TaxTMI 
TaxTMI 
2017 (11) TMI 2006
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....ssessing officer wide order dated 30/12/2011 under section 143 (3) of the income tax act (in short the act) for assessment year 2009 - 10 of Rs. 45038586/- is deleted. This is the solitary ground of appeal, which is as under:- "On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and on facts of the case in deleting the additions made by the Ld. AO amounting to Rs. 45038586/- comprising advertisement expenses of Rs. 1667436/-, business promotion of Rs. 1124141/-, brokerage and commission of Rs. 430540, 09/- and software developing charges of Rs. 205500/- treating them as capital in nature." 2. As assessee is a company engaged in the business of real estate and constructing residential and commercia....
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....e authority. Wide order dated 25/2/2014, the Ld. CIT (A) allowed the claim of the assessee, holding that treatment of such expenses as capital expenditure. Instead of revenue, shall in no way impact the taxation of the appellant because in case of treating the same as capital expenditure. These expenses will be allowed in the year when the transfer of property take place on the sale is booked. The Ld. CIT (A also appreciated the argument of the assessee that about disallowance/treatment is not in accordance with the accounting standard issued by the Institute of chartered accountants of India and would not be in consonance with the provisions of section 209 and 211 of the Companies Act, 1956. It was further held by him that no tangible asse....
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....ssessee has not agreed during the course of assessment proceedings that these disallowances may be made by treating the above expenditure as capital expenditure. He submitted that had there been an agreement to that assessee would not have come into this appeal. On the issue on the merit he vehemently relied upon the order of the Ld. CIT (A) and submitted that all these expenditure are revenue expenditure in nature. He vehemently relied upon the guidance not issued by the Institute of chartered accountants of India on real estate accounting. He submitted that the advertisement and business promotion expenditure are general administrative overheads and brokerage and commission expenditure incurred for the purpose of the sale of the project. ....
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....the assessee is covered by this decision of the coordinate bench. 6. We have carefully considered the rival contention and perused the orders of the lower authorities. The facts are that the assessee is developing a project and for which the assessee has incurred the cost of the project on the land and its development charges. The same have been capitalized as work in progress by the assessee. However, certain expenditure such as advertisement expenditure, brokerage expenditure, business promotion expenditure and software development charges were not capitalized by the assessee, but claimed as revenue expenditure. The guidance has been provided by the Institute of chartered accountants of India for accounting in case of real estate proje....
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....ant and equipment used for the project ; (e) costs of moving plant, equipment and materials to and from the project site; (f) costs of hiring plant and equipment; (g) costs of design and technical assistance that is directly related to the project; (h) estimated costs of rectification and guarantee work, including expected warranty costs; and (i) claims from third parties. 2.4 The following costs should not be considered part of construction costs and development costs if they are material: (a) General administration costs; (b) selling costs; (c) research and development costs; (d) depreciation of idle plant and equipment; (e) cost of unconsum....
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....lizing the project cost but should be expensed. The Ld. departmental representative could not point out that how the accounting made by the assessee is not proper with respect to the guidance note issued by the Institute of chartered accountants of India. Further, none of the expenditure incurred by the assessee were not found to be not genuine. Looking from the another angle about the expenditure claimed by the assessee, it would be apparent that if the assessee follows the completed contract method, then the assessee would be carrying on the cost of the project for the period till the project is sold. Naturally the cost of the project would be increased by these amounts and the revenue is duty bound to grant the deduction of this cost of ....