Assessee's Appeal Partially Granted: Disallowances Deleted, Marketing Expenses Denied.

The Tribunal partially allowed the appeal of the assessee by deleting disallowances under sections 40(a)(ia) and 43B of the Income-tax Act, as well as the adjustment in book profit under section 115JB. However, the Tribunal dismissed the additional grounds for the deduction of marketing expenses, stating they should be allowed in the year the project is completed.

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Issues Involved:
1. Disallowance under section 40(a)(ia) and 43B of the Income-tax Act.
2. Adjustment in book profit under section 115JB of the Income-tax Act.
3. Deduction of marketing expenses not claimed in the original return.

Issue-wise Detailed Analysis:

1. Disallowance under section 40(a)(ia) and 43B of the Income-tax Act:
The assessee, engaged in real estate development, filed a return of income reporting a total income of Rs. 11,17,38,170/-. The return was processed by the Centralized Processing Centre (CPC), which made adjustments aggregating to Rs. 18,35,758/- under sections 40(a)(ia) and 43B of the Act. The assessee contended before the CIT(A) that these disallowances were already added in the computation of income, and making these adjustments again resulted in double taxation. The CIT(A) directed the AO to verify the facts and consider the adjustments based on verification. The Tribunal found that the CIT(A) did not follow the procedure prescribed under section 250 and 251 of the Act. After verifying the records, the Tribunal held that the disallowance of Rs. 18,35,758/- was not warranted, as it would amount to taxing the same amount twice.

2. Adjustment in book profit under section 115JB of the Income-tax Act:
The CPC made an arbitrary adjustment of Rs. 1,62,91,689/- to the book profit computed under section 115JB. The assessee explained that this amount represented the withdrawal from reserves/provisions already offered to tax in earlier years. The Tribunal noted that only specific adjustments are permitted under section 143(1) and directed the deletion of the adjustment made while computing the book profit under section 115JB.

3. Deduction of marketing expenses not claimed in the original return:
The assessee raised additional grounds before the CIT(A) for the deduction of Rs. 3,82,54,259/- towards marketing expenses, which were not claimed in the original return. The CIT(A) dismissed these additional grounds, stating that since the expenses were not claimed in the return and no disallowance was made by the AO, the question of allowing the same does not arise. The Tribunal examined the accounting treatment of these expenses, noting that the assessee adopted Ind AS 115 for revenue recognition, which follows the matching principle. The marketing expenses were included in the work-in-progress and not charged to the profit and loss account. The Tribunal concluded that these expenses should be allowed against revenue in the year the project is completed and sales are booked. Consequently, the Tribunal dismissed the additional grounds raised by the assessee.

Conclusion:
The Tribunal allowed the appeal of the assessee in part. It deleted the disallowances under sections 40(a)(ia) and 43B and the adjustment in book profit under section 115JB. However, it dismissed the additional grounds for the deduction of marketing expenses, stating they should be allowed in the year the project is completed. The order was pronounced in the open court on 01.03.2023.

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