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2021 (9) TMI 1462 - ITAT DELHIDisallowance of expenses as no business activity was carried out by the assessee during the year under consideration - difference between commencement of the business and setting off of the business - HELD THAT:- The project cost in relation to a project comprises of cost of land and cost of development rights, borrowing cost, construction and development cost. In relation to land, the entire cost of land and development rights, stamp duty registration charges and other incidental expenses have to be capitalized. With relation to the borrowing cost, the interest directly related to the project is to be capitalized. All the direct costs relating to the construction and development of the specific project have to be capitalized. The construction cost includes conversion cost, municipal sanction fee, expenses incurred, site labour cost, cost of material, cost of hiring plant & machinery, cost of designs and claims of the third party. The general administrative cost, advertisement, brokerage, selling cost, depreciation of the vehicles and office expenditure are part of the revenue expenditure and need not be capitalized. There is difference between commencement of the business and setting off of the business. All the expenses incurred pre-commencement are to be treated as pre-operative expenses and the expenses incurred which do not form the part of the “work in progress” (WIP) like office expenses, salaries, advertising, travelling expenses which are incurred for running of the business operations are to be treated as revenue expenditure. Hence, the disallowance made by the AO is liable to be obliterated. Appeal of the assessee is allowed.
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