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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI ABY T VARKEY, HON’BLE & SHRI S. RIFAUR RAHMAN, HONBLE
Date of Conclusion of Hearing : 30.11.2023 Date of Pronouncement : 13.12.2023 O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the revenue against order of Learned Commissioner of Income Tax (Appeals)-54, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 02.03.2023 for the A.Y.2018-19. (A.Y: 2018-19) M/s. Tapir Constructions Limited 2. Brief facts of the case are, assessee filed its return of income on 24.09.2018, claiming loss of ₹.23,67,62,389/-. The return of income was processed u/s.143(1) of Income-tax Act, 1961 (in short “Act”). Subsequently case was selected for scrutiny through CASS and accordingly, notices under section 143(2) and 142(1) were issued and served on the assessee. In response authorised representative of the assessee attended and submitted the relevant information through e-portal.
Assessee is in the business of real estate development and during the course of assessment proceedings Assessing Officer observed that the assessee has shown revenue from operation of ₹.4,24,185/- and other income of ₹.6,21,604/-, whereas it has claimed expenses to the extent of ₹.67,40,88,859/- they are as under: - (i) Employee benefit expenses Rs.98,19,884/- (ii) Finance cost Rs.63,27,76,361/- (iii) Depreciation and amortization expenses Rs.3,19,591/- (iv) Other Expenses Rs.3,11,73,023/
The Assessing Officer observed that assessee has not carried out any business activity during the year, hence the claim of expenditure is not proper and it should have been capitalized. When the show cause
Page No. 2 (A.Y: 2018-19) M/s. Tapir Constructions Limited notice was issued under section 142(1) of the Act directing the assessee to explain the above claim of expenditure and in reply vide letter dated 07.01.2021 and 26.02.2021 assessee has made a detailed submissions before Assessing Officer and the same is reproduced in Page No. 3 to 8 of the assessment order.
5. After considering the submissions of the assessee, Assessing Officer rejected the claim of the assessee by relying on the decision of Hon’ble Supreme Court in the case of Shree Maeenakshi Mills Ltd. v. CIT [1967] 63 ITR 207 (SC). The Assessing Officer came to the conclusion that the Hon’ble Supreme Court in unambiguous terms has held that it is only the business expenditure incurred for carrying on the business of the assessee which is allowable. In the present case, the income declared by the assessee does not pertain to its stated business as that of undertaking real estate projects and he observed that in this case the question is not about the claim of expenses as the business expenditure or commercial expediency but it has been raised is with regard to the allowability of the expenditure of finance cost as revenue expenditure or the same requires to be treated as a part of WIP. Therefore, the borrowed funds have been utilized for the inventory and hence the cost attributed to the borrowed
Page No. 3 (A.Y: 2018-19) M/s. Tapir Constructions Limited funds should form part of the Inventory only. Accordingly, he disallowed the same with the direction to treat the same as part of WIP.
With regard to advertisement, brokerage and marketing expenses, employee cost and repairs and maintenance cost, Assessing Officer observed that assessee has relied on Accounting Standard – 9 issued by ICAI and contended that the above expenses cannot be capitalized merely on the ground of non-recognition of any revenue or the profit in the year under consideration. He is of the view that 'Accounting for Construction Contracts' has been referred to in Accounting Standard 7 revised in the year 2002 and the 'Construction Contracts' wherein there are no such Guidelines as has been treated by the assessee in its written submission and the reliance on AS-9 is misplaced. Further, he observed that assessee has failed to establish the advertisement expenses, brokerage & marketing expenses, Employees' Cost and repairs & maintenance expenses can be claimed as revenue expenditure especially having regard to the fact that no business receipts have been credited to Profit & Loss Account for the year under consideration. All the expenses relate to the project which may be forming part of the WIP / Inventory. Therefore, he is of the view that income offered by the assessee does not reflect any income from its stated business activity. Accordingly, he has disallowed
Page No. 4 (A.Y: 2018-19) M/s. Tapir Constructions Limited all the expenses claimed by the assessee and he has restated the income from business and WIP for the year under consideration to be carried forward. The Assessing Officer has determined the total income for the current assessment year at ₹.34,86,340/-.
Aggrieved assessee preferred appeal before the Ld. CIT(A) and filed detailed submissions before him. After considering the detailed submissions of the assessee Ld. CIT(A) by relying on the decision of his predecessor for the previous assessment year i.e., A.Y. 2017-18 in which the then Ld. CIT(A) has allowed the interest expenditure and all other expenditure as a revenue expenditure. By relying on the above observations/decision of previous assessment year, he allowed the ground raised by the assessee.
