DATTANI CONSTRUCTION,MUMBAI V. ITO WARD 42(1)(2), MUMBAI

ITA 2107/MUM/2025

AI Insights

The case involves Dattani Construction, a partnership firm engaged in real estate development, appealing against the order of the Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, Delhi. The appeal contested the reopening of assessment under section 148, discrepancies in income receipts as per Form No. 26AS, and various disallowances of expenses which were transferred to Capital Work-in-Progress. The Tribunal examined the consistency of accounting practices over the years and the treatment of expenses related to ongoing real estate projects.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784585 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 27-03-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAM KASURI
• Assessee Lawyers: PRATEEK JAIN
• Keywords: Set aside; Business income; Opportunity of being heard; Revenue expenditure; Depreciation; Rule of consistency; TDS
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 2107/MUM/2025 Assessment Year: 2011-12 Dattani Construction, Laxmi Shopping Centre, V.L. Road, Kandivali West, Kandivali West S.O., Mumbai-400067. Vs. ITO Ward 42(1)(2), Kautilya Bhavan, Mumbai-400051. PAN NO. AAAFD 4748 E Appellant Respondent Assessee by : Mr. Prateek Jain Revenue by : Mr. Annavaram Kasuri, Sr. DR Date of Hearing : 03/11/2025 Date of pronouncement : 12/11/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 29.01.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds: 1. On the facts and circumstances of the case and in law, Id. CIT(A) erred in confirming the action of Ld. AO in reopening the assessment by issue of notice u/s. 148, which is illegal and bad- in-law or otherwise void for want of jurisdiction. Printed from counselvise.com 2. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. in treating difference in receipts as per 26AS Rs.4,05,826/ for the reasons mentioned in the impugned order or otherwise. 3. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in treating compensation received by the appellant Rs income from others Sources instead of business income for the reasons mentioned in the impugned order or otherwise. 4. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making disallowance of Sales Promotion Expense amounting to Rs. 9,17,014/- by transferring the same to Capital work for the reasons mentioned in the impugned order or otherwise. 5. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making disallowance of Financial Expense amounting to Rs. 23,74,386/ by transferring the same to Capital work reasons mentioned in the impugned order or otherwise. 6. On the facts and circums CIT(A) erred in confirming the action of Ld. AO in making disallowance of General Administration Expense amounting to Rs. 15,37,367/ progress for the reasons mentioned in th order or otherwise. 2. Briefly stated, the facts of the case are that the assessee, a partnership firm, is engaged in the business of real estate development. For the year under consideration, the assessee filed its return of income on 30th Sept income of ₹4,64,557/ and in pursuance thereof, statutory notices under the provisions of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) were duly issued and compli 2. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. in treating difference in receipts as per 26AS Rs.4,05,826/- as income of the appellant, for the reasons mentioned in the impugned order or otherwise. 3. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in treating compensation received by the appellant Rs.48,50,000/ income from others Sources instead of business income for the reasons mentioned in the impugned order or otherwise. 4. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making isallowance of Sales Promotion Expense amounting to Rs. by transferring the same to Capital work-in for the reasons mentioned in the impugned order or otherwise. 5. On the facts and circumstances of the case and in law the Id. rred in confirming the action of Ld. AO in making disallowance of Financial Expense amounting to Rs. 23,74,386/ by transferring the same to Capital work-in- progress for the reasons mentioned in the impugned order or otherwise. 6. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making disallowance of General Administration Expense amounting to Rs. 15,37,367/- by transferring the same to Capital work progress for the reasons mentioned in the impugned otherwise. Briefly stated, the facts of the case are that the assessee, a partnership firm, is engaged in the business of real estate development. For the year under consideration, the assessee filed its return of income on 30th September, 2011, declaring a total 4,64,557/-. The said return was selected for scrutiny, and in pursuance thereof, statutory notices under the provisions of tax Act, 1961 (hereinafter referred to as “the Act”) were duly issued and complied with. Dattani Construction 2 ITA No. 2107/MUM/2025 2. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. in treating difference as income of the appellant, for the reasons mentioned in the impugned order or otherwise. 3. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in treating .48,50,000/- as income from others Sources instead of business income for the reasons mentioned in the impugned order or otherwise. 4. On the facts and circumstances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making isallowance of Sales Promotion Expense amounting to Rs. in- progress for the reasons mentioned in the impugned order or otherwise. 