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The substantive issue for determination is whether the selling expenses incurred by the assessee are allocable to the specific development contract under taken by the assessee and thus required to be added to the contract costs in progress or such expenses can be allowed as revenue expenditure. On perusal, it is noticed that the AS-7 issued by ICAI clearly spells out that the selling and administrative cost are required to be excluded from the contract costs while drawing financial statements. Hence, the action of the assessee resonates that the parameters of AS-7 referred to in the instant case. 12. We also find merit in the plea of the assessee that expenses incurred in the normal course of business is required to be allowed, after setting up of business irrespective of the fact whether the Revenue is not yet earned in view of the decision of the Hon'ble Bombay High Court in the case of Western India Vegetable products Ltd. vs. CIT (1954) 26 ITR 151 (Bom). The action of the assessee in any case is a revenue neutral affair and the Revenue is not put to any tax loss per se by such alleged premature claim. 13.We further find that the controversy is no longerres integraand clearly covered by the decision of the co-ordinate bench of the Tribunal inSunny Vista Realtors (P) Ltd. vs. Asstt. CIT(ITA No. 4580/Mum/2013 vide order dt. 11th Jan., 2017). In the similarly placed situation, the co-ordinate bench has adjudicated the issue in favour of the assessee by a detailed order.

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Sec. 37(1) of Income-tax Act, 1961— Business expenditure—The assessee was engaged in the business of real estate development and construction of commercial and residential building near white field, Bengaluru. The company while selling its residential apartments, claims to have entered into two agreements namely; agreement to sell and construction agreement. It was further claimed that the possession of the apartment will be given to the customers on completion of the construction. The AO, at the time of framing the assessment under s. 143(3) observed that the assessee has claimed selling expenses in the previous year relevant to asst. yr. 2012-13 in question as revenue expenses.The AO further observed that the selling expenses were mostly comprised of advertising expenses of 'white field project'.
It was thus held by the AO that selling expenses claimed as revenue expenditure requires to be capitalized with the project cost and cannot be regarded as expenditure in revenue nature. The claim of selling expenses as the Revenue expenses were thus disallowed by the AO and added to the total income of the assessee. The total loss was assessed. The CIT(A) in first appeal mainly reiterated the observations of the AO and confirmed the action of the AO. The assessee preferred appeal before the Tribunal.
The co-ordinate bench has adjudicated the issue in favour of the assessee by a detailed order.
In parity with the view taken by the co-ordinate Bench and having regard to the tax neutrality, Tribunal find considerable merit in the objection raised by the assessee. The assessee's appeal was accordingly, allowed. --- PRAGNYA CREST PROPERTIES (P) LTD. vs. Deputy CIT.[2020] 23 ITCD Online 151 (BANG)