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2018 (12) TMI 1381 - AT - Income TaxDisallowance of proportionate revenue expenditure - allocating adhoc 10% of other expenses to work-in-progress account - Held that:- Neither, the assessee has furnished any details and reasons for allocating adhoc 10% of other expenses to work-in-progress account nor the AO has given any reasons for adopting the basis of capital deployment, i.e. work-in-progress ratio to the total assets’ ratio to allocate other expenses. The assessee as well as the AO has gone on adhoc basis of allocation of expenses. From this, it is clear that neither the assessee has justified treatment of other expenses being revenue in nature, nor the AO has proved that these expenses are directly relatable to the project undertaken by the assessee to be capitalized to work-in-progress account - neither the assessee has justified its allocation of 10% expenses to work-in-progress nor the AO has justified in allocating the expenditure on the basis of work-in-progress to total asset ratio. A reasonable percentage of expenditure debited under the head ‘other expenses’ needs to be allocated to work-in-progress account. Accordingly, we direct the AO to allocate 25% of other expenses of ₹ 24,74,231 as directly related to the project to be capitalized under the head ‘work-in-progress account’. We, order accordingly.
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