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TMI Blog2022 (10) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Under such circumstances, the same could not be allowed as business expenditure but the same are to be capitalized along with project expenditure as held by Tribunal in AY 2012-13 [ 2022 (2) TMI 696 - ITAT CHENNAI] Facts being pari-materia the same, we direct Ld. AO to verify the expenditure incurred by the assessee and allow capitalization of the same. The revenue s appeal stands partly allowed. Disallowance of project expenses written-off - HELD THAT:- Since we have allowed capitalization of expenses for AY 2013- 14, the same would have direct bearing on income computation of this year. It could also be seen that the expenditure has been allowed to be capitalized for AY 2012-13 also. In this year, the assessee has carried out business operations and would be entitled to claim the corresponding expenditure as per percentage of completion method of accounting being followed by it. Therefore, this issue stand restored back to Ld. AO for fresh adjudication in the light of adjudication of earlier years. The revenue s appeal stand allowed for statistical purposes. Disallowance of Bad Debts u/s 36(1)(vii) r.w.s. 36(2) - HELD THAT:- From the facts, it emerges that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case, the CIT(A) is right in deleting Rs.1,21,81,827/- for AY 2013-14 (other expenses), without appreciating the fact that other expenses consist of Advertisement expenses, Deputation charges etc. which are directly relatable to the construction projects, hence, liable to be taken into the value of Stock as per AS7 percentage completion method or corresponding revenue if any has to be offered as per matching concept and AS as it has not been done so, which is very clear from discussion in Para F L, the AO has rightly disallowed the same? As is evident, the sole matter is allowance of project expenditure as claimed by the assessee during the year. 4. The Ld. Sr. DR submitted that the project expenditure as claimed by the assessee was to be capitalized since no revenue was earned during the year. The Ld. AR, on the other hand, submitted that the expenditure has been claimed as per accounting standard and the same is in accordance with law. The decision in Tribunal in assessee s own case for 2012-13, ITA No.481/Chny/2019 order dated 07.02.2022 has been placed on record. In this year, the bench has allowed capitalization of expenses. Having heard rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business must be allowed in its entirety in the year in which it is incurred and could not be spread over number of years even if the assessee has written it off in his books of accounts. Reliance was also placed on the decision of Hon ble Delhi High Court in CIT vs. Dhoomketu Builders Development Pvt. Ltd. (3 Taxmann.com 18). F inally, this issue was decided in assessee s favor. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 7. Upon due consideration of material facts, it could be gathered that the sole project entered into by the assessee is pending at approval stage and the project has not taken-off yet. The assessee has only constructed model apartment and launched pre-commencement sale. During appellate proceedings, the assessee submitted that expenditure incurred are to be claimed in the years in which it is actually incurred and income is to be offered in the year of receipt which violates the matching concept of accounting. In the construction activities, the income has to be offered either on percentage of completion method or on the basis of completed contract method. From the fact, it emerges that the project has not t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was denied by Ld. AO and profit was taken to be Rs.1.94 Crores as reflected in the Profit Loss Account which was adjusted for further additions and disallowances. The adjudication of Ld. CIT(A) is common for AYs 2013-14 and 2014-15 and accordingly, this issue was decided in assessee s favor. Aggrieved, the revenue is in further appeal before us. 9. Since we have allowed capitalization of expenses for AY 2013- 14, the same would have direct bearing on income computation of this year. It could also be seen that the expenditure has been allowed to be capitalized for AY 2012-13 also. In this year, the assessee has carried out business operations and would be entitled to claim the corresponding expenditure as per percentage of completion method of accounting being followed by it. Therefore, this issue stand restored back to Ld. AO for fresh adjudication in the light of adjudication of earlier years. The revenue s appeal stand allowed for statistical purposes. Assessee s Appeal for AY 2014-15 10. The sole grievance of the assessee is confirmation of disallowance of Bad Debts for Rs.150 Lacs u/s 36(1)(vii) r.w.s. 36(2). The same stem from the fact that the assessee debite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be incidental to business or during ordinary course of business and hence, the loss of investment by way of deposits by the appellant, cannot be claimed as revenue loss. The said order of the CIT(A) was also affirmed by the Tribunal in the further appeal filed by the appellant/assessee, by observing that if the provision written back is the excess provision than the money realized, then that would 100% be brought to tax apart from the fact that whether it is a revenue loss or capital loss; the loss sustained by the assessee in respect of the loan advanced to BFL is in the nature of capital loss and is not allowable under section 28 of the Act; and there is no transfer of asset involved and hence, the loss sustained by the assessee is not liable to be carried forward, though it is a capital loss. We do not find any reason to interfere with the said well considered findings of the authorities below, as the same are based on the material evidence available before them. 9. At this juncture, it is pertinent to refer to the decision rendered by the Allahabad High Court in Indian Turpentine Rosin Co. Ltd. (supra) cited on the side of the respondent, wherein, it was held as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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