ACIT Vs Casa Grande Homes Pvt Ltd (ITAT Chennai)
In the case of ACIT vs. Casa Grande Homes Pvt Ltd (ITAT Chennai), the appeal by the Revenue for Assessment Year (AY) 2016-17 was brought against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 20th September 2019, arising from the assessment framed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act, 1961 on 27th December 2018. The primary issue revolved around the treatment of indirect costs—specifically selling and professional costs—in projects that had not yet commenced.
The Revenue’s grounds of appeal contended that the CIT(A)’s order was contrary to law and the facts of the case. They challenged the deletion of additions related to advertisement and consultancy expenses categorized as other expenses. These expenses were disallowed by the AO on the grounds that they were directly related to a construction project (ECR-14) for which no revenue had been recognized for AY 2016-17.
During the assessment proceedings, it was revealed that Casa Grande Homes Pvt Ltd, the assessee, had claimed expenditures amounting to Rs. 5,15,44,310/-, despite no revenue from operations and ongoing construction activity. The expenses in question included professional/consultancy charges and advertisement expenses for project ECR-14, where no revenue had yet been recognized. The assessee justified these claims by segregating direct construction costs from indirect costs, which were not project-specific and therefore treated as period costs rather than capitalizing them under the percentage of completion method.