5. On the facts and circumstances of the case and in law the Id. rred in confirming the action of Ld. AO in making disallowance of Financial Expense amounting to Rs. 23,74,386/- progress for the reasons mentioned in the impugned order or otherwise. tances of the case and in law the Id. CIT(A) erred in confirming the action of Ld. AO in making disallowance of General Administration Expense amounting to by transferring the same to Capital work-in- e impugned Briefly stated, the facts of the case are that the assessee, a partnership firm, is engaged in the business of real estate development. For the year under consideration, the assessee filed ember, 2011, declaring a total . The said return was selected for scrutiny, and in pursuance thereof, statutory notices under the provisions of tax Act, 1961 (hereinafter referred to as “the Act”) were Printed from counselvise.com 2.1 Subsequently, the assessment was completed under section 143(3) of the Act on 21st March, 2014, wherein the learned Assessing Officer made certain additions and disallowances. These, inter alia, included— receipts as per Form No. 26AS amounting to comprising interest income of ₹3,82,492/-, and (ii) a disallowance of expenses claimed under the head “Income from Other Sources”, which were directed to be capitalised by transfer to “Capital Work 3. On further appeal, the Ld. CIT(A) partly allowed the appeal of the assessee. 4. Aggrieved, the assessee is in appeal before us by way of raising grounds as reproduced above. 5. Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 55. 6. Before us, the Ld. counsel for the assessee submitted that the assessee does not wish to press ground No appeal. Accordingly, same are dismisse 7. Ground No. 2 of the assessee’s appeal pertains to the addition made on account of the difference in receipts as reflected in Form No. 26AS, amounting to Subsequently, the assessment was completed under section 143(3) of the Act on 21st March, 2014, wherein the learned Assessing Officer made certain additions and disallowances. These, —(i) an addition on account of the diffe receipts as per Form No. 26AS amounting to comprising interest income of ₹23,334/- and rental income of , and (ii) a disallowance of expenses claimed under the head “Income from Other Sources”, which were directed to be italised by transfer to “Capital Work-in-Progress”. On further appeal, the Ld. CIT(A) partly allowed the appeal of Aggrieved, the assessee is in appeal before us by way of raising grounds as reproduced above. Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 55. Before us, the Ld. counsel for the assessee submitted that the assessee does not wish to press ground Nos. 1, 3 and 6 of the appeal. Accordingly, same are dismissed as infructuous. Ground No. 2 of the assessee’s appeal pertains to the addition made on account of the difference in receipts as reflected in Form No. 26AS, amounting to ₹4,05,826/–. Dattani Construction 3 ITA No. 2107/MUM/2025 Subsequently, the assessment was completed under section 143(3) of the Act on 21st March, 2014, wherein the learned Assessing Officer made certain additions and disallowances. These, (i) an addition on account of the difference in receipts as per Form No. 26AS amounting to ₹4,05,826/-, and rental income of , and (ii) a disallowance of expenses claimed under the head “Income from Other Sources”, which were directed to be Progress”. On further appeal, the Ld. CIT(A) partly allowed the appeal of Aggrieved, the assessee is in appeal before us by way of raising Before us, the Ld. counsel for the assessee filed a Paper Book Before us, the Ld. counsel for the assessee submitted that the . 1, 3 and 6 of the d as infructuous. Ground No. 2 of the assessee’s appeal pertains to the addition made on account of the difference in receipts as reflected in Form Printed from counselvise.com 7.1 The brief facts relevant to this issue are that, as per Form No. 26AS placed at pages 32 to 35 of the Paper Book, the assessee had received certain sums by way of rent and interest, along with credit for tax deducted at source (TDS), as summarised below: Name of the party Selvel Publicity And Consultants Pvt. Ltd. Kavveri Telecom Infrastructure Ltd. Aditi Fastfood Pvt. Ltd. Total 7.2 The Assessing Officer observed that against the aforesaid receipts aggregating to only a sum of ₹6,42,500/ in the return of income. Consequently, the balance amount, comprising rent of ₹3,82,492/ undisclosed. 7.3 During the course of assessment proceedings, the assessee submitted that it had, in fact, received only rent of from Selvel Publicity and Consultants Pvt. Ltd. any payment from Kavveri Telecom Infrastructure Ltd. amount of TDS credited in its favour. The assessee thus contended that, since the TDS of same amount was taken as income. In this manner, the assessee claimed to have offered total income of credit for the entire TDS of The brief facts relevant to this issue are that, as per Form No. 26AS placed at pages 32 to 35 of the Paper Book, the assessee had received certain sums by way of rent and interest, along with credit for tax deducted at source (TDS), as summarised below: Nature of receipt Total amount paid/credited Total tax deducted Selvel Publicity And Rent 6,00,000/- 60,000/ Kavveri Telecom Rent 4,24,992/- 42,499/ Aditi Fastfood Pvt. Ltd. Interest 23,334/- 2,334/ 10,48,326/– 1,04,833 The Assessing Officer observed that against the aforesaid receipts aggregating to ₹10,48,326/–, the assessee had disclosed 6,42,500/– under the head “Miscellaneous Income” in the return of income. Consequently, the balance amount, 3,82,492/– and