TaxTMI 
TaxTMI 
2007 (10) TMI 315
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.... projects. 1b. While doing so, learned CIT (A) failed to appreciate that the said expenditure was required to be capitalized and could not be allowed as a deduction even going by the assessee's method of accounting. 3. Briefly stated, the facts are that the assessee is a builder and developer. The assessee firm has shown income of Rs. 16.08 lakhs from its completed project of Panchavati Gardens. It is noted by the AO from the P&L a/c of the assessee that an amount of Rs. 14,27,377 has been debited to the P&L a/c towards advertisement and exhibition charges. The assessee was asked by the AO to explain why this expense of Rs. 14,27,377 should not be disallowed as these are not related to completed projects of field view and Panchavati G....
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....n appeal before learned CIT (A). Learned CIT (A) deleted this disallowance on the basis that there is no justification for the AO in treating the advertisement expenditure on different footing from the other administrative expenses such as salary, telephone expenses, conveyance, general charges etc, as the advertisement expenses as well as all such other expenses like salary, office expenses, conveyance etc. are non allocable expenditure to any specific project undertaken by the assessee. It is held by learned CIT (A) that the disallowance is found to have been made for no valid reason and on this basis, he deleted this disallowance. Now, the Revenue is in appeal before us. 4. Learned Departmental Representative of the Revenue supported ....
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.... was transferred to the assessee firm. Similarly, our attention was drawn to page No. 12 of the paper book which contains a bill of Rs. 8,84,001 out of which also, 2/5th has been allocated to the assessee. It is submitted that this bill of Rs. 8,84,001 is on account of advertisement during 13th Feb., 2001 to 15th Feb., 2001 in four newspapers. It is submitted that the copies of these newspaper cuttings are appearing on page Nos. 13 to 15 of the paper book and in these newspaper cuttings, five projects are referred to of Dynamix group, out of which, two projects i.e. Millennium Gardens and Madhuban are belonging to the assessee firm; and hence, 2/5th expenses are transferred to the assessee firm. It is submitted that on the same basis, Rs. 1....
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....struction Ltd. v. Jt. CIT [2006] 102 TTJ (Mumbai)(SB) 505 : [2006] 101 1TD 156 (Mumbai)(SB). It is submitted that in this judgment of the Special Bench of the Tribunal, reliance was placed by the assessee on AS-7 issued by the Institute of Chartered Accountants of India, which has been referred to by the Special Bench in para No. 6 of the judgment and as per the same, example of cost that relates directly to a specific contract does not include expenses like advertisement; and hence, as per this judgment of the Special Bench, advertisement expenses cannot be capitalized because in the present case, advertisement expenses are not referable to a particular project. Reliance was placed on the Tribunal judgment rendered in the case of Paranjpe ....
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.... materials on record and have gone through the orders of authorities below and judgments cited by learned Authorised Representative of the assessee. We find that in the case of Wall Street Construction Ltd., it was held by the Special Bench of the Tribunal that if the assessee is following project completion method of accounting, Interest identifiable with that project should be allowed only in the year, in which project is completed and income from that project is offered for taxation and it cannot be allowed on year to year basis. In para No. 22 of this judgment, it is noted by the Special Bench that interest expenses are allocated to different projects. In the light of these facts, we examine the facts of the present case. In the present....
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....nses because these administrative expenses cannot be allocated to individual project on any rational basis. Whereas, advertisement expense is found to be allocable to individual project on the same basis as per which, these expenses were allocated by Dynamix group to the assessee firm. In the light of this fact, we are of the considered opinion that judgment of Special Bench of the Tribunal rendered in the case of Wall Street Construction Ltd. is directly applicable to the present case, and respectfully following the same, we hold that advertisement expenses should be capitalized as work-in-progress; and the same are not allowable as expenditure in the present year. 10. Regarding the Tribunal judgment rendered in the case of Paranjape Gr....