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2019 (5) TMI 1066

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..... ELD THAT:- Test adopted by the CIT (A) was the right one. Further, the guidance note of the ICAI which lays down the accounting standards to be followed in such circumstances has been correctly applied, both by the CIT (A) as well as the ITAT. These are purely indirect not related to the cost of the project and therefore, same could not have been taken the project as workin- progress. Such an advertisement expenditure on account of brand promotion advertisement, etc are indirect revenue expenditure which are otherwise allowable as business expense u/s 37 (1). As per the . guidance note of accounting for real estate issued by lCAI, selling cost is not included in the cost of construction and development and since it is an indirect cost, ther .....

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..... on of the Revenue was that the expenditure to an extent of ₹ 1,72,25,470/- should have been taken as work in progress instead of claiming it as indirect expenses in the profit and loss account. 5. With the Assessing Officer ( AO ) having not agreed with the Assessee on this aspect, an appeal was filed before the Commissioner of Income Tax (Appeals) [ CIT (A) ] who agreed with the Assessee by following the guidance note of the Institute of Chartered Accountants of India ( ICAI ) as regards accounts of real estate transactions. It was held that the AO was in error in taking all the selling and market expenses to work in progress. 6. The Revenue s appeal has been dismissed by the ITAT by observing as under: 6. After considering the findi .....

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..... ICAI and also the accounting standard has given a categorical finding that selling and marketing expenses being indirect expenditure cannot be taken to the work in progress and therefore such a disallowance made by the AO treating it to part of work-in-progress has rightly been deleted by him. Accordingly 'bider' or Ld. CIT (A) on this score is upheld. 7. Having heard learned counsel for the Revenue, this Court is satisfied that the test adopted by the CIT (A) was the right one. Further, the guidance note of the ICAI which lays down the accounting standards to be followed in such circumstances has been correctly applied, both by the CIT (A) as well as the ITAT. 8. No substantial question of law arises for consideration. The appeal .....

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