interest of ₹23,334/ During the course of assessment proceedings, the assessee submitted that it had, in fact, received only rent of Selvel Publicity and Consultants Pvt. Ltd. and had not received Kavveri Telecom Infrastructure Ltd. amount of TDS credited in its favour. The assessee thus contended that, since the TDS of ₹42,499/– was reflected in its name, the same amount was taken as income. In this manner, the assessee claimed to have offered total income of ₹6,42,499/ credit for the entire TDS of ₹1,04,834/–. Dattani Construction 4 ITA No. 2107/MUM/2025 The brief facts relevant to this issue are that, as per Form No. 26AS placed at pages 32 to 35 of the Paper Book, the assessee had received certain sums by way of rent and interest, along with credit for tax deducted at source (TDS), as summarised below: Total tax deducted Total TDS deposited 60,000/- 60,000/- 42,499/- 42,499/- - 2,334/- 1,04,833 1,04,833 The Assessing Officer observed that against the aforesaid , the assessee had disclosed “Miscellaneous Income” in the return of income. Consequently, the balance amount, 23,334/–, remained During the course of assessment proceedings, the assessee submitted that it had, in fact, received only rent of ₹6,00,000/– and had not received Kavveri Telecom Infrastructure Ltd., except for the amount of TDS credited in its favour. The assessee thus contended lected in its name, the same amount was taken as income. In this manner, the assessee 6,42,499/– while availing Printed from counselvise.com 7.4 The Assessing Officer, however, did not find the explanat satisfactory. He was of the view that since the assessee had claimed credit for the entire TDS amount of upon it to declare the corresponding gross receipts of Accordingly, he treated the differential sum of comprising rent of undisclosed income and added the same to the total income of the assessee. 7.5 Before the Ld. CIT(A) the assessee again reiterated that no rental income or the interest income was re Telecom Infrastructure Ltd. and Aditi Fastfood Pvt. Ltd. either in the current year or in the subsequent year and therefore, no addition was warranted. contention of assessee observin “5.2 Ground of Rs.3,82,492/ proceedings, appellant has submitted that difference of rent shown in 26AS of the appellant had neither received the sum nor was the amount in anyway receivable by them. The only error on the part of the appellant was that the corresponding TDS in respect of the rent which was not related was claimed by them. Apart from that appellant has not submitted any documents showing that the addition made by the AO was erroneous. However, during the assessm that appellant has not restricted its TDS claim to the amount offered to tax but claimed full TDS corresponding to the amount reflected in 26AS statement whereas appellant offered only portion of the corresponding income to made payments to the appellant had deducted TDS thereon have uploaded the said information in their TDS returns corresponding to the appellant's PAN. Therefore, whatever AO contended appears to be true as appellant stated that it claimed the TDS amount. However, it failed to prove to whom this The Assessing Officer, however, did not find the explanat satisfactory. He was of the view that since the assessee had claimed credit for the entire TDS amount of ₹1,04,834/–, it was incumbent upon it to declare the corresponding gross receipts of Accordingly, he treated the differential sum of comprising rent of ₹3,82,492/– and interest of undisclosed income and added the same to the total income of the Before the Ld. CIT(A) the assessee again reiterated that no rental income or the interest income was received from M/s Kavveri Telecom Infrastructure Ltd. and Aditi Fastfood Pvt. Ltd. either in the current year or in the subsequent year and therefore, warranted. The Ld. CIT(A) however rejected the contention of assessee observing as under: 5.2 Ground of Rs.3,82,492/-. During the course of appellate proceedings, appellant has submitted that difference of rent shown in 26AS of the appellant had neither received the sum nor was the amount in anyway receivable by them. The only error on of the appellant was that the corresponding TDS in respect of the rent which was not related was claimed by them. Apart from that appellant has not submitted any documents showing that the addition made by the AO was erroneous. However, during the assessment proceedings, AO has observed that appellant has not restricted its TDS claim to the amount offered to tax but claimed full TDS corresponding to the amount reflected in 26AS statement whereas appellant offered only portion of the corresponding income to tax. The parties who have made payments to the appellant had deducted TDS thereon have uploaded the said information in their TDS returns corresponding to the appellant's PAN. Therefore, whatever AO contended appears to be true as appellant stated that it had erroneously claimed the TDS amount. However, it failed to prove to whom this Dattani Construction 5 ITA No. 2107/MUM/2025 The Assessing Officer, however, did not find the explanation satisfactory. He was of the view that since the assessee had claimed , it was incumbent upon it to declare the corresponding gross receipts of ₹10,48,326/–. Accordingly, he treated the differential sum of ₹4,05,826/–, and interest of ₹23,334/–, as undisclosed income and added the same to the total income of the Before the Ld. CIT(A) the assessee again reiterated that no ceived from M/s Kavveri Telecom Infrastructure Ltd. and Aditi Fastfood Pvt. Ltd. respectively either in the