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2020 (12) TMI 162 - AT - Income TaxDisallowance of loss arising on valuation of inventory (which is nothing but accumulated expenses of earlier years included as part of work-in progress - A.R. submitted that the income tax is to be charged on real income thus submitted that the assessee has treated the revenue expenses as work in progress and did not write off the same, since no business income was available - HELD THAT:- CIT(A) has noticed that the expenditure of ₹ 2.51 crores consisted of only "revenue expenses". He has further given a finding that, if at all these expenses are related to any abandoned project, the claim should have been made by the assessee in FY 2009-10, since the Joint Development Agreement was terminated in that year only. As earlier noticed that the assessee has treated these expenses as "pre-operative expenses" till 31.3.2010 and only in the financial year 2010-11, the assessee has converted the same as "work in progress". It is a well settled proposition of law that the accounting treatment given in the books of account is not binding on the assessee/revenue to determine the correct amount of total income under the Income tax Act. However, in order to claim any amount as expenditure or loss, the conditions or procedures prescribed under the Income tax Act should have been followed by the assessee. A.R. submitted that the accumulated amount of ₹ 2.51 crores represented only revenue expenses and hence the assessee could have claimed the same as business loss in the earlier years. In that case, the brought forward business loss would have been allowed as deduction. This submission of the assessee appears to be attractive. However, the Income tax Act prescribes conditions for filing of loss returns and for carry forward of losses. None of those conditions have been followed by the assessee and no loss was claimed or determined in any of the past years. Hence it cannot be presumed or deemed that the claim of the assessee represented brought forward loss. Accordingly, this contention of the assessee is liable to be rejected. As noticed that the amount of ₹ 2.51 crores represented expenses incurred by the assessee upto 31.3.2010. As observed by Ld CIT(A), the claim should have been made by the assessee in FY 2009-10 relevant to A.Y. 2010-11, since the Joint development agreement was terminated in that year. Hence we agree with the view of the Ld CIT(A) that this amount cannot be claimed during the year under consideration. In view of the above, we do not find it necessary to interfere with the order passed by Ld CIT(A). - Appeal of the assessee is dismissed.
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