Case Law Details
Bengal Peerless Housing Development Company Limited Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that claim of deduction towards marketing and sales expenses relating to work-in-progress project is allowable in the year in which project is completed and sales are booked in the profit and loss account.
Facts- Assessee is engaged in the business of real estate, primarily in the development of residential as well as commercial complexes.
The assessee company had undertaken the development of Avidipta II, Axis-siliguri, Digangana-extension, Sonar tari-extension and Ghuni real estate projects.
In respect of project Avidipta II, expenses incurred on advertisement and publicity, brokerage, commission, and business promotion have been charged to the work-in-progress since the project is yet to be completed. These expenses have not been charged to the profit and loss account and thus have not been claimed as a deduction when computing the total income in the return originally filed by the assessee. In terms of the adoption of Ind AS 115 for revenue recognition, revenue is recognized only when the project is completed, i.e., when the customer obtains control over the promised good under the contract. Under this method, by following the matching concept of accounting principles, costs are accumulated during the course of the contract. Profit and loss are established in the last accounting period only when the contract is completed and the performance obligation is satisfied by transferring control of the dwelling unit to the customer.
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