INCOME TAX ACT, 1961

Section 28

Business loss - Business loss on demolished project - AO was of opinion that opening work-in-progress was a capital loss -

Assessee was engaged in the business of development and construction of residential/commercial projects. AO, on perusing the Profit & Loss Account, noted that assessee firm had debited various expenses to work-in-progress and AO was of the opinion that opening work-in-progress was a capital loss as assessee had demolished the constructed property. This as per AO was coming out of the assessee's notes on business activity. Hence, AO held that such demolished project cannot be part and parcel of work-in-progress. Held: Assessee's case was that there was court cases and amendments in the rules and plans which have led to change in plan and consequent amendment and demolition of certain aspects of project. But, assessee's contention was that assessee was still continuing with project and the expenditure in this regard had to be treated as work-in-progress in as much as assessee was following project completion method. In the facts and circumstances of the case, matter needed to be remanded back to AO who was directed to consider the veracity of assessee's submission with reference to the relevant evidences.

Followed:Lunar Electricals v. ACIT (2012) 210 taxmann 69 (Del-HC) : 2012 TaxPub(DT) 3130 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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