Edenic Propbuild Private Limited Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, disposed of cross appeals filed by the Revenue and the assessee arising from the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The dispute related to the allowability of project expenses written off, lease rent expenses, and administrative expenses incurred by the assessee, a company engaged in the business of real estate, construction, and development.
The Assessing Officer (AO) had disallowed a total expenditure of Rs. 31,74,10,824/- claimed in the profit and loss account. This comprised project expenses written off of Rs. 9,70,88,219/-, lease rent expenses of Rs. 21,79,51,620/-, and administrative expenses of Rs. 23,70,985/-. The CIT(A) deleted the addition relating to project expenses but upheld the disallowance of lease rent and administrative expenses, resulting in appeals by both parties.
The Tribunal noted that the assessee had entered into a development agreement dated 24 November 2007 with the Royal Calcutta Turf Club (RCTC) for developing a club/hotel project. The assessee incurred expenditure of Rs. 9,70,88,219/-, which was reflected as Capital Work-in-Progress (CWIP). However, disputes between the parties led to prolonged arbitration and litigation, following which the assessee decided to abandon the project completely and wrote off the CWIP.