Aggrieved, Revenue is in appeal before us raising following grounds in its appeal: - “i. Whether on the facts and in the circumstances of the case, the learned CIT(A) was right in allowing the interest claimed of Rs.20,73,82,170/-, Employee Benefit Expenses of Rs. 98,19,884/-, Advertisement expenses of Rs. 67,65,259/-, Brokerage and Marketing expenses of Rs. 1,40,48,104/- and Repairs & Maintenance expenses of Rs. 22,33,316/- without appreciating the fact that no income from the stated business activity of real estate development was offered by the assessee?" ii. "Whether on the facts and in the circumstances of the case, the learned CIT(A) was right in deleting the addition of interest
Page No. 5 (A.Y: 2018-19) M/s. Tapir Constructions Limited expenses of Rs. 20,73,82,170/-, Employee Benefit Expenses of Rs.98,19,884/-, Advertisement expenses of Rs. 67,65,259/-, Brokerage and Marketing expenses of Rs. 1,40,48,104/- and Repairs & Maintenance expenses of Rs. 22,33,316/- to the cost of real estate project under development/ WIP/ Inventory account, since these are expenses related to the stated business activity of real estate development, hence the same ought to have been capitalized?" iii "The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal if need be."
9. At the time of hearing, Ld. DR submitted that assessee is in the of real-estate development and assessee has not disclosed any income relating to real-estate business and it only claimed expenditure, all relating to real estate development. He supported the findings of the Assessing Officer that all these expenditures should have been capitalised instead of claiming that as an expenditure particularly when the assessee has not declared any income from the real estate activities. In this regard, he brought to our notice Page No. 8 of the assessment order. Further, he brought to our notice Page No. 22 of the appellate order and submitted that Ld. CIT(A) has merely followed the earlier assessment order without application of mind. Therefore, he prayed that the additions made in the assessment order may be sustained.
10. On the other hand, Ld.AR of the assessee made detailed submissions as submitted before the Ld. CIT(A) and further he brought to our notice Page No. 11 of the Paper Book which is the income and Page No. 6 (A.Y: 2018-19) M/s. Tapir Constructions Limited expenditure account wherein assessee has declared certain income under the head revenue from operation and other income. He also brought to our notice the calculation of WIP wherein assessee has carried forward the direct cost relating to the project as WIP and he submitted that interest and other expenditure are period cost that has to be allowed as revenue expenditure and these period costs cannot be capitalised. In this regard he brought to our notice various schedules of expenditures claimed by the assessee and he also brought to our notice detailed submissions made by the assessee before Assessing Officer which is part of the Paper Book [kept at Page No. 105 of the Paper Book] wherein assessee has made detailed submissions and also filed the extract of ICDS – IX and he also submitted that assessee has explained the ICDS calculation and method of calculation before Assessing Officer. He submitted that the method of interest claimed by the assessee is as per the ICDS Method. With regard to interest claimed, he relied on the decision of Coordinate Bench in the case of DCIT v. Sanathnagar Enterprise Ltd., [2022] 139 taxmann.com 557 (Mumbai – Trib.) and DCIT v. Lodha Developers Ltd., [2022] 143 taxmann.com 442 (Mumbai – Trib.).
11. With regard to other revenue expenditures he submitted that these are covered issues in favour of assessee. In this regard he relied on the Page No. 7 ITA NO. 2145/MUM/2023 (A.Y: 2018-19) M/s. Tapir Constructions Limited decision of Coordinate Bench in the case of Macrotech Construction (P.) ltd., v. ACIT [2019] 103 taxmann.com 348 (Mumbai – Trib.) and DCIT v. M/s. Citra Properties Ltd., in dated 25.08.2022.
