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TMI Blog2017 (5) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... ly claimed to have been credited to work-inprogress. 3. The brief facts of the case are that the Assessing officer observed that the assessee has debited land development expenses of Rs. 41,57,264/- on 31.3.2010, which was shown as 'payable' but in the subsequent submission, it was claimed that it is not payable but is taken to work in progress account. On query by the Assessing Officer, it was submitted by the assessee that for accounting development expenses originally, profit and loss account was debited and the credit should have been given to work-inprogress account, which was inadvertently given to 'development expenses payable' account and that the rectification of mistake of crediting payable account will not result into addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uchers. He observed that there may be dispute over estimation of amount of expenditure debited to profit and loss account as proportionate cost, however, it is not correct to disallow the entire expenditure, when it is not the case of the Assessing Officer that the Gross Profit /Net Profit rate is lower and not comparable with the preceding years or that there is disparity in the amount of expenditure claimed on account of development expenses in comparison to that of preceding years. He noted that when all costs are debited to work-in-progress account and are carried forward as balance sheet item, estimated cost relating to the area sold is required to be taken out from work-in-progress by way of a credit. Therefore, while accounting for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts sold during the year, even though no part of that amount represented any expenditure actually made during the year. The Hon'ble Supreme Court held that there was a certain and accrued liability and the estimated expenditure required to discharge the liability will have to be deducted. The CIT(A) observed that the ratio of this decision is applicable to the issue in dispute in the present appeal. He also noted that Accounting Stanard-7 of ICAI also approves the estimate of cost to be made. He noted that the construction of housing project generally is spread over more than one year but the sales takes place as the project progresses and, therefore, there is a challenge in accounting for revenue and costs. He, therefore, deleted the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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