TMI Blog2020 (12) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee/revenue to determine the correct amount of total income under the Income tax Act. However, in order to claim any amount as expenditure or loss, the conditions or procedures prescribed under the Income tax Act should have been followed by the assessee. A.R. submitted that the accumulated amount of ₹ 2.51 crores represented only revenue expenses and hence the assessee could have claimed the same as business loss in the earlier years. In that case, the brought forward business loss would have been allowed as deduction. This submission of the assessee appears to be attractive. However, the Income tax Act prescribes conditions for filing of loss returns and for carry forward of losses. None of those conditions have been followed by the assessee and no loss was claimed or determined in any of the past years. Hence it cannot be presumed or deemed that the claim of the assessee represented brought forward loss. Accordingly, this contention of the assessee is liable to be rejected. As noticed that the amount of ₹ 2.51 crores represented expenses incurred by the assessee upto 31.3.2010. As observed by Ld CIT(A), the claim should have been made by the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02,889/- out of the above said work in progress amount of ₹ 3,71,09,319/-. Following note was appended to the Annual report:- Certain preoperative expenditure amounting to ₹ 2,51,54,293/- incurred by the company during earlier years towards various activities with regard to various proposed projects hitherto considered as part of work in progress has been expenses out during the year by duly adjusting the carrying cost of project work in progress in view of discontinuance of those projects. 6. The above said claim of ₹ 2,51,54,293/- came to be considered by the Assessing officer. The discussions made by the AO are extracted below:- 2. During the year the company has expenses off certain pre-operative expenditure amounting to ₹ 2,51,54,293/- incurred during the earlier years towards various activities with regard to various projects proposed hitherto considered as part of work in progress by adjusting the carrying cost of projects work in progress in view of discontinuance of the projects. Sri Ramachandra Bhat P was required to furnish a justification for the claim as an allowable expenditure in response to which it is submitted that this exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld CIT(A) noticed that the Joint Development Agreement entered with Mr. Jayaram Shetty was terminated in FY 2009-10 itself, as per the agreements filed by the assessee. Hence he took the view that the assessee should have written off the expenses in FY 2009-10 itself and not two years later in FY 2011-12. The Ld CIT(A) also called for details of expenses relating to the claim of ₹ 2.51 Crores. The details furnished by the assessee have been extracted by Ld CIT(A) and his discussions are extracted below, for the sake of convenience:- 15. On the year wise details filed it is seen that the appellant has incurred expenditure as under. Financial Year 2007-08 6122376 Financial Year 2008-09 12847846 Financial Year 2009-10 6184071 Total 25151293 9. The Ld CIT(A) noticed that the contentions of the assessee are not appreciable and against the facts. The relevant discussions made by Ld CIT(A) and the decision taken by him are extracted below:- 17. On examination of this I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject which failed during the current financial year and the appellant lost money on that and therefore, the same needs to be written off and therefore charged to the P L account during this year itself. What I find instead is that there are common expenses like salary to managing director, salaries to staff, advertisement expenses and other expenses which cannot be related to any specific project. Therefore, the write off proposed by the appellant during the current year is not correct. The action of the AO is correct and the grounds of appeal are rejected. 24. Any way this will not result in any loss to the appellant and the common expenses which are charged to the P L account (after write off) will continue to remain a part of WIP and can be charged to the P L account based on percentage completion method in future years. 10. The Ld A.R. submitted that the income tax is to be charged on real income. He submitted that the assessee has treated the revenue expenses as work in progress and did not write off the same, since no business income was available. Only during the year relevant to AY 2012-13, the assessee has executed a project and could declare business income. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The Ld A.R. submitted that the accumulated amount of ₹ 2.51 crores represented only revenue expenses and hence the assessee could have claimed the same as business loss in the earlier years. In that case, the brought forward business loss would have been allowed as deduction. This submission of the assessee appears to be attractive. However, the Income tax Act prescribes conditions for filing of loss returns and for carry forward of losses. None of those conditions have been followed by the assessee and no loss was claimed or determined in any of the past years. Hence it cannot be presumed or deemed that the claim of the assessee represented brought forward loss. Accordingly, this contention of the assessee is liable to be rejected. 16. It can be noticed that the amount of ₹ 2.51 crores represented expenses incurred by the assessee upto 31.3.2010. As observed by Ld CIT(A), the claim should have been made by the assessee in FY 2009-10 relevant to A.Y. 2010-11, since the Joint development agreement was terminated in that year. Hence we agree with the view of the Ld CIT(A) that this amount cannot be claimed during the year under consideration. In view of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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