2023 (8) TMI 284

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....of employee benefit expense, finance cost, administration expenses and depreciation by treating such expenditure as capital work-in-progress despite admitting the fact that Appellant had started/commenced its business during the year under consideration. 2. Without prejudice to Ground No. 1 above, the Ld. CIT(A)/AO have erred on facts and under the law in capitalizing the expenditure of Rs. 64,08,489/- to capital work- in-progress instead of capitalizing the same to inventory viz. work-in-process - construction of project. 3. That the Ld. AO was legally unjustified in assessing income from foreign exchange fluctuation, administration fee, rebate & discount and sundry balances written off aggregating to Rs. 4,10,426/- as income from othe....

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.... the ld Sr. DR supported the orders of the authorities below and submitted that the expenditure claimed by the assessee was not allowable as the same was to be allowed as deduction only when there is direct and intimate connection between the expenditure and character of the assessee as trader and not as owner of assets. He further submitted that the AO was right in holding that since the income of assessee from business and profession has been computed at Nil therefore, the expenses so disallowed are part of capital work in progress. The ld Sr. DR also submitted that even alternative prayer of assessee is not allowable as expenditure claimed have no linkage with the construction work in progress of the project undertaken by the assessee. H....

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....esulted into distortion of the correct profits, as per the project completion method followed. While reaching this conclusion, the ITAT discussed the then Bombay High Court decision in the case of Taparia Tools Ltd. (260 ITR 102), now affirmed by the Hon'ble Supreme Court of India) wherein the principle of matching concept had been upheld. Similarly as can be seen from the assessment order and from the financial statements filed before me, the appellant capitalized total expenditure under various heads amounting to Rs. 19,53,24,096/-. Expenses of similar nature amounting to Rs. 9,73,05,401/- were also capitalized in the preceding year. In the circumstances, since the costs are identified and determined by the appellant itself, and alloc....

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.... noted that the all the expenditure in question relate to the project particularly on advertisement and publicity expenses of Rs. 12.63 lakhs, commission payment of Rs. 28.94 lakhs, entertainment expenses of Rs. 1.19 lakhs and these expenses ought to be capitalized and added to the work in progress. 8. In my humble understanding neither the AO nor the Id CIT(A) has disputed the quantum and incurring all expenses for the purpose of business of assessee. The issue remains as to whether the claim of expenditure is allowable as revenue or the same required to be capitalized either as a part of capital work in progress or as part of work in progress of construction of project. The basis taken by the AO in presuming that business of the assessee....