TMI Blog2018 (10) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... or the said purpose will have to be treated as attributable to specific project and capitalised. The AO is directed to examine the payment of ₹ 15,65,000 and to the extent it relates to corporate brand identity exercise and logo design should be allowed as revenue deduction. The AO will allow opportunity of being heard to the assessee. - Decided partly in favor of assessee. Legal & professional charges - Held that:- the assessee had engaged professionals for carrying out liasoning work in relation to Sarjapur site. Therefore payment made to these two persons are referable to a particular project and therefore these expenses have to be capitalised to the concerned project. - Decided against the assessee. - ITA No.2242/Bang/2018 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginally, the claim of the assessee was rejected by the AO in his order of assessment u/s. 143(3) of the Income-Tax Act, 1961 [ the Act ] dated 22.12.2014. The assessee filed appeal before the CIT(Appeals), who by his order dated 31.3.2017 accepted the claim of the assessee that its business was set up during the relevant previous year, but did not allow expenses of Rs,15,65,000 claimed under the head advertisement and business promotion expenditure of ₹ 9,10,000 and ₹ 5,30,000 claimed under the head legal and professional charges . According to the CIT(Appeals), these two items of expenses were linked to the project already undertaken by the assessee and therefore ought to be capitalised as part of work-in-progress and proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional charges should not be capitalised as part of work in progress. The relevant clauses of AS 2 reads thus:- Definitions 3. The following terms are used in this Statement with the meanings specified: Inventories are assets: ( a) held for sale in the ordinary course of business; ( b) in the process of production for such sale; or ( c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. 4. Inventories encompass goods purchased and held for resale, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be clear from para 4 of AS-2, (b) advertisement and business promotion expenses as well as legal professional charges were related to a project and cannot be allowed as a revenue expenditure and have to be capitalised as capital cost of the project. Aggrieved by the aforesaid order of CITA, the assessee is in appeal before the Tribunal. 6. I have heard the submissions of the ld. Counsel for the assessee and the ld. DR. The ld. Counsel for the assessee reiterated the submissions as were made before the CITA. He filed a Paperbook containing several case laws which relate to applicability of AS-7 and AS-2. Since the assessee in the present case is following AS-9, these decisions are not relevant and the ld. Counsel for the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be treated as attributable to specific project and capitalised. The AO is directed to examine the payment of ₹ 15,65,000 and to the extent it relates to corporate brand identity exercise and logo design should be allowed as revenue deduction. The AO will allow opportunity of being heard to the assessee. 8. As far as legal professional charges are concerned, it is clear from the agreement between the assessee and Prashant Rana and Lenin R.K. that the assessee had engaged professionals for carrying out liasoning work in relation to Sarjapur site. Therefore payment made to these two persons are referable to a particular project and therefore these expenses have to be capitalised to the concerned project. We therefore uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Standards to be followed by an Assessee and no other accounting standard has been notified. 11. AS-7, AS-9 issued by ICAI or the ICAI Guidance Note on Accounting for Real Estate Transactions, 2006, have not been notified and hence they do not have statutory force. The Assessee follows mercantile system of Accounting. AS-7 or AS-9 or ICAI Guidance Note on Accounting for Real Estate Transactions, 2006, cannot be said to be either Cash system or Mercantile system of accounting. All these systems of recognizing revenue have trappings of both cash system or mercantile system but cannot be said to fall strictly within the parameters of either cash system or mercantile system of accounting. For example, in a real estate project if none of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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