Tax Authorities Cannot Apply 8% Gross Receipt Estimation When Highway Construction Costs Are Deferred Revenue Expenditure

The ITAT ruled against the AO's 8% gross receipts estimation and treatment of highway construction costs as capital work-in-progress. The Tribunal determined that infrastructure assets belonged to NHAI, with the assessee merely having toll collection rights post-completion. Expenses incurred were classified as business assets or deferred revenue expenditure, to be proportionately debited during toll operation period. The ITAT rejected additions under Section 40(a)(ia) since no revenue expenditure was claimed in P&L. Similarly, Section 43B disallowances were invalidated as expenses were transferred to work-in-progress account without P&L claims. The ruling aligned with CBDT Circular dated 23.04.2014, confirming no taxable income accrual during the assessment year. .....

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