current year or in the subsequent year and therefore, The Ld. CIT(A) however rejected the . During the course of appellate proceedings, appellant has submitted that difference of rent shown in 26AS of the appellant had neither received the sum nor was the amount in anyway receivable by them. The only error on of the appellant was that the corresponding TDS in respect of the rent which was not related was claimed by them. Apart from that appellant has not submitted any documents showing that the addition made by the AO was erroneous. ent proceedings, AO has observed that appellant has not restricted its TDS claim to the amount offered to tax but claimed full TDS corresponding to the amount reflected in 26AS statement whereas appellant offered only tax. The parties who have made payments to the appellant had deducted TDS thereon have uploaded the said information in their TDS returns corresponding to the appellant's PAN. Therefore, whatever AO contended had erroneously claimed the TDS amount. However, it failed to prove to whom this Printed from counselvise.com TDS belongs to and who has offered the corresponding amount for taxation in their returns. In view of that contention of the appellant is rejected and addition made by the AO Rs.3,82,492/ sustained. Ground of no.3 is therefore, 7.6 We have carefully heard the rival submissions of the parties and perused the material available on record. The controversy that arises for consideration is whether the assessee is entitled to claim credit of tax deducted at source (TDS) in respect of amounts reflected in Form No. 26AS, without having offered the corresponding income to tax in the year under consideration. 7.7 It is an admitted sum of ₹10,48,326/– assessee, comprising rent of The case of the assessee, however, is that no rent was actually received from Kavveri Telecom Infrastructure Ltd. credit of TDS appearing in its favour. Likewise, with respect to Fastfood Pvt. Ltd., it has been contended that no interest amount was received apart from the TDS component. 7.8 In our considered o at the level of the Assessing Officer. The Assessing Officer shall ascertain—(i) whether the alleged deductor has claimed the impugned amount as rental expenditure in its books of account towards the assessee, o or actually paid by the said deductor to the assessee. The Assessing Officer may also verify from the respective deductors whether only TDS belongs to and who has offered the corresponding amount for taxation in their returns. In view of that contention of the appellant is rejected and addition made by the AO Rs.3,82,492/- on account house property income is being sustained. Ground of no.3 is therefore, dismissed.” We have carefully heard the rival submissions of the parties and perused the material available on record. The controversy that onsideration is whether the assessee is entitled to claim credit of tax deducted at source (TDS) in respect of amounts reflected in Form No. 26AS, without having offered the corresponding income to tax in the year under consideration. It is an admitted position that as per Form No. 26AS, a total – has been shown as receipts in the name of the assessee, comprising rent of ₹4,24,992/– and interest of The case of the assessee, however, is that no rent was actually Kavveri Telecom Infrastructure Ltd., except for the credit of TDS appearing in its favour. Likewise, with respect to , it has been contended that no interest amount was received apart from the TDS component. In our considered opinion, this issue necessitates verification at the level of the Assessing Officer. The Assessing Officer shall (i) whether the alleged deductor has claimed the impugned amount as rental expenditure in its books of account towards the assessee, or (ii) the quantum of amount, if any, credited or actually paid by the said deductor to the assessee. The Assessing Officer may also verify from the respective deductors whether only Dattani Construction 6 ITA No. 2107/MUM/2025 TDS belongs to and who has offered the corresponding amount for taxation in their returns. In view of that contention of the appellant is rejected and addition made by the AO of on account house property income is being We have carefully heard the rival submissions of the parties and perused the material available on record. The controversy that onsideration is whether the assessee is entitled to claim credit of tax deducted at source (TDS) in respect of amounts reflected in Form No. 26AS, without having offered the corresponding income to tax in the year under consideration. position that as per Form No. 26AS, a total has been shown as receipts in the name of the and interest of ₹23,334/–. The case of the assessee, however, is that no rent was actually , except for the credit of TDS appearing in its favour. Likewise, with respect to Aditi , it has been contended that no interest amount pinion, this issue necessitates verification at the level of the Assessing Officer. The Assessing Officer shall (i) whether the alleged deductor has claimed the impugned amount as rental expenditure in its books of account r (ii) the quantum of amount, if any, credited or actually paid by the said deductor to the assessee. The Assessing Officer may also verify from the respective deductors whether only Printed from counselvise.com the TDS amount was finally adjusted or settled between the parties, and no other amount was either paid or payable. 