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2022 (11) TMI 250 - HC - Income TaxNature of expenses - expenses on advertisement, business promotion, brokerage and commission and software development charges - Revenue or capital expenditure - classification of the expenses being a ‘revenue neutral’ exercise - ITAT referred to the Guidance Note provided by the ICAI for accounting in the case of real estate projects and concluded that the expenses under the four (4) heads disallowed by the AO are covered by paragraph no. 2.4 of the Guidance Note and are therefore, administrative expenditure and thus, these expenses cannot be carried forward and should be expensed and classification of the said expenditure as revenue expenditure would not place the Revenue at any disadvantageous position whereas it may put the Assessee to some disadvantage - HELD THAT:- The contention of the Revenue that the disallowed expenses are of an ‘enduring nature’ and should therefore be capitalized to the cost of the project is not based on any legal principle. The Revenue does not dispute that these expenses are not a direct cost of the specific project but are indirect costs incurred by the Assessee for development of its real estate business. Revenue does not dispute that these expenses are admittedly not incurred as cost towards completion of the on-going real estate project and therefore in our considered view these expenses cannot be added toward the cost of valuation of the specific asset. The expenses such as advertising expenses, business promotion and brokerage and commission have been incurred by the Assessee towards building its reputation and network in the real estate market and so also the software development charges are incurred towards administrative expenses. No error in the findings of the ITAT, which holds that the said expenses incurred by the Assessee are in the nature of general administration cost and selling cost as classified by the Guidance Note issued by ICAI. The said expenses had been incurred by the Assessee for its business and therefore, it qualifies for deduction as revenue expenditure, as per the decision of this court in Gopal Dass [2019 (3) TMI 1272 - DELHI HIGH COURT] The admissibility of the deduction is therefore not denied by Revenue but it is only the year of deduction which is sought to be postponed. It is in these facts the ITAT has held the classification of the expense is revenue neutral. It would be pertinent to note the decision of the Supreme Court on the issue of “revenue neutrality” wherein the Apex Court in the decision of Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] held in the subsequent accounting year, the assessee did derive benefits under the advance license and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic. No infirmity in the order of the ITAT and that any substantial question of law arises for consideration in the present appeal. Accordingly, the same is dismissed.
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