TMI Blog2023 (3) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the computation of taxable income referred above, we without any hesitation hold that disallowance made u/s 40(a)(ia) and 43B is not warranted. MAT computation u/s 115JB - In respect of arbitrary adjustment made in the book profit computed u/s 115JB of the Act, assessee has adequately explained his case that this amount represented the amount withdrawn from reserve/provision and the same stands credited in the profit and loss account for the year under consideration and was reduced from the book profit since it was already offered to tax in the earlier years. We note that certain specific adjustments are only permitted to be made under the provisions of Section 143(1) of the Act.we direct to delete the adjustment made while computing the book profit u/s 115JB of the Act. Claim of deduction made by the assessee towards marketing and sales expenses relating to project Avidipta-II - accounting treatment in terms of applicable accounting standard and accounting principles - assessee has adopted control approach for revenue recognition prescribed under the Ind AS 115 by considering satisfaction of performance obligation over time which is taken to be analogous to PCM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently revised on 30/6/2020, reporting total income of Rs.11,17,38,170/- computed under the normal provisions of the Act since tax payable on the book profit under section 115JB of the Act was less than the tax payable under the normal provisions of the Act. Return of the assessee was processed by Centralized Processing Centre, Bengaluru (CPC), for which intimation u/s 143(1) of the Act was issued on 7/10/2020. In the return so processed, adjustments aggregating to Rs. 18,35,758/- were made to the total income returned by the assessee. This amount comprised of Rs. 4,20,000/- towards disallowance u/s 40(a)(ia) of the Act and Rs. 14,15,758/- u/s 43B of the Act. Further, there was an adjustment made in the book profit computed u/s 115JB of the Act, by which the book profit was increased by an amount of Rs.1,62,91,689/-. Aggrieved, assessee went in appeal before the ld. CIT(A). 3. Before ld. CIT(A), it was submitted that, disallowance made u/s 40(a)(ia) and 43B of the Act have already been added by the assessee itself, in the computation of income while arriving at the total income reported in the return filed by the assessee. Making adjustments of these amounts again and incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, referred to the computation of taxable income placed at page 13 of the paper book to demonstrate that adjustments made in the processing of return u/s 143(1) of the Act, in respect of disallowance made u/s 40(a)(ia) and 43B of the Act, had already been added by the assessee suo motto. The relevant extract of the computation of taxable income is reproduced for ease of reference:- 6.1. Ld. Counsel reiterated that such disallowance tantamount to taxing the same amount twice and, therefore, should be deleted. Ld. Sr. D/R when confronted with these facts could not controvert the same. 7. We find that, ld. CIT(A) has merely given directions to the ld. AO to verify the records and based on his verification of the records, he may consider the additions / disallowances to be made. We note that approach adopted by the ld. CIT(A) is not in accordance with the provisions of section 250 of the Act which prescribes the procedure in appeal to be complied with by the ld. CIT(A). Further, section 251 adequately empowers the ld. CIT(A) to exercise his powers while disposing the appeal. Despite such non adherence of the provisions of law by the ld. CIT(A), we ourselves find it pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made effective till the financial statements are authorized have been considered for the purpose of preparation of these financial statements. These are the Company s first Ind AS standalone financial statements. It is also disclosed that Ind AS 115 on Revenue from Contracts with Customers has been introduced with effect from 01.04.2018 (relevant to AY 2019-20) under modified retrospective approach which does not have any impact on the financial statements. 9.2. As per Ind AS 115, revenue shall be recognized based on satisfaction of performance obligation by transferring the control in the promised good or service to the customer. The said satisfaction of performance obligation can occur either over time or at a point in time , depending upon fulfillment of one of the following criteria as specified in clause 35 of Ind AS 115 a) the customer simultaneously receives and consumes the benefits provided by the entity s performance as the entity performs; b) the entity s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced; or c) the entity s performance does not create an asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckdrop and understanding, we refer to the facts of the present case. During the year, assessee company had undertaken the development of following real estate projects:- I. Avidipta II II. Axis-sililguri III. Digangana-extension IV. Sonar tari- extension V. Ghuni 10.1. Expenditure incurred by the assessee of Rs.3,82,54,258/- which have not been considered deductible as claimed before the ld. CIT(A), while computing, the total income of the assessee, includes - 1. Advertisement and Publicity - Rs. 3,50,900/- 2. Brokerage and commission - Rs.44,20,600/- 3. Business promotion - Rs.22,82,678/- 10.2. Details of expenses incurred on each of these projects is certified by the Chartered Accountant vide certificate dated 25/06/2019, which is extracted below:- 10.3. In respect of project Avidipta II, expenses incurred on advertisement and publicity, brokerage, and commission and business promotion (referred together as marketing and sales expenses) have been charged to the work-inprogress since the project is yet to be completed. These expenses have not been charged to the profit and loss account and thus, have not been claimed as deduction while co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,93,121 40,12,07,258 1,54,54,00,379 1,02,37,16,119 43,23,78,028 1,45,60,94,147 11.2. The above inventory of work-in-progress amounting to Rs. 159,33,65,370/- appears in the balance sheet under the head Current Assets placed at page number 26 of the paper book. A detailed composition of this work-in-progress project wise has already been extracted above, which has been duly certified by the Chartered Accountants. 11.3. As already noted above, assessee has adopted revenue recognition policy based on satisfaction of performance obligation over time when the control is transferred to the customer, meaning thereby all costs are accumulated during the course of its completion and the same is charged against the revenue when the control of the completed unit is transferred to the customer to satisfy the criteria of matching concept of accounting. In the matching concept, revenue and income earned during an accounting period is compared with the expenses incurred during the same period. This matching concept has been recognized by the Hon ble Supreme Court in the case of Taparia Tools Ltd v. CIT [2015] 7 SCC 540 (SC). 11.4. We also note that se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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