Tribunal Admits Delayed Appeals for AY 2013-15, Capitalizes Expenses

The Tribunal condoned the delay in filing appeals for AY 2013-14 and 2014-15 due to COVID-19, admitting them for adjudication. Deferred revenue expenditure and other expenses were held to be pre-commencement and should be capitalized, not allowed as business expenditure. Project expenditure was allowed to be capitalized for AY 2013-14, with a fresh adjudication for AY 2014-15. The disallowance of bad debts for AY 2014-15 was upheld, considering the nature of the advances. The revenue's appeal for AY 2013-14 was partly allowed, while the appeals for AY 2014-15 were allowed for statistical purposes, and the assessee's appeal was dismissed.

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Issues Involved:
1. Delay in filing appeals due to COVID-19.
2. Deletion of deferred revenue expenditure and other expenses.
3. Capitalization of project expenditure.
4. Disallowance of Bad Debts under Section 36(1)(vii) read with Section 36(2).

Detailed Analysis:

1. Delay in Filing Appeals:
The revenue's appeals for AY 2013-14 and 2014-15 were delayed by 164 days due to the COVID-19 lockdown. The Tribunal condoned the delay, recognizing the extraordinary circumstances of the pandemic, and admitted the appeals for adjudication on merits.

2. Deletion of Deferred Revenue Expenditure and Other Expenses:
The Revenue questioned the deletion of Rs. 4,03,86,928/- (deferred revenue expenditure) and Rs. 1,21,81,827/- (other expenses) by the CIT(A) for AY 2013-14. The core issue was whether these expenses should be capitalized or allowed as business expenditure. The Tribunal noted that the project was still pending approval and had not commenced. It was held that these expenses were pre-commencement and should be capitalized, not allowed as business expenditure.

3. Capitalization of Project Expenditure:
The Tribunal observed that the assessee had only constructed a model apartment and initiated pre-launch sales. The project had not taken off, and thus, the expenses incurred were pre-commencement expenses. Following the precedent set in AY 2012-13, the Tribunal directed the AO to allow capitalization of Rs. 277.70 Lacs and Rs. 45.90 Lacs as debited in the Profit & Loss Account as 'other expenses'. For AY 2014-15, the Tribunal restored the issue back to the AO for fresh adjudication, considering the capitalization allowed in earlier years.

4. Disallowance of Bad Debts:
The assessee's appeal for AY 2014-15 involved the disallowance of Rs. 150 Lacs claimed as Bad Debts under Section 36(1)(vii) read with Section 36(2). The Tribunal upheld the disallowance, agreeing with the AO and CIT(A) that the advances were not business-related and money lending was not the assessee's main business. The Tribunal cited the Madras High Court decision in Ashok Leyland Ltd. vs. ACIT, which held that such advances, being capital in nature, could not be claimed as revenue loss.

Conclusion:
- The revenue's appeal for AY 2013-14 was partly allowed.
- The revenue's appeal for AY 2014-15 was allowed for statistical purposes.
- The assessee's appeal for AY 2014-15 was dismissed.

Order Pronounced on 26th October, 2022.

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