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TMI Blog2014 (12) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) - 38, Mumbai, erred in law and in facts in considering aggregate indirect expenditure of Rs. 48,74,727 i.e. employee cost Rs. 760,169, administrative expenses Rs. 137,574 (both net of expenses allocated to property under development) and selling/marketing expenses Rs. 39,76,983 for calculating closing workin- progress as on 31 March 2008 for the reason that same is not allowable as revenue expenditure. 2. Without prejudice to ground no. 1 above, on the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in law and in facts in calculation of Rs. 29,94,659 to be added to work in progress in respect of expenditure mentioned in ground no. 1 above. 3. On the facts and in the circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceeding, Assessing Officer (hereinafter referred to as the AO) asked the assessee to explain as to why the above stated expenses relating to proportionate Employees cost, Office and administrative expenses and selling & marketing expenses should not be disallowed and carried forward to the work-in-progress. The assessee explained that the employee cost of Rs. 7,60,169/- was in respect of salary paid to the employees who were looking after the administration of office and not directly related to construction of the project. Similarly, for the office and administrative expenses, the same were incurred for office and administration purposes further that the selling and marketing expenses had been incurred for selling and marketing of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises undertaking the construction activities on their own account as a venture of commercial nature" (copy placed at page 49 & 50 of paper book) wherein it has been stated that revised AS -7 shall not be applicable to the builders undertaking the commercial activity on their own and it was also stated that the work in progress shall constitute inventory for the builders and shall be valued as per AS-2 issued by the Institute of Chartered Accountant of India (ICAI). The Ld. Counsel has further submitted that the assessee has accordingly followed the Accounting Standard -2 for determining the work in progress. He has further brought our attention to para 13 of As-2, wherein it has been mentioned that the following expenses have to be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive expenses and selling expenses are not project cost and are to be charged to the profit & loss account in the very same year in which they are incurred. In view of the above facts and following the Guidance Notes and Accounting Standards, the assessee has individually worked out the expenses directly related to work in progress and expenses not related to work in progress and accordingly debited in respective heads. The Ld. Counsel has further relied upon section 145A of the Act, which read as under: "[Method of accounting in certain cases. 145A. Notwithstanding anything to the contrary contained in section 145,- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect to interest as the assessee itself has added the interest cost to the work-in-progress and claimed it in subsequent year in the proportion of revenue offered. Thus, the facts in assessee's case are quite distinguishable and the decision of Special Bench (supra) is not applicable to the facts of the assessee's case. 10. The ld. DR on the other hand has relied upon the findings of the lower authorities. He has stressed that the Ld. CIT(A) has rightly appropriated the indirect expenses to the WIP in proportion to the percentage of completion in respect of the area sold. 11. We have considered rival contentions and carefully gone through the orders of the authorities below. The percentage completion method of accounting has been regularl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office employees' salary, administrative expenses and marketing & selling expenses is as per the recognized principles of accountings and as such the claim of the assessee deserves to be allowed. We hold accordingly. The additions made by the lower authorities on this issue are hereby ordered to be deleted. Ground No.3 12. The Ld, representatives of the parties have stated that since the Ld. CIT(A) has failed to adjudicate this ground, the same should be restored to the CIT(A) for adjudication. This ground/issue is accordingly restored to the file of the CIT(A) for adjudication after giving the parties a proper opportunity to present their case. 13. In the result, the appeal of the assessee is hereby allowed. Order pronounced in the op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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