TMI Blog2017 (11) TMI 2006X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and the assessee has incurred loss assessee is duty bound to set of this loss within a specified number of assessment year specified under section 72 of the Income Tax Act, i.e. 8 years. If the assessee cannot set of these losses during that particular period then the assessee forgoes the tax advantage of claim of the loss. Therefore, even if the expenditure is allowed to the assessee for this year as deduction, it does not make the case of the revenue at any disadvantageous position, in fact, it puts assessee into some disadvantage On the identical facts and circumstances of the case, the coordinate bench in case [ 2016 (11) TMI 709 - ITAT MUMBAI] for assessment year 2008-09 has allowed the claim of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57074/ . The balance amount of Rs. 53100923/- is been charged to the profit and loss and claimed as expenses. On enquiry the assessing officer noted that the assessee has made huge expenses under the head of advertisement expenses, business promotion expenses, brokerage and commission and software development charges amounting in all to Rs. 4503 8586. It was noted by the Ld. assessing officer that the assessing officer enquired about the same with the assessee as to why not the above expenses be also capitalized as the same directly relates to the ongoing project. As stated by the Ld. AO the assessee did not offer any explanation but agreed for the same. Therefore, accordingly, the addition of Rs. 45038586/ was made to the total income of the assessee and the assessed income was determined at Rs. (-) 6712775/ against the returned loss of Rs. 51751361/ . 3. The assessee being aggrieved with the order of the Ld. assessing officer preferred an appeal before the Ld. 1st appellate authority. Wide order dated 25/2/2014, the Ld. CIT (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 tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 development charges, he submitted that these expenditure are been incurred for the purpose of day-to-day operation of the company and has nothing to do with the project. He further relied on the decision of the Hon ble Supreme Court in case of Excel industries in 358 ITR and pressed the argument of revenue neutrality. His argument was that if the expenditure has not been allowed to the assessee during this year then the expenditure would have been allowable to the assessee in the year in which the assessee shows income. In both the years the rate of taxes are identical. Therefore, instead of granting the above deduction in this year, the deduction would be granted in the year of the sale. He further submitted that the expenditure incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs that may be attributable to project activity in general and can be allocated to the project. 2.3 Construction costs and development costs that relate directly to a specific project include (a) land conversion costs, betterment charges, municipal sanction fee and other charges for obtaining building permissions; (b) site labour costs, including site supervision; (c) costs of materials used in construction or development of property; (d) depreciation of plant and equipment used for the project ; (e) costs of moving plant, equipment and materials to and from the project site; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during this year and the assessee has incurred loss assessee is duty bound to set of this loss within a specified number of assessment year specified under section 72 of the Income Tax Act, i.e. 8 years. If the assessee cannot set of these losses during that particular period then the assessee forgoes the tax advantage of claim of the loss. Therefore, even if the expenditure is allowed to the assessee for this year as deduction, it does not make the case of the revenue at any disadvantageous position, in fact, it puts assessee into some disadvantage. Furthermore, on the identical facts and circumstances of the case, the coordinate bench in case of ITA No. 310/Mum/2012 for assessment year 2008-09 has allowed the claim of the assessee for deduction under section 37 (1) on account of advertisement expenses, brokerage expenses. Therefore, respectfully following the decision of the coordinate bench we also allow the claim of the assessee with respect to the deduction of advertisement expenses, business promotion expenses, brokerage and commission and software development charges. Furthermore, we do not find any infirmity in the order of the Ld. CIT (A), hence, we confirm the same and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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