INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Commission/brokerage expenses claimed by real estate developer - Disallowance on the ground of non-offering of receipts from sale of FSI -

Assessee-company engaged in real estate development claimed deduction of Rs. 1.20 crores on account of brokerage and commission expenses. AO disallowed deduction on the ground that receipt from the sale of FSI was not offered to tax and therefore, the expenses was not liable to be allowed. Held: Except certain specific provisions relating to amortisation of initial expenses in certain cases, there is no other statutory provision for allowing revenue expenses in a phased or spread out manner. On the other hand, the expenses are required to be claimed and allowed only in the year in which the expenses are incurred or the liability towards such expenses accrued. Revenue expenditure is essentially allowable in the year to which it pertains or in which it is incurred. In the instant case, commission and brokerage expenses were accrued and liabilities towards such expenses were created as soon as the deal took place between assessee company and the party and accordingly brokerage/commission was due, and hence, claim of assessee was liable to be allowed, irrespective of whether sales agreement was registered or not during the year under consideration.

Supported:Mysore Tobacco Co. Ltd. v. CIT (1978) 115 ITR 698 (Kar) : 1978 TaxPub(DT) 991 (Karn-HC) and Calico Dyeing & Printing Works v. CIT (1958) 34 ITR 0265 (Bom) : 1958 TaxPub(DT) 155 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX APPELLATE TRIBUNAL RULES, 1963

Rule 34(5)(c)

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