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2019 (11) TMI 138 - AT - Income TaxAllowable business expenses/loss - compensation expenses attributable to unsold part of land - HELD THAT:- There is no dispute regarding genuineness of the payment. In this view of the matter there is no accounting mandate that business expenditure incurred need to be allocated to the entire cost of land which is in stock of assessee to artificially increase the cost. In fact this is not sustainable as per accounting principle as the compensation paid has not been incurred for acquisition of land. The value of land is the cost incurred and other incidental expenses incurred for acquisition of land. The work-in-progress in this regard would be development activity done, which enhance the value of land. By no stretch of imagination the compensation paid for breach of contract can be treated as development activity in the land. There is no concept of deferred revenue expenditure in tax laws. If the expenditure incurred is revenue in nature the same has to be allowed as expenditure/loss and the same is not to be allocated over some years. Decision of Vatika Town Ships P. Ltd. [2013 (6) TMI 622 - ITAT DELHI] (to which one of the Accountant Member was a party) is fully applicable in the facts of the case wherein as held that when advances are returned alongwith interest, for booking of plots, when deal could not be materialized the compensation paid was business expenditure. This decision has been elaborately quoted by learned CIT(A) in his order reproduced above. Similarly, Hon'ble Delhi High Court in the case of CIT Vs. Bhagwan Das Rameshwar Dayal [1984 (5) TMI 35 - DELHI HIGH COURT] has held that damages paid on account of breach of contract are normal loss incidental to business. There is no infirmity in the order of learned CIT(A) that the compensation paid by the assessee is business expenditure/loss and the same is allowable in the present assessment year itself. - Decided against revenue
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