ACIT, New Delhi v. M/s Tricone Projects India Ltd., New Delhi

ITA 3769/DEL/2011 | 2008-2009
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 376920114 RSA 2011
Assessee PAN AACCT3297K
Bench Delhi
Appeal Number ITA 3769/DEL/2011
Duration Of Justice 3 month(s) 25 day(s)
Appellant ACIT, New Delhi
Respondent M/s Tricone Projects India Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 30-11-2011
Assessment Year 2008-2009
Appeal Filed On 05-08-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE SHRI U. B. S. BEDI JM AND SHRI K. D. RANJ AN AM I. T. APPEAL NO. 3769 (DEL) OF 2011. ASSESSMENT YEAR : 200809. ASSTT. COMMISSIONER OF INCOME-TAX M/S. TRICONE PROJECTS INDIA LTD. C I R C L E : 13 (1) VS. 1 A-D VANDANA BUILDING N E W D E L H I. 11 TOLSTOY MARG N E W D E L H I. P A N / G I R NO. AAC CT 3297 K. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : N O N E; DEPARTMENT BY : SHRI B. R. R. KUMAR SR. D. R.; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 8-09 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)XIX NEW DELHI. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (APPEALS) HAS ERRED IN DELETING DISALLOWANCE OF RS.24 43 290/ - BY INCORRECTLY HOLDING THAT PAYMENT OF VALUATION CHARGES DIRECTLY RELATED TO THE PROJECTS OF THE ASSESSEE COMPANY WERE IN THE NATURE OF ADMINISTRATI VE EXPENSES AND HENCE WERE TO BE TREATED AS REVENUE EXPENDITURE INSTEAD OF CAP ITAL EXPENDITURE AS TREATED BY THE ASSESSING OFFICER. 2 I. T. APPEAL NO. 3769 (DEL) OF 2011. 3. THE ONLY ISSUE FOR OUR CONSIDERATION RELATES TO DELETING THE DISALLOWANCE OF RS.24 43 290/- BY HOLDING THAT THE PAYMENT OF VALUA TION CHARGES RELATED TO PROJECTS WERE IN THE NATURE OF ADMINISTRATIVE EXPENSES. THE FACTS OF TH E CASE STATED IN BRIEF ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY WAS ENGAGE D IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE ASSESSEE CLAIMED LEGAL AND PROFES SIONAL EXPENSES OF RS.49 35 893/- IN PROFIT AND LOSS ACCOUNT WHICH INCLUDED VALUATION FEE PAID TO VARIOUS PARTIES IN RESPECT OF VALUATION OF WORK IN PROGRESS OF INDORE KHANDWA INDORE NIHALPUR PATIALA AND LUDHIANA PROJECTS. THE AMOUNT PAID WAS OF RS.24 43 290/-. THE ASSESSING O FFICER OBSERVED THAT THE EXPENDITURE INCURRED WAS DIRECTLY RELATED TO PROJECTS OF THE ASSESSEE CO MPANY SHOWN AS WORK IN PROGRESS. THEREFORE THE EXPENSES INCURRED ON VALUATION OF WORK IN PROGR ESS SHOULD HAVE BEEN CAPITALIZED BY THE ASSESSEE. THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.24 43 290/- AS PART OF WORK IN PROGRESS AND DISALLOWED THE CLAIM OF THE ASSESSEE. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT THE ASSESSEE HAD PAID VALUATION FEE TO KUSHMAN WAKEFIELD INDIA PVT. LTD. AND C. B. RICHARD S ELLIS FOR THE VALUATION OF WORK IN PROGRESS [INVENTORY] AT ITS PROJECT SITES WHERE THE CONSTRUCTION WAS GOING ON. THE CONSTRUCTION OF HOUSES AND FLATS UNDER HOUSING PROJECT WAS THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE. THE ASSESSEE DEVELOPS AND CONSTRUCTS THE FLATS WHICH WE RE MEANT FOR SALE IN THE MARKET. THE HOUSES AND FLAT UNDER CONSTRUCTION FORM PART OF INVENTORIE S BEING WORK IN PROGRESS OF THE COMPANY. THE WORK IN PROGRESS INTER ALIA INCLUDED COST OF LAND AND COST OF CONSTRUCTION OF HOUSES AND FLATS WHICH WERE UNDER DEVELOPMENT PENDING COMPLETION. T HE MAIN PURPOSE OF GETTING THE VALUATION DONE WAS THE COMPLIANCE WITH THE PROVISIONS OF SCHE DULE VI TO THE COMPANIES ACT 1956 AND ACCOUNTING STANDARD-2 VALUATION OF INVENTORIES IS SUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. TO COMPLY WITH THE ABOVE REQUIREMENTS THE ASSESSEE HAS TO GET VALUATION OF WORKS IN PROGRESS DONE FROM AN AUTHORIZED VALUER. THE ASSES SEE IN ORDER TO FULFILL THE STATUTORY REQUIREMENTS INCURRED THE SAID EXPENDITURE. THEREF ORE THE EXPENDITURE WAS IN THE NATURE OF REGULAR ADMINISTRATIVE BUSINESS EXPENDITURE SUCH AS AUDIT FEE LEGAL OPINION COMPLIANCE CHARGES ETC. WHICH ARE INCURRED REGULARLY YEAR AFTER YEAR AND HAS TO BE TREATED AS REVENUE EXPENDITURE. THE LD. CIT (A) AFTER CONSIDERING THE FACTS OF THE CASE CAME TO THE CONCLUSION THAT EXPENDITURE INCURRED WAS INDIRECT EXPENDITURE LIKE ANY OTHER AD MINISTRATIVE EXPENSES WHICH NEED NOT BE 3 I. T. APPEAL NO. 3769 (DEL) OF 2011. CAPITALIZED. THE ASSESSEE BEING IN REAL ESTATE BUSI NESS HAD TAKEN ALL THE DIRECT EXPENSES AS WORK IN PROGRESS SINCE THERE WAS NO INCOME ACCRUED AS O N 31 ST MARCH 2008. THE EXPENDITURE INCURRED ON VALUATION OF WORK IN PROGRESS WAS RELAT ED TO VALUATION OF INVENTORY AND THEREFORE COULD NOT BE CAPITALIZED. HE ACCORDINGLY DELETED TH E ADDITION. 5. BEFORE US NONE APPEARED ON BEHALF OF THE ASSESS EE. WE HAVE HEARD THE LD. SR. DR WHO HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER ST RONGLY. 6. WE FIND THAT THE EXPENDITURE INCURRED ON VALUATI ON IS INDIRECT EXPENDITURE. THE ASSESSEE HAS INCURRED THE EXPENDITURE AS REQUIRED UNDER AS-2 AND PART II SCHEDULE VI TO THE COMPANIES ACT 1956 WHICH REQUIRES THAT DISCLOSURE TO THIS E FFECT SHOULD BE MADE AS PER CLAUSE 3(III). SINCE THE EXPENDITURE INCURRED IS LIKE LEGAL EXPENSES WH ICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER IN OUR CONSIDERED OPINION THE LD. CIT (APPEALS) WA S JUSTIFIED IN DELETING THE ADDITION OF RS.24 43 290/- WHICH WAS CAPITALIZED AS PART OF THE PROJECT COST. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A PPEALS) TREATING THE SAME AS ADMINISTRATIVE EXPENDITURE. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 30 TH NOVEMBER 2011. SD/- SD/- [ U. B. S. BEDI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH NOVEMBER 2011. * MEHTA * 4 I. T. APPEAL NO. 3769 (DEL) OF 2011. COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT.