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TMI Blog2023 (6) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees salary, administrative expenses and marketing selling expenses is as per the recognized principles of accountings and as such the claim of the assessee deserves to be allowed. We hold accordingly. The additions made by the lower authorities on this issue are hereby ordered to be deleted. Thus we hereby direct the AO to delete the impugned additions. Decided in favour of assessee. - ITA No. 6116/DEL/2017 - - - Dated:- 31-5-2023 - Shri Kul Bharat, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member For the Assessee : Shri Sukh Sagar, Adv. For the Department : Sh. Atiq Ahmed, Sr. DR ORDER PER KUL BHARAT, JUDICIAL MEMBER: This appeal, by the assessee, is directed against the order of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on loss on sale of fixed assets and Rs. 1,44,312 under the other head. 4. The assessee was called upon as to why it did not capitalize the expenses claimed in P L account, since, the Assessing Officer was of the view that the expenses of Rs. 34,40,792 were required to be capitalized under the head capital work in progress . Thus, he assessed income at Rs. 9,34,790 and recomputed it as under: Loss declared as per computation of income Rs. 25,06,006 Add: As discussed in para-4 Rs. 34.40.792 Revised taxable income Rs. 9,34,786 Round off to Rs. 9,34,890 5. Aggrieved against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-Tax(Appeals) has decided the issue by observing as under: 3.3 The Ld. AR has argued that it has consistently followed the accounting policy of claiming as revenue expenditure such expenses which are not related to the project in consonance with AS-7, construction contract and guidance note on Accounting for Real Estate Transaction which provides that costs which cannot be attributed to a contract are to be excluded from the cost of construction. Further, since the appellant is following the completion percentage method, it has allocated all direct and indirect construction overheads relating to the project which is inventorised as VVIP. The Ld. AR has further stated that though at a single location, the project is not one and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AR s assertion that individual expenses which are not related to the project, should be excluded from the cost of construction. Since there is only one project as is discernible from the accounts, all the costs are directly relatable to this project only. There is therefore, no justification of claiming expenditure on revenue account when no revenue is recognized during the year in consonance with the Percentage Completion Method of Accounting followed by the appellant. The Ld. AR s reliance on the case laws is misplaced, as they are not applicable to the facts of the case. Selective capitalization of expenses incurred during the year resorted to by the company is not is not in compliance with any accounting standard. The Ld. AR has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the office and administrative expenses and selling and marketing expenses are to be charged to the profit loss account in the very same year in which they are incurred and have to be excluded from the cost of inventories for working out closing WIP as per the guidelines issued by the ICAI, Accounting Standard AS-2 and AS-7. The assessee has regularly and consistently been following the said method of accounting as per the provisions of section 145A of the I.T. Act. The ITA No.2298/M/2012 has not assigned any cogent reason as to why the method, which has been consistently followed by assessee and accepted by the department in past as well in succeeding assessment years and which is in accordance with the recognized principles of accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case. 12. We also find merit in the plea of the assessee that expenses incurred in the normal course of business is required to be allowed, after setting up of business irrespective of the fact whether the revenue is not yet earned in view of the decision of the Hon ble Bombay High Court in the case of Western India Vegetable products Ltd. 26 ITR 151 (Bom.). The action of the assessee in any case is a revenue neutral affair and the revenue is not put to any tax loss per se by such alleged premature claim. 13. We further find that the controversy is no longer resintegra and clearly covered by the decision of the co-ordinate Bench of the Tribunal in Sunny Vista Realtors Pt. Ltd. vs ACIT in ITA No.4580/Mum/2013 vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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