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2019 (4) TMI 364

enses u/s 35D - HELD THAT:- The nature of expenses incurred by assessee by giving assured returns to customers from whom capital was received from customers which should form part of construction project. In our opinion these expenditure are to be considered as part of capital project. Thus such capital expenditure spending would impact Balance Sheet and cannot form part of Profit & Loss account directly. - We thus do not agree with analogy applied by CIT(A) regarding assured returns expenses in the nature of ‘selling cost’. - Assessee placed reliance upon decision of CIT vs M/s Doomketu Builders [2013 (4) TMI 668 - DELHI HIGH COURT]. It is observed that the issue before Hon’ble Court was, whether business in real estate development .....

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PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by revenue against order dated 20/03/2050 passed by Ld. CIT (A)-3, Delhi for assessment year 2009-10 on following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in holding that income of the assessee has to be computed in accordance with POCM method without considering that the assessee had submitted before the AO that the construction of the building has not started during the year and there was no possibility of applying percentage completion method. 2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in allowing deduction for various expenses following POCM method without examining .....

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notice under section 143 (2) of the Income Tax Act, 1961 (the Act) was issued to assessee. In response to statutory notice, Representative of assessee appeared before Ld. AO and furnished details as called for. Ground No.4 2.1. Ld.AO observed that assessee is a company engaged in the business of construction of commercial buildings to be used as office spaces. During the course of assessment proceedings, Ld. AO observed that assessee had shown stock in hand at ₹ 68,86,91,281/-under the head income and had claimed expenditure amounting to ₹ 2,52,54,490/-. Ld. AO called upon assessee to explain as to why these expenses prior to commencement of business were not capitalized, but claimed as revenue expenses. In reply, assessee submi .....

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77; 2,17,41,335/- which was shown as assured return, ₹ 32,90,015/- as other expenses and ₹ 35,370/- in P&L account by assessee, by holding that these are in the nature of selling cost as it related directly to sales. 5.1. Referring to section 35D, Ld.Sr.DR submitted that, what is allowable under this section is expenditure in connection with preparation of any feasibility report, preparation of project report, conducting market survey or any other survey necessary for business of assessee, engineering services relating to business of assessee so on and so forth specifically mentioned under Sub- Clause 2 of Section 35D. He thus vehemently argued that preliminary expenses allowed by Ld. CIT (A) is not as per law. 6. On the con .....

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st . 8.3. Assessee placed reliance upon decision of Hon ble Delhi High Court in case of CIT vs M/s Doomketu Builders (supra). It is observed that the issue before Hon ble Court was, whether business in real estate development was set up during relevant accounting year, which is not the case before us. There is no dispute regarding the business being set up during the year. 8.4. We are therefore of the view that ₹ 2,17,41,335/-towards assured returns to be capitalized/shown as work-in-progress. 8.5. As regards other expenses amounting to ₹ 32,51,545/- deleted by Ld.CIT (A), it is observed that assessee stated it to be in the nature of professional charges and commission. No details regarding the same was furnished by way of vouch .....

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