Considered the rival submissions and material placed on record, we observe from the record that the assessee has not declared substantial income from real estate development since the same is under construction. However, assessee has claimed the interest and other administrative expenses including marketing expenses as revenue expenditure. We observe that Ld. CIT(A) has allowed the same by relying on the various decisions and also decision of the previous assessment in assessee’s own case. After considering the submissions of both the parties, we observe that with regard to interest expenditure claimed by the assessee the same is allowed by Coordinate Bench in the case of DCIT v. Sanathnagar Enterprise Ltd., (supra) as a period cost and the findings are as under: - “6. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 7. When learned Departmental Representative’s attention was invited to the decisions of the coordinate benches in the cases of Ashish Builders Pvt Ltd Vs ACIT (ITA No 1566/Mum/2011), ACIT Vs
Page No. 8 (A.Y: 2018-19) M/s. Tapir Constructions Limited Palava Dewellers Pvt Ltd (ITA No 2147/Mum/18), Kotle Patil Developers Ltd Vs DCIT (ITA No 80/Pune/16) wherein on the same set of facts it is held that irrespective of the capitalization of interest, as part of WIP, on account of following percentage of completion method, and even after insertion of proviso to Section 36(1)(iii), the interest has been allowed as a deduction, learned Departmental Representative fairly accepted that the law has been so laid down by the coordinate benches, but then he points out that it will result in a double deduction for deduction of interest as also deduction of WIP at the pint of booking revenue. He submits that the matter should be remitted to the file of the Assessing Officer at least for this factual verification. In any event, he vehemently relies upon the stand of the Assessing Officer and submits that the deduction of interest should not be allowed under section 36(1)(iii) in view of proviso thereto as also in view of the fact that at the point of time of booking related revenues, the WIP, which includes interest charges as well, the deduction is allowed anyway. We are, however, not inclined to approve his this plea in principle for the reason that the coordinate benches have consistently held that in view of the specific provisions under section 36(1)(iii), interest is to be allowed as a deduction irrespective of its capitalization as WIP, but while charging the WIP, corresponding reduction is to be allowed for the interest already claimed as deduction. In any event, the very foundation of disallowance is special bench decision in the case of Wall Street Construction (supra) which stands reversed by Hon’ble jurisdictional High Court in the case of CIT Vs Lokhandwala Construction Industries Limited (260 ITR 579) which holds good even today. The proviso to Section 36(1)(iii) does not come into play in the present case as the residential units are part of the stock in trade, and not the capital assets. Respectfully following the views so expressed by the coordinate benches, we approve the detailed and well-reasoned approach adopted by the CIT(A) and decline to interfere, in principle, in the matter. As regards the learned Departmental Representative’s apprehension of double deduction, however, we consider it fit and proper to add that once these amounts are allowed as deduction in the year of incurring the expenditure, the same shall not be eligible for being allowed as deduction yet again as a part of the work in progress being debited to the profit and loss account in any subsequent year. The double deduction will thus not be permissible. The conclusions arrived at by the learned CIT(A), subject to this observation, are approved.
Page No. 9 (A.Y: 2018-19) M/s. Tapir Constructions Limited 8. Learned representatives fairly agree that whatever we decide for the assessment year 2013-14 will equally apply to the other two assessment years 2014-15 and 2015-16 as well. The conclusions arrived at by the learned CIT(A) for the other two years must also be approved, subject to the observations above, as well.”
13. Respectfully following the above decision, we do not find any infirmity in the order of the Ld. CIT(A) and accordingly the ground raised by the revenue is dismissed.
With regard to other expenses, we observe that on similar facts the Coordinate Bench of the Tribunal in the case of Macrotech Construction (P.) Ltd., v. ACIT (supra) held as under: - “5. We have considered the rival contentions and carefully gone through the order of Authorities below and deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us. From the record we found that the assessee is a developer and undertaking construction activity of building for the purpose of sale. The AO was of the view that the expenditure incurred on the above heads were to be capitalised and cannot be allowed as Revenue expenditure. From the record we found that assessee follows mercantile system of accounting. In order to recognise the revenue from the project, it follows percentage completion method of accounting. All the expenses incurred by the assessee which are directly attributable to the project have been debited to work in progress and the expenses which were not attributable to the project have been debited to Profit & Loss Account During the assessment year under consideration, the assessee company has incurred various expenses which inter alia includes (i) salary and employee related expenses of Rs. 6, 88, 74, 859/- (ii) Office and administrative expenses of Rs. 3,72,71,119/- and (Hi) selling and marketing expenses of Rs. 1, 99,50,317/-. All the expenses incurred by the assessee Company have been debited/capitalised to the work in progress except that part which relates to administration of business; as under:
Page No. 10 (A.Y: 2018-19) M/s. Tapir Constructions Limited Expenses Sr. Expenses Expenses debited to Particulars No. Incurred Capitalised profit & Loss A/c. i) Salary and employee 6,88,74, 859/~ 5,50,99,8877- 1,37,74,972/- related expenses ii) Office and 3,72,71, 119/- 2J2,40,668/- 1,00,30,451/- administrative expenses iii) selling and marketing 1,99,50,317/- 1,99,50,377/- expenses Total 12,60,96,295/- 8,23,40,5557- 4,37,55,740/- 6. In the above table, in the case of employee cost and administrative expenses, the expenses capitalised to work in progress represents 80% of the total expenses incurred and remaining 20% is debited to Profit & Loss Account. Detailed workings of expenses incurred are given in statement filed before lower authorities.
