TMI Blog2013 (2) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... and they revolve around reasonable estimations. In that sense, the revenue’s objection on the quantification of the same is definitely justified. The said judgments concur with each other in allowing such liabilities, as long as such liabilities are capable of being estimated with reasonable certainty. Till these requirements are satisfied, the liability is not a contingent one The assessee is under obligation to explain to A.O. the mode and manner of arriving at the figure of Rs. 250/- per unit towards the site development expenses to be incurred in future. It is not the requirement of the law that the assessee can debit the said expenditure on actually incurring the same. Remand back to AO - ITA No.830/Hyd/2011 - - - Dated:- 7-9-2012 - Asha Vijayaraghavan and D. Karunakara Rao, JJ. Appellant Rep by: Shri K. Gnana Prakash Respondent Rep by: Shri C.P. Ramaswamy ORDER Per: Asha Vijayaraghavan: This appeal filed by the revenue is directed against the order of CIT(A), Vijayawada dated 28/02/2011 for the assessment year 2007-08. 2. Briefly stated the facts of the case are that the assessee company is in the business of real estate. For the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn. Consequently, the Assessing Officer had no reason to ignore the revised return. b) The Assessing Officer proceeded on his computation of income by adopting the income as per original return of income, which was based on the profit and loss account drawn in accordance with the books of accounts regularly maintained and audited. The Assessing Officer did not find any defects in the audited accounts. Consequently, he had no reason nor gave an reason to disallow the provision made in the accounts towards an estimated cost of site development for an aggregate sum of Rs. 1,48,45,500/- as debited in the P L account (though the Assessing Officer added only Rs. 1,48,45,000/-.) c) In this regard it is submitted that this estimated cost is provided on a realistic basis @ Rs. 250/- per sq.yard sold, with reference to actual number of sites sold and registered during the year under consideration. These all are expenditure committed to be incurred in terms of the sale agreements, besides the regulations prescribed by the local authorities. Consequently, this expenditure partly actually incurred and partly to be incurred. Consequently, there is no reason for disallowing this e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite development expenditure relatable to the area of plots sold and registered during the year is claimed as an admissible expenditure for the year, while, the total area of saleable land is 1,13,721 sq.yds, only 59,328 sq.yds have been sold during the relevant period. He further noted that the average sale price works out to Rs. 1089/- sq.yds is quantified by adopting an average rate of Rs. 250/- per sq.yd. which works out to Rs. 1,48,45,500/- and the total cost of plots sold works out to Rs. 777/- per sq.yd. which is inclusive of the future expenditure on site development of Rs. 250/- per sq.yd. 5. The CIT(A) observed that there can be no dispute over the fact that the assessee is under an obligation to develop the site as per the statutory approvals from the authorities and such an exercise would necessarily result in outflow of resources to meet the obligation. Therefore, a reasonable and reliable estimate of the obligation to develop the site has been made by the assessee by adopting an average rate of Rs. 250/- per sq.yd for the proposed expenditure. The CIT(A) further observed that as seen from the assessment order, the Assessee had demonstrated before the AO that whenever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rized the site development expenditure as provisional. 8. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. The AO made an addition of Rs. 1,48,45,000/- towards provisional cost of site development rejecting the submission of the assessee that the cost of plots sold included the provision for site development expenditure which was in proportion to the corresponding sales figures and the future expenditure being provisional cost of site development claimed by the assessee in its profit and loss account was submitted to be an admissible expenditure u/s 37(1) of the Act. The CIT(A), following the decision of Hon ble Supreme Court in the case of Rotork Controls India (P) Ltd. (supra), on which reliance placed by the assessee, held that the provisional cost of site development debited to the P L a/c is to be treated as an admissible expenditure as the cost of site development is held to be an ascertained liability. He, however, held that the revised return filed by the assessee being valid, the income of the assessee for the AY 2007-08 is to be adopted at Rs. 51,69,667/- as per the revised return. The H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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