7.9 If, upon such verification, it is found that no amount other than the TDS has been received or is receivable by the assessee, the Assessing Officer shall grant credit of the TDS reflected in Form No. 26AS in favour of the assessee, after taking into account the rental income of ₹42,500/– similar course of action shall be adopted in respect of the interest from Aditi Fastfood Pvt. Ltd. 7.10 Accordingly, this Assessing Officer for fresh adjudication, after carrying out necessary verification and making such inquiries as may be deemed fit from the concerned deductors. The Assessing Officer shall thereafter decide the issue in accordance with law and after affording due opportunity of being heard to the assessee. 7.11 The ground No. 2 of the appeal of the assessee is allowed for statistical purposes. 8. Ground Nos. 4 and 5 of the assessee’s appeal pertain to the disallowance of sales promotion expenses amounting to ₹9,17,014/– and fininacial expenses amounting to The Assessing Officer treated the said expenditures as not allowable under the head “Income from Other Sources” the TDS amount was finally adjusted or settled between the parties, o other amount was either paid or payable. If, upon such verification, it is found that no amount other than the TDS has been received or is receivable by the assessee, the Assessing Officer shall grant credit of the TDS reflected in Form No. avour of the assessee, after taking into account the rental from M/s Kavveri Telecom Infrastructure Ltd. similar course of action shall be adopted in respect of the interest Aditi Fastfood Pvt. Ltd. Accordingly, this ground of appeal is restored to the file of the Assessing Officer for fresh adjudication, after carrying out necessary verification and making such inquiries as may be deemed fit from the concerned deductors. The Assessing Officer shall he issue in accordance with law and after affording due opportunity of being heard to the assessee. The ground No. 2 of the appeal of the assessee is allowed for Ground Nos. 4 and 5 of the assessee’s appeal pertain to the disallowance of sales promotion expenses amounting to and fininacial expenses amounting to The Assessing Officer treated the said expenditures as not allowable “Income from Other Sources” and accordingly Dattani Construction 7 ITA No. 2107/MUM/2025 the TDS amount was finally adjusted or settled between the parties, If, upon such verification, it is found that no amount other than the TDS has been received or is receivable by the assessee, the Assessing Officer shall grant credit of the TDS reflected in Form No. avour of the assessee, after taking into account the rental M/s Kavveri Telecom Infrastructure Ltd.. A similar course of action shall be adopted in respect of the interest ground of appeal is restored to the file of the Assessing Officer for fresh adjudication, after carrying out necessary verification and making such inquiries as may be deemed fit from the concerned deductors. The Assessing Officer shall he issue in accordance with law and after affording due opportunity of being heard to the assessee. The ground No. 2 of the appeal of the assessee is allowed for Ground Nos. 4 and 5 of the assessee’s appeal pertain to the disallowance of sales promotion expenses amounting to and fininacial expenses amounting to ₹22,74,836/–. The Assessing Officer treated the said expenditures as not allowable and accordingly Printed from counselvise.com directed that the same be capitalised by way of transfer to Work-in-Progress (CWIP). 8.1 The brief facts relevant to the issue under consideration are that the assessee had debited certain expenses a “Miscellaneous Income” ₹18,31,596/–, general administrative expenses of and financial expenses of assessee that, in earlier assessment years, a consistent practice had been followed whereby 70% of such expenses were claimed as deductible under the head balance 30% was capital to the assessee’s real estate projects. the AO in earlier years. 8.2 However, for the year under consideration, the learned Assessing Officer deviated from this practice and transfer entire amount of certain expenses to specifically—sales promotion expenses of donation of ₹9,14,502/ ₹50,20,998/– (after allowing depreciation of financial expenses of 8.3 In appeal, the learned Commissioner of Income Tax (Appeals) [CIT(A)] granted partial relief to the assessee. The Ld. CIT(A) accepted the assessee’s contention with respect to general directed that the same be capitalised by way of transfer to Progress (CWIP). The brief facts relevant to the issue under consideration are that the assessee had debited certain expenses a “Miscellaneous Income”, comprising sales promotion expenses of , general administrative expenses of and financial expenses of ₹23,74,386/–. It was the contention of the assessee that, in earlier assessment years, a consistent practice had been followed whereby 70% of such expenses were claimed as deductible under the head “Income from Other Sources” balance 30% was capitalised as Capital Work-in-Progress to the assessee’s real estate projects. This practice was accepted by the AO in earlier years. However, for the year under consideration, the learned Assessing Officer deviated from this practice and transfer entire amount of certain expenses to Capital Work sales promotion expenses of ₹9,17,014/ 9,14,502/–), general administrative expenses of (after allowing depreciation of ₹4,68,573/ financial expenses of ₹23,74,386/–—aggregating to ₹ In appeal, the learned Commissioner of Income Tax (Appeals) [CIT(A)] granted partial relief to the assessee. The Ld. CIT(A) accepted the assessee’s contention with respect to general Dattani Construction 8 ITA No. 2107/MUM/2025 directed that the same be capitalised