The above expenses have been individually determined and debited to either work in progress or to Profit & Loss Account. In order to calculate the work in progress and for recording the transaction it has relied on the "Expert Advisory Committees Report" (EAC) on "Applicability of revised AS 7 to enterprises undertaking the construction activities on their own account as a venture of commercial nature", wherein it was stated that AS 7 shall not be applicable to the builders undertaking the commercial activity on their own and it was also stated that the work in progress shall constitute inventory for the builders and shall be valued as per AS 2 issued by the Institute of Chartered Accountant of India (ICAI). Operational Part of the report is reproduced as under:- Following queries have been considered by the EAC: (a) Whether the revised AS 7 would be applicable to the company for accounting for new housing project, which may be undertaken by the company on or after 1.4.2003 on the same business model as mentioned in the facts of the case. (b) In case revised AS 7 is not applicable to the company, whether the company can value its inventories in accordance with the Accounting Standard (AS) 2, Valuation of Inventories', issued by the Institute of the Chartered Accountants of India, considering the definition of Inventory as 'an asset in the process of production for the purpose of sale', i.e. whether the activity of developing housing projects on its own account as a I commercial venture by the company can be construed as a production activity. j
Page No. 11 (A.Y: 2018-19) M/s. Tapir Constructions Limited (c) If the activities of the company cannot be considered as a production activity and consequently AS 2 is also not applicable, which Accounting Standard should be followed for recognition and valuation of its construction of its construction work-in-progress?" [Emphasis supplied] The above queries have been answered by the EAC as under: (a) The revised AS 7 would not be applicable to the company for accounting for new housing project which are undertaken by the company during the accounting periods commencing on or after 1.4.2003. (b) The activity of developing housing projects on its own account as a commercial venture by the company is of the nature of production activity and, therefore, should be construed as such. The inventories should be valued by the company in accordance with AS 2 as explained in paragraph 1 above. (c) AS 2 is relevant for the valuation of inventories including construction work-in-progress and not for recognition of revenue. AS 9 would be relevant for recognition of revenue; 8. It is very clearly evident from the above that for valuing the work-in- progress, Accounting Standard 2 has to be followed as categorically stated by the EAC, which has been duly followed by the assessee for determining the work in progress. The AS 2 refers to valuation of Inventories. On perusal of the AS 2 (inventory valuation) at paragraph 13, following expenses have been categorically stated to be excluded from the inventories being work-in- progress in the assessee's case: (a) abnormal amounts of wasted materials, labour or other production costs; (b) storage costs, unless those costs are necessary in the production process before a further production stage; (c) administrative overheads that do not contribute to bringing inventories to their present location and condition; and (d) selling costs.
Therefore, it is very clear from the above wordings of AS-2 that the administrative expenses which are not related to bringing the inventories (work-in-progress) to their present location and condition are to be excluded from the Inventories being work in progress in Page No. 12 (A.Y: 2018-19) M/s. Tapir Constructions Limited the assessee's case. Moreover, it is also categorically stated that the selling expenses shall not form part of Inventories. The assessee being following the accounting policies framed by the ICAI by way of AS 2 and report of EAC, worked out the closing work in progress considering the expenses directly attributable to the construction of the project and the expenses which were not directly attributable to work in progress has been debited to Profit & Loss account.
The above accounting method followed by the assessee has been also fortified by the "Guidance Note on Accounting for Real Estate Transaction" issued by the Institute of the Chartered Accountants which vide paragraph 2.2 defines the "Project Cost (i.e. which expenses shall be included while determining the project cost) and at paragraph 2.4 it has been specifically stated that: "The following cost should not be considered part of construction cost and development cost if they are material: (a) General administration costs; (b) Selling cost; (c) Research and development cost; (d) Depreciation of idle plant and equipment; (e) Cost of unconsumed or uninstalled material delivered at site; and (f) Payment made to sub-contractors in advance of work performed."
