AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 1536
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....o the claim of expenses incurred for software up-gradation and services; (iii) in regard to payment of brokerage expenses, and (iv) with regard to payment made towards IBM and Bharti Airtel for providing computer maintenance and broadband services to the group. 2. The assessee, which is a builder and developer for Assessment Year (AY) 2008-09 filed its returns and had claimed deduction on account of various expenditures. For the purposes of this appeal, the Revenue urges four issues - outlined in the previous paragraph. The Assessing Officer (AO) had disallowed all four heads of expenditures. As the assessee follows the percentage method mandated (under Accounting Standards 7) [hereafter also referred to as "AS-7"], and recognised under ....
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....ze in the period in which they are incurred. The cost which can be attributed/allocated over the inventory should comprise all the cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. In the case of construction activities the cost of purchase of land and construction cost can only be attributed over the project. The brokerage expenses are purely a selling cost and cannot form a part of inventory. In view of the accounting standard, the brokerage expenses being a selling cost cannot be capitalized with the cost of inventory and cannot be allocated to the construction activity. It is also seen that this issue has been decided in favour of one of the group company nam....
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....ncluded in the cost of construction for the purpose of valuation of closing stock of WIP. The accounting standard of ICAI also does not support the proposition of capitalization of brokerage. I am, therefore, of the opinion that this expenditure cannot be capitalized and has to be allowed as arevenue expenditure. The above addition of Rs. 6,80,52,340/- is therefore, deleted. The ASSESSING OFFICER has relied upon the Supreme Court judgment in the case of Madras Industrial Investment Corp. 225 ITR 802 (SC) and has held that the expenses has to be spread over in several years if the benefit of such expenditure is continuing in the ensuing years. The facts of this judgment cannot be applied to the appellant's case as Brokerage and Commission l....
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.... AY 1984-85 and order of Tribunal and the decision of the Hon'ble Delhi High Court in the case of sister concern of the assessee. As rightly pointed out by ld. Counsel for the assessee, we find that identical issue has been considered by Tribunal in the case of M/s. DLF Ltd. (supra) wherein also the assessee was following POCM method of revenue recognition and disallowance of brokerage on similar reasoning was deleted by Tribunal by observing as follows: 169. We have carefully considered the rival contentions. We have also perused the order of ITAT in assessee's own case for AY 1984-85 submitted before us by the ld. AR. This decision has also been considered by the AO at page 188 of the assessment order. The AO has not followed this decis....
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....e, we confirm the order of CIT(A) in deleting the addition of Rs. 20,87,70,567/- on account of brokerage expenses for sale of various properties. Therefore, ground no.14 is rejected." 5. In DLF Universal Limited (supra), this Court after framing questions with respect to allowance under brokerage and commission claimed by the assessee in the context of percentage completion method adopted by it held as follows: "8. The assessee had claimed Rs. 61,78,414/- as expenditure towards brokerage and commission. The amount was paid to its brokers for booking and sale of certain properties during the assessment year. The Assessing Officer disallowed this expenditure on the ground that during the year the conveyance of the sale deeds were not execut....
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.... we are of the opinion that such expenditure has to be allowed. The question of law is consequently answered in favour of the assessee and against the Revenue." 6. It is not disputed that for past years as well, the treatment given by the assessee was accepted by the Revenue. Furthermore, the project completion method which this Court alluded to in DLF Universal Ltd. (supra) finds reflection as an approved method in the decision of the Supreme Court. Furthermore, this Court notices that as to what appropriate methods of treatment of expenditure in the hands of a particular business per se have to be adopted, is the subject matter of Accounting Standards. In the present case, after 2007, every builder must necessarily follow the percentage ....