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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI AMIT SHUKLA, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Manoj Sinha
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the revenue against order of the Learned Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 23.08.2022 for the A.Y.2018-19.
Brief facts of the case are, assessee is a private limited company engaged in the business of Construction and Development of Real Estate
(A.Y: 2018-19) M/s. Antevorta Developers Pvt. Ltd., projects. During the current assessment year assessee filed its return of income on 17.11.2017 declaring a loss of ₹.2,70,63,702/-. Subsequently, assessee’s case was selected for limited scrutiny and accordingly, notices u/s. 143(2) and 142(1) were issued and served on the assessee.
The assessment was completed u/s. 143(3) of the Act assessing the total income at ₹.31,40,130/- disallowing business expenditure of ₹.3,56,79,717/- and capitalizing the expenses (net of income) of ₹.2,95,11,720/- by adding the same to Work-in-progress. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) has deleted the additions made by the Assessing Officer.
Aggrieved revenue, is in appeal before us raising following grounds in its appeal: -, "1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the disallowance of business expenditure of Rs. 2,30,68,611/- being net expenses claimed during the year [i.e. Rs. 3,01,75,616/- (-) Rs. 71,07,005/-] and capitalization of these expenses by adding the same to Capital Work-in-progress, ignoring that the assessee had only one contract and therefore, entire expenses were liable to be capitalized as work in progress.
2. On the facts and in the circumstances of the case and in law, the CIT(A) has failed to consider that since there was no sales offered for tax during the year and only construction activity had been carried out, no corresponding expenses could be allowed to the assessee.”
(A.Y: 2018-19) M/s. Antevorta Developers Pvt. Ltd., 5. At the time of hearing, Ld. AR brought to our notice that similar issue was considered by the Coordinate Bench in the assessee’s own and he brought to our notice the relevant grounds raised by the revenue and the Coordinate Bench in ITA.No. 5064/Mum/2019 dated 01.11.2021 has decided the issue in favour of the assessee by dismissing the appeal filed by the Revenue.
6. On the other hand, Ld. DR relied on the order of the Assessing Officer.
Considered the rival submissions and material placed on record, we observe that Assessing Officer has disallowed the business expenditure claimed by the assessee and added the above said expenditure in work- in-progress. Since the similar issue was considered and adjudicated by the Coordinate Bench in favour of the assessee in assessee’s own case for the assessment year 2014-15, for the sake of clarity, we are reproducing the ratio of the above decision: -
“8. We have heard the rival submissions and perused the material available on record. The sole disputed issue emphasised by the Ld.DR that the CIT(A) has granted relief to the assessee by treating the expenses debited to profit and loss account as the revenue expenditure whereas the Assessing Officer in the assessment proceedings has made elaborate discussions on the facts and treated such expenditure as part of the capital work in progress. The CIT(A)
(A.Y: 2018-19) M/s. Antevorta Developers Pvt. Ltd., has relied on the decision of the Co-ordinate Bench of the Honble Tribunal in the group companies case and allowed the relief. Whereas, the Revenue has not accepted the decision of the ITAT and challenged before Jurisdictional High Court of Bombay in appeal u/s.260A of the Act. Whereas the Ld. AR has supported the order of the Id. CIT(A) and relied on the group company decision of the Hon'ble Tribunal. We consider it appropriate to refer to the observations of the CIT(A) at page 11 Para 8.3 to 8.4 which is read as under:- "8.3. I have noted that a similar issue had come up for adjudication before the Hon'ble ITAT Mumbai Bench "H" in one of the group concern of the Appellant. The Hon'ble ITAT, Mumbai "H" Bench in in the case of M/s Hiranandani Palace Gardens P. Ltd. Vs ACIT(OSD), Circle 3(1), Mumbai for the A.Y. 2009-10, vide order dated 30.12.2015 had held as under- "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 assesses. In the succeeding assessment year 2010- 11. the AO has accepted the deductibility of the identical nature of expenses in the assessment order passed w's 143(3) of the IT. 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 have to be excluded from the cost of inventories for working out closing WIP as per the guidelines issued 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 provisions of section 145A of the LT, Act. The AO has not assigned any cogent reason as to why the method. which has been consistently followed by 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 (A.Y: 2018-19) M/s. Antevorta Developers Pvt. Ltd., 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."
Both the Ld representatives of the parties have submitted that the issue is squarely covered by the above decision of the Tribunal. We find that rather the case of the assessee is on better footing as the assessee was carrying out different projects though at the same location, hence it was not a case of single project Even otherwise the resultant income from the project is a loss even after capitalisation of expenditure by the AO to work in progress. Hence, there is no tax implication, so far as the year under consideration is concerned and the loss otherwise also has to be carried forward. Under such circumstances, it cannot be said that the assessee has adopted the above stated accounting method to avoid tax on income for the year under consideration. The assessee, thus, has followed the accounting method which has been consistently followed by it and which is as per the recognized principles of accounting In view of the above discussion of the matter and following the above decision of the Tribunal for the sake of consistency, this issue is decided in favour of the assessee." 8.4 Thus, this issue is covered in favour of the Appellant by the order of the Hon'ble ITAT. Mumbai in the case of M/s Hiranandani Palace Gardens P. Ltd, referred supra. Accordingly, the Ground No. 1 of the present appeal is allowed.
9. The Ld. DR could not controvert the findings of the CIT(A) with any cogent material or new tangible information and relied on the Assessing officer order. We find the CIT(A) has dealt on the provisions of law, facts, Accounting standards and the Co-ordinate Bench decision of this Hon'ble Tribunal in the group companies case and granted the relief and passed a reasoned order. We respectfully
(A.Y: 2018-19) M/s. Antevorta Developers Pvt. Ltd., fallow the judicial precedence and are not inclined to interfere with the order of the CIT(A) and uphold the same and dismissed the grounds of appeal of the Revenue.”
8. Respectfully following the above said decision, we are inclined the dismiss the grounds raised by the revenue.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 13th March, 2023