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2020 (2) TMI 153 - AT - Income TaxDisallowance of project management expenses claimed u/s 37 - Change in method of accounting in respect of project management expenses - Whether expenditure incurred after 01/07//2011 i.e.. after the suspension of the business cannot be capitalized as the property construction was not in existence during this period and there was no work in progress during this period? - HELD THAT:- In this case, there is no doubts with regard to the fact that the assessee has followed a consistent method of accounting for accounting project management expenses in the past, but due to changed circumstances, it has changed its method of accounting from a particular date and such changes was bonafide and need of the hour. AO, as well as the Ld.CIT(A) were erred in coming to the conclusion that the assessee has changed its method of accounting without there being any changes in facts and circumstances and such changes was not bonafide. Hon’ble Bombay High Court, in the case of Bajaj Auto Limited vs CIT [2016 (9) TMI 1047 - BOMBAY HIGH COURT] had taken similar view and held that the assesee was well within its rights to bring about changes, so long as the assesse adopts such change bonafide and propose to employee the new method regularly. In this case, the assessee has changed method of accounting inrespect of project management expenses from a particular date and said method of accounting has been continued in subsequent years and which has been accepted by the revenue. Change in method of accounting was also supported by a reason of temporarily suspension of business activity due to circumstances beyond the control of the assessee. Therefore, assesee was well within its right to change method of accounting for accounting particular expenditure. The Ld. AO and Ld.CIT(A) without appreciating the fact that has simply rejected the claim of the assessee, without assigning any reasons, how the changed method of accounting was not in accordance with the principles of accounting followed by the assesse. Hence, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were erred in disallowed, project management expenses claimed by the assessee u/s 37(1) - Decided in favour of assessee.
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