Which section/case laws state allowable notional expenditure

Actually, it gets deducted automatically......... the cost of original land purchase and all the expenditures to convert the land to such plots are deductible to total sell amount received/receivable over sellable area; for arriving the income under PGBP.

how come, when it was agri land its sqft govt. guideline value is very low as eg. rs.50/-per sqft. but after it had got converted into stock-in-trade by partition of full area into small pieces of residential plots after allowing space for roads & reserve areas than on applying to panchyat/municipal for converting agri class land to residential class land they increase the govt. guideline value per sqft. to rs.500/- for registration purposes after considering the site plan. now my question is whether portion of space for roads & reserve area's govt. guideline sqft. value is allowable as notional expenditure for deducting against the sale able sites govt.guide line values as received as sale consideration from each buyers of site..?? Means by allowing roads & reserve spaces (donating to Govt.register office) for making land as residential purposes, will make a notional loss of those portion of land area without any consideration receipt from it, whether such value is allowable as expenditure in my profit & loss account???

 

Refer Apex court rulling in the case of Calcuta Co. Ltd. v CIT  and Section 29.

As per your assumption/ way of calculation.......... that loss gets nullified against exact amount of notional income over the area.

So, in practice, only the real expenditures are allowed for deduction......... and not such imaginary losses!!