9911796707
TMI Blog2020 (12) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ory (which is nothing but accumulated expenses of earlier years included as part of work-in progress). 3. The assessee is a private limited company and is engaged in housing and real estate development. It was incorporated in the financial year 2007-08. According to Ld A.R., the business of the assessee was set up in that year itself. It was incorporated for carrying on the business of housing and real estate developments. It did not report any business income till the assessment year 2011-12. Only during the year under consideration, i.e., in the year relevant to assessment year 2012-13, it reported business income, since it undertook construction of a residential project. 4. The assessee has been incurring expenses over the years under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious activities with regard to various projects proposed hitherto considered as part of work in progress by adjusting the carrying cost of projects work in progress in view of discontinuance of the projects. Sri Ramachandra Bhat P was required to furnish a justification for the claim as an allowable expenditure in response to which it is submitted that this expenditure was in relation to a project cancelled for which the company had entered into a JDA for construction of villa. Though the land owner could not fulfil his obligation, the company had incurred various expenses in connection with the project which was shown as WIP pending commencement of the projects. The company finally called off the project and during the year the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, an amount of Rs. 2,51,54,293/- was reduced from the value of work in progress as the net realisable value was NIL, since the above said amount represented only revenue expenditure. The assessee placed its reliance on the decision rendered by Hon'ble Jharkhand High Court in the case of CIT vs. Tata Robins Fraser Ltd (2012)(211 Taxman 257/27 taxmann.com 15), wherein it was held that the expenditure incurred on unaccomplished project was allowable as revenue expenditure. 8. The Ld CIT(A) noticed that the Joint Development Agreement entered with Mr. Jayaram Shetty was terminated in FY 2009-10 itself, as per the agreements filed by the assessee. Hence he took the view that the assessee should have written off the expenses in FY 2009-10 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument of the appellant during the course of hearing was that the project being called off is the reason for write off. Factually this was disproved during the course of hearing before me. It is clear that the project was called off during financial year 2009-10 whereas the write off is proposed by the appellant during the financial year 2011-12. 20. In the case of Asia Power judgment on which the Appellant has relied, it is seen that Asia Power debited immediately the expenditure in the year in which the agreement was cancelled. However, in the case of Appellant it has been debited after two years from the date of transactions. The Appellant has failed to show anything during this Financial Year (i.e. FY 2011-12) which triggered the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant and the common expenses which are charged to the P&L account (after write off) will continue to remain a part of WIP and can be charged to the P&L account based on percentage completion method in future years. 10. The Ld A.R. submitted that the income tax is to be charged on real income. He submitted that the assessee has treated the revenue expenses as work in progress and did not write off the same, since no business income was available. Only during the year relevant to AY 2012-13, the assessee has executed a project and could declare business income. Hence the assessee has written off accumulated expenses/work in progress, as it is not related to the project under execution. The said claim is in consonance with the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been made by the assessee in FY 2009-10, since the Joint Development Agreement was terminated in that year only. We have earlier noticed that the assessee has treated these expenses as "pre-operative expenses" till 31.3.2010 and only in the financial year 2010-11, the assessee has converted the same as "work in progress". 15. It is a well settled proposition of law that the accounting treatment given in the books of account is not binding on the assessee/revenue to determine the correct amount of total income under the Income tax Act. However, in order to claim any amount as expenditure or loss, the conditions or procedures prescribed under the Income tax Act should have been followed by the assessee. The Ld A.R. submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
