Case Law Details
M/s. Hagwood Commercial Developers Pvt. Ltd Vs ACIT (ITAT Mumbai)
Conclusion: Since assessee had set up the business by acquiring land and obtaining approval for construction of mall and residential complex although the mall had not commenced business till the end of the relevant previous year, therefore, assessee had rightly charged the general overhead expenses being indirect expenses incurred in the P&L account in compliance with AS-2 & AS-7 which was mandatory as per ICAI and notified by Central Government as per Section 211(3C) of the Companies Act, 1956.
Held: Assessee had debited certain expenses to P&L account. AO held expenses debited to P&L account should not be allowed since there was no business activity and there was no business income and the project was still under progress. It was held assessee had set up the business by acquiring land and obtaining approval for construction of mall and residential complex although the mall had not commenced business till the end of the relevant previous year . Assessee had rightly charged the general overhead expenses being indirect expenses incurred in the P&L account in compliance with AS-2 & AS-7 which was mandatory as per ICAI and notified by Central Government as per Section 211(3C) of the Companies Act, 1956 wherein the Companies were statutorily required to follow the same. It could not be pointed out by Department that how by following the aforestated mandatory Accounting Standards, profits of assessee could not be computed correctly. Accounting Standards issued by ICAI which was an expert body could not be discarded lightly unless it was shown that by following the said accounting standards the profits could not computed correctly in accordance with provisions of Section 145 of the Act or the said Accounting Standards were directly in conflict with provisions of the Act.
FULL TEXT OF THE ITAT JUDGEMENT
These are bunch of four appeals pertaining to two different assessee’s consisting of cross appeals by the assessee as well Revenue. Out of these four appeals, two appeals are by two different assessees’ being ITA Nos. 1306/Mum/2015 and 1308/Mum/2015 and other two appeals by the Revenue are with respect to those two different assessees’ being ITA Nos. 1540/Mum/2015 and ITA No. 1539/Mum/2015 are cross appeals for the assessment year 2012-13 which are directed against separate appellate orders both dated 29-12-2014 passed by the learned Commissioner of Income Tax(Appeal)-48, Mumbai (hereinafter called “the CIT(A)”), the appellate proceedings before learned CIT(A) has arisen out of two different assessment orders both dated 09-01-2014 passed by learned ACIT, Central Circle-13, Mumbai(hereinafter called “ the AO”) u/s 143(3) of the Income-tax Act,1961(hereinafter called “the Act”). The issues involved in these appeals are common; the same have been heard together and are being disposed of by this single consolidated order for the sake of convenience.
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