Project marketing expenses for real estate development held allowable as revenue expenditure; addition deleted.

Project marketing expenses incurred for commercial properties were claimed as revenue expenditure in the profit and loss account without being capitalised in work-in-progress. The assessee, a real estate developer, had not effected any sale of commercial property during the year, and the revenue authorities' adjustment was treated as tax-neutral because any allowance or disallowance would require corresponding adjustments in later years through carry forward, set-off, or work-in-progress. Given the practical difficulty of making year-wise adjustments across multiple assessment years, the addition was deleted and the claim was accepted in favour of the assessee.

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Issues: Whether project marketing expenses incurred in connection with commercial properties, claimed as revenue expenditure in the profit and loss account without capitalisation in work-in-progress, were allowable for the year under appeal.

Analysis: The assessee was engaged in real estate development and no sale of commercial property took place during the year. The disputed expenditure related to marketing of the project and had been debited to the profit and loss account. The adjustment made by the Assessing Officer was treated as tax-neutral because allowing the expenditure in the current year would affect carry forward and set-off in later years, while disallowance would require corresponding upward adjustment in work-in-progress. In view of the practical difficulty in making year-wise adjustments across multiple assessment years, the addition was not sustained.

Conclusion: The addition was deleted and the issue was decided in favour of the assessee.

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