Disallowance of Stamp Duty and Registration Expenses Set Aside Under Income Tax Rules Section

The ITAT Pune held that the disallowance of stamp duty and registration expenses was unwarranted. The assessee recognized revenue using the Percentage Completion Method, with costs properly adjusted in work-in-progress figures and indirect expenses reflected in the Profit and Loss Account. The AO did not dispute the correctness of opening and closing work-in-progress nor acknowledge that stamp duty and registration expenses were included under "Duties and Taxes" in the income tax return. The AO's observation regarding sales promotion expenses lacked support from the assessee's books. Since the expenses were duly reflected and net profits and losses from relevant sites were aggregated and offered to tax, the disallowance was set aside. The decision favored the assessee.

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The Appellate Tribunal (ITAT Pune) allowed the appeal of the assessee, a partnership firm engaged in building, against the disallowance of Rs. 9,79,600/- incurred towards Stamp duty and Registration expenses for A.Y. 2016-17. The disallowance was made by the Assessing Officer and upheld by the CIT(A) on the ground that the estimated project cost under the Percentage Completion Method (PCM) was inclusive of Sales and Promotion expenses. The Tribunal noted that the assessee had recognized revenue on PCM, with costs adjusted for closing work-in-progress, and that Stamp duty and Registration expenses were duly reflected under "Duties and Taxes" in the Profit and Loss Account and income tax return. The Assessing Officer did not dispute the correctness of opening and closing work-in-progress nor provide specific evidence from the books of account to support the disallowance. The Tribunal held that the impugned disallowance was "uncalled for," set aside the CIT(A) order, and allowed the appeal, stating the expenses were legitimately claimed and reflected in the return.

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