Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (3) TMI 1230 - AT - Income TaxDisallowance of expenditure incurred by the assessee towards project - non commencement of business - Methods of accounting - HELD THAT:- Upon perusal of clause-19, we find that General administration costs and selling costs are generally not considered a part of contract cost unless they are contract specific. Applying the same to the fact of the case, we find that the assessee has debited expenditure of such a nature only in the Profit & Loss Account. Theses expenditure was not project specific and allowable as period cost. Nothing on record establishes that there was any change in aforesaid method of accounting by the assessee during the year under consideration. As held that AS-7 as an approved system of accounting and regular accounting methodology adopted by the assessee could not be disregarded by the department. On the basis of above discussion, it could be observed that the assessee was consistently following a particular method of accounting which was in accordance with Accounting Standard issued by ICAI and which is well accepted by higher courts. Therefore, there being no change in fact, the said methodology could not be rejected by the revenue. Most importantly, the Tribunal in assessee’s own case for AY 2012- 13 had held that it was not necessary that the business had actually commenced for claiming of expenses but the relevant fact was that the business was set up or not. It is quite evident from the financial statements, that the assessee had already set up its business and was undertaking various projects, the expenditure of which was being accumulated under the head Capital Work-in-progress. Therefore, the observation of Ld. CIT(A) that the business was not set up could not be sustained. Keeping in view the entirety of facts and circumstances, the disallowance as confirmed by Ld. CIT(A) could not be sustained in the eyes of law. By deleting the same, we allow ground no.1 Disallowance u/s 14A r.w.r. Rule 8D(2)(iii) - HELD THAT:- We find that no adjudication has been rendered by Ld. first appellate authority, in this regard since the same was termed as academic in nature. However, going by the factual matrix, we find that the assessee has already offered suo-moto disallowance of ₹ 0.75 Lacs against the exempt income and Ld. AO without considering the basis of disallowance, has proceeded to apply Rule 8D. We find that the issue of disallowance u/s 14A for AY 2012-13 has already been sent back by the Tribunal to Ld.AO for fresh adjudication. Therefore, with a view of enable the revenue to take consistent stand in the matter, the matter of disallowance u/s 14A would stand remitted back to the file of Ld. AO on similar lines.
|