accounted for interest/salary in earlier years. The actual payment is being made in this year under consideration and shown as other expenses and claimed in the profit and loss account. This amounts to double deduction of the salary and interest to partners. In the year in which it is paid and the year in which it has accrued. Undoubtedly, the appellant has included interest and salary in earlier years to the cost of the flats/assets an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lary and interest to partners for A.Y. 2003-04 and 2004-05 are shown under the head current assets. Referring to para 5.2 of the order of the CIT(A) he submitted that the CIT(A) has given a finding that assessee has already claimed or accounted for interest/salary in earlier years. He submitted that the above finding of the CIT(A) is wrong and the assessee has not claimed the same in the past and there is no double deduction. He accordingly submitted that the order of CIT(A) be set aside and the grounds raised by the assessee be allowed. 8. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A) and submitted that by claiming the salary and interest to partners in the current year the assessee is cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any infirmity in the above observation of Ld. CIT(A). The salary and interest to partners for A.Y. 2005-06 and 2006-07 has already been debited to the cost of flats in those years and credited to capital account of partners. Once the same has been debited to the cost of the flat in the preceding assessment years, the assessee cannot claim the same again under the head "other expenses" in the current year. Even though there was no profit in the preceding assessment years, nothing precluded the assessee from claiming the minimum salary paid to the partners in those years. The method followed by the assessee in the instant case amounts to claiming of the expenditure twice, i.e. in the year when the assessee has debited such expenses to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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