Furthermore, in Guidance note on Accounting for Real Estate Transaction also it was stated that the general administration cost and selling cost shall not form part of work in progress (refer page 66 of paper book}. In short, the accounting treatment given in Guidance note on Real Estate Transaction is at par with AS 2 reproduced above and the assessee has followed these accounting principles in preparing its accounts year after year including the year under consideration. We found that the assessee, in compliance to these accounting principles, determined the expenses which are not related to the work in progress and debited the same to the profit & loss account being administrative expenses and selling expenses incurred for day to day functioning of the business and marketing; likewise, the expenses directly attributable to the work in progress have been debited to work in progress.
12. Moreover it is not possible to run a business without incurring the administrative cost Apart from the construction related expenses,
Page No. 13 ITA NO. 2145/MUM/2023 (A.Y: 2018-19) M/s. Tapir Constructions Limited the assessee was also obliged to incur various administrative and selling expenses in order to run its business smoothly which is purely in the nature of revenue expenses not related to constriction activity of the assessee; hence, they are allowable in the year in which they are incurred.
As per our considered view the revenue expenditure in the nature of employee cost, etc. cannot be capitalised to work-in-progress as per the Accounting Standard as well as the accounting policy and judicial pronouncements. We also found that the method adopted by the assessee is duly supported by the consistent practice of the assessee both in preceding as well succeeding years which have been accepted by the Department under scrutiny assessments. The issue under consideration is also covered by the decision of the Tribunal in assessee's sister concern, Sunny Vista Realtors Pvt. Ltd. in dated 11th January, 2017. In this case also the Tribunal was placed with similar situation which is evident from the facts mentioned on page No. 7 of the said order. We find that disallowance of expenditure made by the AO in that case was on account of sales and marketing, administrative expenses and finance expenses. After taking note of the Accounting Standard-7 in para 9, the Tribunal came to the conclusion in para 10 of its order that the Accounting Standard-7 has no applicability in the case of developer. We observe that in the case of assessee the CIT(A) has also held that Accounting Standard-7 is not applicable in the case of the assessee. Furthermore, the Tribunal on page 15 onwards have held that the revenue expenditure in the nature of administrative expenditure, etc. cannot be capitalised and finally deleted the addition after relying upon the Tribunal's decision in the case of another sister concern, M/s. Lodha Plazz as well as Hiranandani Palace Pvt. Ltd. Reliance can also be placed on the decision of the Coordinate Bench in the case of sister concern of the assessee, namely, M/s. Lodha Palazzo in ITA No. 2298/Mum/2012 dated 10.12.2014. The relevant part of the above decision is reproduced herein below: "11. We have considered rival contentions and carefully gone through the orders of the authorities below. The percentage completion method of accounting has been regularly followed by the assessee. In the succeeding assessment year 2010-11, the A.O has accepted the deducibility of the identical nature of expenses in the assessment order passed u/s 143(3) of the I.T. Act. We agree with contention of the Ld. Counsel for the assessee that the employee cost refers to salary paid to the employees who are looking after the administration of office and not directly related to construction of the project but is part of the administrative expenses. Similarly, the office and administrative expenses and selling and marketing expenses are to be charged to the profit & loss account in the very same year in which they are incurred and Page No. 14 (A.Y: 2018-19) M/s. Tapir Constructions Limited have to be excluded from the cost of inventories for working out closing WIP as per the guidelines issued by the ICAI, Accounting Standard AS-2 and AS-7. The assessee has regularly and consistently been following the said method of accounting as per the provision of section 145A of the IT. Act. The A.O has not assigned any cogent reason as to why the method, which has been consistently followed by the assessee and accepted by the department in past as well in succeeding assessment years and which is in accordance with the recognized principles of accounting by ICAI is being rejected. In our view, the action of the Revenue Authorities in rejecting the assessee's accounting method, without assigning any reason is not justified. The accounting method followed by the assessee and thereby excluding the indirect expenses such as office employees' salary, administrative expenses and marketing & selling expenses is as per the recognized principles of accountings and as such the claim of the assessee deserves to be allowed. We hold accordingly. The additions made by the lower authorities on this issue are hereby ordered to be deleted."
14. We have also carefully gone through the assessment order passed in assessee's case under Section 143(3) of the Act, wherein the AO himself has accepted assessee's contention of this expenditure being revenue in nature. We also found that the assessee has already capitalised large part of expenditure incurred and its opening work-in-progress and closing work-in- progress are Rs.202.91 crores and Rs.256.24 crores, respectively. In this view of the matter the bonafide of the assessee's consistent accounting policy cannot be doubted.
