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TMI Blog2017 (11) TMI 2006X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 under section 143 (3) of the income tax act (in short the act) for assessment year 2009 - 10 of Rs. 45038586/- is deleted. This is the solitary ground of appeal, which is as under:- "On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and on facts of the case in deleting the additions made by the Ld. AO amounting to Rs. 45038586/- comprising advertisement expenses of Rs. 1667436/-, business promotion of Rs. 1124141/-, brokerage and commission of Rs. 430540, 09/- and software developing charges of Rs. 205500/- treating them as capital in nature." 2. As assessee is a company engaged in the business of real estate and constructing residential and commercial projects mainly in the state of Rajasthan. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (A) allowed the claim of the assessee, holding that treatment of such expenses as capital expenditure. Instead of revenue, shall in no way impact the taxation of the appellant because in case of treating the same as capital expenditure. These expenses will be allowed in the year when the transfer of property take place on the sale is booked. The Ld. CIT (A also appreciated the argument of the assessee that about disallowance/treatment is not in accordance with the accounting standard issued by the Institute of chartered accountants of India and would not be in consonance with the provisions of section 209 and 211 of the Companies Act, 1956. It was further held by him that no tangible asset is being created by treating these expenses as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings that these disallowances may be made by treating the above expenditure as capital expenditure. He submitted that had there been an agreement to that assessee would not have come into this appeal. On the issue on the merit he vehemently relied upon the order of the Ld. CIT (A) and submitted that all these expenditure are revenue expenditure in nature. He vehemently relied upon the guidance not issued by the Institute of chartered accountants of India on real estate accounting. He submitted that the advertisement and business promotion expenditure are general administrative overheads and brokerage and commission expenditure incurred for the purpose of the sale of the project. Therefore, it's the sales cost. Regarding the software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate bench. 6. We have carefully considered the rival contention and perused the orders of the lower authorities. The facts are that the assessee is developing a project and for which the assessee has incurred the cost of the project on the land and its development charges. The same have been capitalized as work in progress by the assessee. However, certain expenditure such as advertisement expenditure, brokerage expenditure, business promotion expenditure and software development charges were not capitalized by the assessee, but claimed as revenue expenditure. The guidance has been provided by the Institute of chartered accountants of India for accounting in case of real estate projects. These guidelines are undisputedly applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) costs of hiring plant and equipment; (g) costs of design and technical assistance that is directly related to the project; (h) estimated costs of rectification and guarantee work, including expected warranty costs; and (i) claims from third parties. 2.4 The following costs should not be considered part of construction costs and development costs if they are material: (a) General administration costs; (b) selling costs; (c) research and development costs; (d) depreciation of idle plant and equipment; (e) cost of unconsumed or uninstalled material delivered at site; and (f) payments made to sub-contractors in advance of work performed. 2.5 Costs that may be attributable to project activity in general and can be alloca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, none of the expenditure incurred by the assessee were not found to be not genuine. Looking from the another angle about the expenditure claimed by the assessee, it would be apparent that if the assessee follows the completed contract method, then the assessee would be carrying on the cost of the project for the period till the project is sold. Naturally the cost of the project would be increased by these amounts and the revenue is duty bound to grant the deduction of this cost of project at the time of sale. Therefore in that particular scenario, the amount of expenditure incurred by the assessee would be allowed to the assessee is a deduction in that particular year. If the deduction is allowed to the assessee during this year an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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