Assessee wins appeal as advertisement and business promotion expenses for flat sales allowed as legitimate marketing costs

ITAT Delhi allowed the assessee's appeal regarding disallowance of advertisement and business promotion expenses. The tribunal held that these expenses were legitimately incurred for marketing and selling flats, with genuineness undisputed by Revenue. Following accounting standards and precedent from Somnath Buildtech case, AO was directed to delete the disallowances. Regarding TDS credit denial per Form 26AS, ITAT directed AO to verify the claim and provide appropriate relief if found correct.

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Issues involved:
The judgment involves issues related to the assessment of total income, disallowance of expenses, charging of interest, initiation of penalty proceedings, and denial of credit of TDS.

Assessment of Total Income:
The appeal was against the order assessing the total income of the assessee at INR 63,88,750, contrary to the returned loss of INR 5,10,67,809, based on directions from the Dispute Resolution Panel for the Assessment Year 2014-15.

Disallowance of Expenses - Advertisement and Business Promotion, Brokerage:
The Assessing Officer disallowed advertisement and business promotion expenses of INR 5,12,89,562 and brokerage expenses of INR 61,67,000, considering them as project expenses not incurred for earning revenue during the year. The Dispute Resolution Panel upheld these disallowances.

Arguments and Rulings:
The assessee, a real estate developer, followed the Percentage Completion Method of accounting and did not book revenue due to project completion being only 0.14%. The expenses were claimed for marketing and selling flats, not solely for the project. The Tribunal found the expenses necessary for the business and in compliance with Accounting Standards. Citing relevant case laws, the Tribunal dismissed the Revenue's contention and allowed the appeal to delete the disallowances.

Denial of Credit of TDS:
Ground No. 4 related to the denial of credit of TDS as per Form 26AS. The Tribunal directed the Assessing Officer to verify the claim and provide relief if found correct.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of disallowances of expenses and verification of TDS credit. The judgment was pronounced on 21st February 2024.

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