by way of transfer to Capital The brief facts relevant to the issue under consideration are that the assessee had debited certain expenses against , comprising sales promotion expenses of , general administrative expenses of ₹51,24,557/–, . It was the contention of the assessee that, in earlier assessment years, a consistent practice had been followed whereby 70% of such expenses were claimed as “Income from Other Sources” and the Progress pertaining This practice was accepted by However, for the year under consideration, the learned Assessing Officer deviated from this practice and transferred the Capital Work-in-Progress, 9,17,014/– (excluding ), general administrative expenses of 4,68,573/–), and ₹83,12,398/–. In appeal, the learned Commissioner of Income Tax (Appeals) [CIT(A)] granted partial relief to the assessee. The Ld. CIT(A) accepted the assessee’s contention with respect to general Printed from counselvise.com administrative expenses and directed that 70% thereof be allowed as deduction, with the remaining 30% to be capitalised as Work-in-Progress. However, he declined to extend similar treatment to the sales promotion expenses and financial expenses, ther sustaining the disallowance of those items. 8.4 Before us, the Ld. counsel for the assessee referred to Paper Book page 29 and 31 of the Paper Book where detail of the sales promotion expenses and investment expenses is provided. For ready reference said detail is reproduced as under : “DATTANI CONSTRUCTIONS SCHEDULE FORMING THE PART OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 Miscellaneous Income Particulars Rent Recd Compensation Sales Promotion Expenses Particulars Advertisement Donations “DATTANI CONSTRUCTIONS SCHEDULE FORMING THE PART OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 Financial Expenses Particulars ministrative expenses and directed that 70% thereof be allowed as deduction, with the remaining 30% to be capitalised as . However, he declined to extend similar treatment to the sales promotion expenses and financial expenses, ther sustaining the disallowance of those items.. Before us, the Ld. counsel for the assessee referred to Paper Book page 29 and 31 of the Paper Book where detail of the sales promotion expenses and investment expenses is provided. For ready reference said detail is reproduced as under : CTIONS SCHEDULE FORMING THE PART OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 Rs. Ps. 642499.60 4850000.00 5492499.60 Sales Promotion Expenses Schedule No. 4 917014.00 914582.00 1831596.00 Total 1831596.00 “DATTANI CONSTRUCTIONS SCHEDULE FORMING THE PART OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011 Financial Expenses Schedule No. 6 Dattani Construction 9 ITA No. 2107/MUM/2025 ministrative expenses and directed that 70% thereof be allowed as deduction, with the remaining 30% to be capitalised as Capital . However, he declined to extend similar treatment to the sales promotion expenses and financial expenses, thereby Before us, the Ld. counsel for the assessee referred to Paper Book page 29 and 31 of the Paper Book where detail of the sales promotion expenses and investment expenses is provided. For ready Schedule No. 4 Schedule No. 6 Printed from counselvise.com Discount Brokerage Interest 8.5 We have given our thoughtful consideration to the rival submissions advanced by both on record, and duly considered the findings of the authorities below. The material facts are not in dispute. The assessee is engaged in the business of real estate development and, in the ordinary course of its operatio expenditure including financial, administrative, and sales promotion expenses. The financial expenses comprise brokerage, discount, and interest components, some of which are directly relatable to ongoing real estate projec 8.6 It is evident from the record that the assessee has been consistently following a uniform accounting methodology over the years, wherein 30% of the expenditure incurred under the aforesaid heads is capitalised as part of balance 70% is claimed as revenue deduction in the year of incurrence. This accounting treatment, being consistently followed in preceding assessment years, has been accepted by the Department and not found fault with in earlier scrutiny assessments. The principle of consistency, recognised by judicial precedents, mandates that a settled accounting practice accepted in Rs. Ps. 375125.00 174500.00 2374386.00 1824761.00 2374386.00 Total 2374386.00 We have given our thoughtful consideration to the rival submissions advanced by both parties, perused the material placed on record, and duly considered the findings of the authorities below. The material facts are not in dispute. The assessee is engaged in the business of real estate development and, in the ordinary course of its operations, incurs various categories of expenditure including financial, administrative, and sales promotion expenses. The financial expenses comprise brokerage, discount, and interest components, some of which are directly relatable to ongoing real estate projects. It is evident from the record that the assessee has been consistently following a uniform accounting methodology over the years, wherein 30% of the expenditure incurred under the aforesaid heads is capitalised as part of Capital Work-in-Progress balance 70% is claimed as revenue deduction in the year of incurrence. This accounting treatment, being consistently followed in preceding assessment years, has been accepted by the Department and not found fault with in earlier scrutiny The principle of consistency, recognised