15. We observe that while disallowing these expenditure as revenue expenditure the CIT(A) in para 5.5 of his order observed that Accounting Standard-1 is not applicable for valuation of work-in- progress. This is factually incorrect as is evident from the paragraph No.1 of Accounting Standard-2. As per the said paragraph the Accounting Standard would not be applicable in respect of work-in- progress of construction contracts to which Accounting Standard-7 is applicable. Furthermore, Accounting Standard-2 is not applicable in respect of work-in-progress of business of service providers. Under these facts and circumstances it is not correct to say the Accounting Practice-2 is not applicable to developers and since assessee is in the business of development of building, Accounting Standard-2 is applicable to the assessee.
16. We also observed that in the case of M/s. Lodha Plazzo, the Tribunal has specifically observed in page 3, para 6 that Accounting Standard-2 would be applicable in the case of developer. The Tribunal has arrived at this conclusion after considering the Expert Advisory Committee Report of the Institute of Chartered Accounts of India.
Page No. 15 (A.Y: 2018-19) M/s. Tapir Constructions Limited 17. We also found that the CIT(A) has relied upon the decision of the Hon'ble Supreme Court in the case Madras Industrial Investment Corporation (supra) and the decision of the Hon'ble Bombay High Court in the case of Taparia Tools Ltd. (supra). However, the decision of the Hon'ble Bombay High Court in the case of Taparia Tools Ltd. 372 ITR 605 has been subsequently reversed by the Hon'ble Supreme Court. Not only this, the Hon'ble Supreme Court has duly considered the earlier decision of the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation (supra), which has also been relied upon by the CIT(A). The relevant paragraphs of the Hon'ble Supreme Court decision reads as under:- "15. Judgment in Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 225 ITR 802/91 Taxman 340 (SC) was cited by the learned counsel for the Revenue to justify the decision taken by the courts below. We find that the Court categorically held even in that case that the general principle is that ordinarily revenue expenditure incurred wholly and exclusively for the purpose of business is to be allowed in the year in which it is incurred. However, some exceptional cases can justify spreading the expenditure and claiming it over a period of ensuing years. It is important to note that in that judgment, it was the assessee who wanted spreading the expenditure over a period of time and had justified the same.
Thus, the first thing which is to be noticed is that though the entire expenditure was incurred in that year, it was the assessee who wanted the spread over. The Court was conscious of the principle that normally revenue expenditure is to be allowed in the same year in which it is incurred, but at the instance of the assessee, who wanted spreading over, the Court agreed to allow the assessee that benefit when it was found that there was a continuing benefit to the business of the company over the entire period.
What follows from the above is that normally the ordinary rule is to be applied, namely, revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the IT Department cannot deny the same. However, in those cases where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of 'Matching Concept' is satisfied, which up to now has been restricted to the cases of debentures."
18. In view of the above discussion, we do not find any merit for the disallowance made by the AO on account of employee, cost, administrative expenditure and selling and marketing expenses, which are essentially in the nature of revenue expenditure.
In the result, appeal filed by the assessee is allowed in terms indicated hereinabove.
Page No. 16 (A.Y: 2018-19) M/s. Tapir Constructions Limited 20. With regard to Revenue's appeal, we observed that a categorical finding has been recorded by the CIT(A) that during the year assessee has received Rs.54.01 crores on account of security premium whereas maximum outstanding amount of investment made was Rs.36.50 crores. Since own fund was more than the investment, no disallowance was warranted in terms of the decision of the Hon'ble Jurisdictional High Court in the case of Reliance Utilities and Power Ltd. 313 ITR 340. The finding so recorded with regard to the availability of interest free funds vis-a-vis investment has not been controverted by the learned D.R. by bringing on any cogent material on record. We do not find any infirmity in the order of the CIT(A) for deleting the addition under Section 14A by recording definite finding and applying the proposition of law laid down by the Hon'ble Jurisdictional High Court in the case of Reliance Utilities and Power Ltd. (supra).
In the result, the appeal filed by the assessee is allowed in terms indicated hereinabove whereas the appeal filed by Revenue is dismissed.”
Respectfully following the above decision, we do not find any infirmity in the order of Ld. CIT(A) and accordingly ground raised by the revenue is dismissed.
In the result, appeal filed by the revenue is dismissed. order pronounced in the open court on 13th December, 2023.