2025 (7) TMI 1678 - AT - Income Tax

Disallowance of towards Stamp duty and Registration expenses - estimated project cost used for the purpose of computation of Percentage Completion is inclusive of Sales and Promotion expense - as per DR Stamp duty and Registration expenses are not appearing in the income tax return filed - assessee submitted that genuine expenses incurred towards Stamp duty and Registration have been debited to the Profit and Loss Account and that the revenue has been recognised on the basis of Percentage Completion Method (PCM) and income has been offered to tax HELD THAT - Assessee is showing the revenue based on the Percentage Completion Method and cost portion is adjusted in the figure for closing work-in-progress and the other indirect expenses incurred during the year are duly reflected in the Profit and Loss Account. AO has not disputed the correctness of the opening and closing work-in-progress. AO has also not taken into account that the Stamp duty and Registration expenses which have been included under the head Duties and Taxes and duly reflected in the income tax return. AO has observed that the assessee has claimed for the Sales Promotion expenses. This observance of the AO is not supported by any specific observations from the Books of Account of the assessee regularly maintained. Computation of income and Income and Expenditure account and the relevant schedules of the income tax return filed by the assessee and notice that the expenses of Stamp duty and Registration expenses have been duly reflected in the income tax return under the head Duties and Taxes and the net profit from the Kothrud site along with loss incurred in Shivajinagar site have been aggregated and offered to tax in the computation of income. Impugned disallowance is uncalled for. Decided in favour of assessee.

Summary

The Appellate Tribunal (ITAT Pune) allowed the appeal of the assessee, a partnership firm engaged in building, against the disallowance of Rs. 9,79,600/- incurred towards Stamp duty and Registration expenses for A.Y. 2016-17. The disallowance was made by the Assessing Officer and upheld by the CIT(A) on the ground that the estimated project cost under the Percentage Completion Method (PCM) was inclusive of Sales and Promotion expenses. The Tribunal noted that the assessee had recognized revenue on PCM, with costs adjusted for closing work-in-progress, and that Stamp duty and Registration expenses were duly reflected under "Duties and Taxes" in the Profit and Loss Account and income tax return. The Assessing Officer did not dispute the correctness of opening and closing work-in-progress nor provide specific evidence from the books of account to support the disallowance. The Tribunal held that the impugned disallowance was "uncalled for," set aside the CIT(A) order, and allowed the appeal, stating the expenses were legitimately claimed and reflected in the return.