by judicial precedents, mandates that a settled accounting practice accepted in Dattani Construction 10 ITA No. 2107/MUM/2025 2374386.00 2374386.00 2374386.00 We have given our thoughtful consideration to the rival parties, perused the material placed on record, and duly considered the findings of the authorities below. The material facts are not in dispute. The assessee is engaged in the business of real estate development and, in the ns, incurs various categories of expenditure including financial, administrative, and sales promotion expenses. The financial expenses comprise brokerage, discount, and interest components, some of which are directly It is evident from the record that the assessee has been consistently following a uniform accounting methodology over the years, wherein 30% of the expenditure incurred under the aforesaid Progress and the balance 70% is claimed as revenue deduction in the year of incurrence. This accounting treatment, being consistently followed in preceding assessment years, has been accepted by the Department and not found fault with in earlier scrutiny The principle of consistency, recognised by judicial precedents, mandates that a settled accounting practice accepted in Printed from counselvise.com prior years cannot be arbitrarily disturbed in a subsequent year unless there is a material change in facts or law. 8.7 The learned As consistent practice and directed the transfer of the entire expenditure to Capital Work expenses are relatable to the projects under development. The learned CIT(A), while accepted the assessee’s contention in respect of administrative expenses but maintained the disallowance of sales promotion and financial expenses. 8.8 The question that, therefore, arises for determination is whether such sales promotion and financial expenses can be treated wholly as capital in nature or whether a proportion thereof merits treatment as revenue expenditure, as consistently followed by the assessee in earlier years. 8.9 We find that the sales promot advertisement and publicity expenditure incurred to enhance the overall business visibility and brand presence of the assessee alongwith expenses for publicity of projects also. Such expenditure, by its very nature, cannot be confined project but contributes to the general promotion of the assessee’s business as a whole. The donation component, on the other hand, has already been disallowed separately by the Assessing Officer, prior years cannot be arbitrarily disturbed in a subsequent year unless there is a material change in facts or law. The learned Assessing Officer, however, deviated from this consistent practice and directed the transfer of the entire Capital Work-in-Progress, on the reasoning that such expenses are relatable to the projects under development. The learned CIT(A), while appreciating the past pattern, partially accepted the assessee’s contention in respect of administrative expenses but maintained the disallowance of sales promotion and The question that, therefore, arises for determination is her such sales promotion and financial expenses can be treated wholly as capital in nature or whether a proportion thereof merits treatment as revenue expenditure, as consistently followed by the assessee in earlier years. We find that the sales promotion expenses comprise advertisement and publicity expenditure incurred to enhance the overall business visibility and brand presence of the assessee alongwith expenses for publicity of projects also. Such expenditure, by its very nature, cannot be confined exclusively to a particular project but contributes to the general promotion of the assessee’s business as a whole. The donation component, on the other hand, has already been disallowed separately by the Assessing Officer, Dattani Construction 11 ITA No. 2107/MUM/2025 prior years cannot be arbitrarily disturbed in a subsequent year sessing Officer, however, deviated from this consistent practice and directed the transfer of the entire , on the reasoning that such expenses are relatable to the projects under development. The appreciating the past pattern, partially accepted the assessee’s contention in respect of administrative expenses but maintained the disallowance of sales promotion and The question that, therefore, arises for determination is her such sales promotion and financial expenses can be treated wholly as capital in nature or whether a proportion thereof merits treatment as revenue expenditure, as consistently followed ion expenses comprise advertisement and publicity expenditure incurred to enhance the overall business visibility and brand presence of the assessee alongwith expenses for publicity of projects also. Such expenditure, exclusively to a particular project but contributes to the general promotion of the assessee’s business as a whole. The donation component, on the other hand, has already been disallowed separately by the Assessing Officer, Printed from counselvise.com and therefore, does not form pa the financial expenses discount—partly relate to financing arrangements connected with the projects and partly to the general working capital requirements of the business. 8.10 In our considered opinion, where an assessee is consistently following a method of apportioning part of such expenditure to capital work and claiming the balance as revenue, and such method has been accepted in earlier years, there is no valid reason for departure in the year under consideration in the absence of any contrary finding that the method results in distortion of income. Further, as rightly contended by the assessee, whether the expenditure is allowed as a deduction in the present year or capitalised and allowed as part of the project cost in subsequent years would be revenue rates applicable. 