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2019 (4) TMI 364 - AT - Income TaxAllowability of revenue expenses in construction business - expenses related to assured returns on capital investment - capital as part of WIP or revenue - POCM method followed - preliminary expenses u/s 35D - HELD THAT:- The nature of expenses incurred by assessee by giving assured returns to customers from whom capital was received from customers which should form part of construction project. In our opinion these expenditure are to be considered as part of capital project. Thus such capital expenditure spending would impact Balance Sheet and cannot form part of Profit & Loss account directly. We thus do not agree with analogy applied by CIT(A) regarding assured returns expenses in the nature of ‘selling cost’. Assessee placed reliance upon decision of CIT vs M/s Doomketu Builders [2013 (4) TMI 668 - DELHI HIGH COURT]. It is observed that the issue before Hon’ble Court was, whether business in real estate development was set up during relevant accounting year, which is not the case before us. There is no dispute regarding the business being set up during the year. We are therefore of the view that assured returns to be capitalized/shown as work-in-progress. As regards other expenses deleted by Ld.CIT (A), it is observed that assessee stated it to be in the nature of professional charges and commission. No details regarding the same was furnished by way of vouchers/bills, to ascertain true nature for its allowability. Before CIT(A) also assessee has not filed any details, and merely submitted that these are preliminary expenses. Audited accounts filed before us also do not reveal exact nature of these payments. Thus it could not have been ascertained whether these expenses were incurred towards professional charges & commission. Even before us, assessee did not file any details/evidences/documents, which could throw light on nature of expenses. We therefore uphold the view taken by AO and restore disallowance towards other expenses. As regards a sum of ₹ 35, 370/-, it is observed that assessee has not provide details regarding the same either before Ld.AO or Ld.CIT(A). We therefore uphold the disallowance by Ld.A.O - decided against assessee.
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