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2023 (3) TMI 281 - AT - Income Tax
Adjustments in the processing of return u/s 143(1) - disallowance u/s 40(a)(ia) and 43B - HELD THAT:- As referred to the computation of taxable income to demonstrate that adjustments made in the processing of return u/s 143(1) of the Act, in respect of disallowance made u/s 40(a)(ia) and 43B had already been added by the assessee suo motto.
CIT(A) has merely given directions to the ld. AO to verify the records and based on his verification of the records, he may consider the additions / disallowances to be made. We note that approach adopted by the ld. CIT(A) is not in accordance with the provisions of section 250 of the Act which prescribes the procedure in appeal to be complied with by the ld. CIT(A). Further, section 251 adequately empowers the ld. CIT(A) to exercise his powers while disposing the appeal. Despite such non adherence of the provisions of law by the ld. CIT(A), we ourselves find it proper to verify the records in this respect for the meritorious disposal.
Considering the facts on record and going through the computation of taxable income referred above, we without any hesitation hold that disallowance made u/s 40(a)(ia) and 43B is not warranted.
MAT computation u/s 115JB - In respect of arbitrary adjustment made in the book profit computed u/s 115JB of the Act, assessee has adequately explained his case that this amount represented the amount withdrawn from reserve/provision and the same stands credited in the profit and loss account for the year under consideration and was reduced from the book profit since it was already offered to tax in the earlier years. We note that certain specific adjustments are only permitted to be made under the provisions of Section 143(1) of the Act.we direct to delete the adjustment made while computing the book profit u/s 115JB of the Act.
Claim of deduction made by the assessee towards marketing and sales expenses relating to project Avidipta-II - accounting treatment in terms of applicable accounting standard and accounting principles - assessee has adopted ‘control approach’ for revenue recognition prescribed under the Ind AS 115 by considering satisfaction of performance obligation ‘over time’ which is taken to be analogous to PCM - HELD THAT:- Section 145 and 145A of the Act provides for computation of income under the head ‘profits and gains from business or profession’ and ‘income from other sources’ by applying the ‘Income Computation and Disclosure Standards (ICDS)’. Since no specific ICDS has been notified for real estate developers, revenue and cost recognition is governed by the applicable accounting standards and Ind AS discussed
Considering the discussion made on the accounting treatment in terms of applicable accounting standard and accounting principles as well as judicial precedents, we are of the considered view that claim of deduction made by the assessee towards marketing and sales expenses relating to project Avidipta-II are not allowable in the year under consideration while computing the total income under the provisions of the Act. However, keeping in mind the detailed discussion made above on the accounting treatment, we are of the considered view to hold that since these expenses have been accumulated in work-in-progress as per the above stated accounting standard and revenue recognition policy and also considering the matching concept of accounting principle, these have to be allowed and considered against the revenue in the year in which performance obligation is satisfied, in other words, in the year in which the said project is completed and sales are booked in the profit and loss account. Accordingly, ground no. 3 and 4 are dismissed.