8.11 In view of the foregoing, and bearing in mind the settled principles of consistency and revenue neutrality, w justification for the deviation made by the Assessing Officer or for the partial disallowance sustained by the learned CIT(A). We, therefore, set aside the findings of the learned CIT(A) on this issue and direct the Assessing Officer to adopt the consistently followed by the assessee in earlier years capitalise 30% of the sales promotion and financial expenses as and therefore, does not form part of the present dispute. Similarly, the financial expenses—comprising brokerage, interest, and partly relate to financing arrangements connected with the projects and partly to the general working capital requirements r considered opinion, where an assessee is consistently following a method of apportioning part of such expenditure to capital work and claiming the balance as revenue, and such method has been accepted in earlier years, there is no valid reason for ure in the year under consideration in the absence of any contrary finding that the method results in distortion of income. Further, as rightly contended by the assessee, whether the expenditure is allowed as a deduction in the present year or and allowed as part of the project cost in subsequent years would be revenue-neutral in effect, given the uniformity of tax In view of the foregoing, and bearing in mind the settled principles of consistency and revenue neutrality, w justification for the deviation made by the Assessing Officer or for the partial disallowance sustained by the learned CIT(A). We, therefore, set aside the findings of the learned CIT(A) on this issue and direct the Assessing Officer to adopt the accounting treatment consistently followed by the assessee in earlier years capitalise 30% of the sales promotion and financial expenses as Dattani Construction 12 ITA No. 2107/MUM/2025 rt of the present dispute. Similarly, comprising brokerage, interest, and partly relate to financing arrangements connected with the projects and partly to the general working capital requirements r considered opinion, where an assessee is consistently following a method of apportioning part of such expenditure to capital work and claiming the balance as revenue, and such method has been accepted in earlier years, there is no valid reason for ure in the year under consideration in the absence of any contrary finding that the method results in distortion of income. Further, as rightly contended by the assessee, whether the expenditure is allowed as a deduction in the present year or and allowed as part of the project cost in subsequent neutral in effect, given the uniformity of tax In view of the foregoing, and bearing in mind the settled principles of consistency and revenue neutrality, we find no justification for the deviation made by the Assessing Officer or for the partial disallowance sustained by the learned CIT(A). We, therefore, set aside the findings of the learned CIT(A) on this issue accounting treatment consistently followed by the assessee in earlier years—namely, to capitalise 30% of the sales promotion and financial expenses as Printed from counselvise.com Capital Work-in-Progress deductible expenditure for the year under consi 8.12 Accordingly, we set aside the findings of the learned CIT(A) on this issue and direct the Assessing Officer to allow the assessee to capitalise 30% of the sales promotion and investment expenses as Capital Work the balance 70% as revenue expenditure. 8.13 The ground No. 4 and 5 of the appeal of the assessee are allowed. 9. The ground No. 7 is being general in nature and same is not required to be adjudicated upon and same is dismissed as infructuous. 10. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on Sd/- (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 12/11/2025 Rahul Sharma, Sr. P.S. Progress and to allow the balance 70% as deductible expenditure for the year under consideration. Accordingly, we set aside the findings of the learned CIT(A) on this issue and direct the Assessing Officer to allow the assessee to capitalise 30% of the sales promotion and investment Capital Work-in-Progress, while permitting deduction of the balance 70% as revenue expenditure. The ground No. 4 and 5 of the appeal of the assessee are The ground No. 7 is being general in nature and same is not required to be adjudicated upon and same is dismissed as In the result, the appeal of the assessee is partly allowed for statistical purposes. ounced in the open Court on 12/11/2025. Sd/ (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Dattani Construction 13 ITA No. 2107/MUM/2025 and to allow the balance 70% as deration. Accordingly, we set aside the findings of the learned CIT(A) on this issue and direct the Assessing Officer to allow the assessee to capitalise 30% of the sales promotion and investment-related mitting deduction of The ground No. 4 and 5 of the appeal of the assessee are The ground No. 7 is being general in nature and same is not required to be adjudicated upon and same is dismissed as In the result, the appeal of the assessee is partly allowed for /11/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER Printed from counselvise.com Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Dattani Construction 14 ITA No. 2107/MUM/2025 BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "