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2022 (10) TMI 1043 - AT - Income TaxAllowance of project expenditure - Allowability of deferred revenue expenditure which is getting claimed by the assessee over and above the actual project expenses amount already considered in purchase - HELD THAT:- As sole project entered into by the assessee is pending at approval stage and the project has not taken-off yet. The assessee has only constructed model apartment and launched pre-commencement sale. During appellate proceedings, the assessee submitted that expenditure incurred are to be claimed in the years in which it is actually incurred and income is to be offered in the year of receipt which violates the matching concept of accounting. In the construction activities, the income has to be offered either on percentage of completion method or on the basis of completed contract method. From the fact, it emerges that the project has not taken-off and therefore, the expenditure incurred by the assessee are to be taken as incurred during pre-commencement stage. Under such circumstances, the same could not be allowed as business expenditure but the same are to be capitalized along with project expenditure as held by Tribunal in AY 2012-13 [2022 (2) TMI 696 - ITAT CHENNAI] Facts being pari-materia the same, we direct Ld. AO to verify the expenditure incurred by the assessee and allow capitalization of the same. The revenue’s appeal stands partly allowed. Disallowance of project expenses written-off - HELD THAT:- Since we have allowed capitalization of expenses for AY 2013- 14, the same would have direct bearing on income computation of this year. It could also be seen that the expenditure has been allowed to be capitalized for AY 2012-13 also. In this year, the assessee has carried out business operations and would be entitled to claim the corresponding expenditure as per percentage of completion method of accounting being followed by it. Therefore, this issue stand restored back to Ld. AO for fresh adjudication in the light of adjudication of earlier years. The revenue’s appeal stand allowed for statistical purposes. Disallowance of Bad Debts u/s 36(1)(vii) r.w.s. 36(2) - HELD THAT:- From the facts, it emerges that the assessee has lent surplus funds to another entity which are not business advances. No commercial expediency of advances could be demonstrated by the assessee. The assessee claimed the write-off of advances as irrecoverable u/s 36(1)(vii) which applies for a business transaction only and not otherwise. The money lending is not the business of the assessee neither the advances were incidental to the business activities of the assessee. In such a case, the ratio of recent decision in Ashok Leyland Ltd. [2022 (6) TMI 269 - MADRAS HIGH COURT] would squarely apply to the facts of the case - Respectfully following the same, we dismiss the ground raised by the assessee.
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