TMI Blog2013 (10) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... o reject the same and to estimate the income by applying project percentage completion method is not justified – Decided in favor of Assessee. - ITA No. 2642/Mum/2012 - - - Dated:- 4-10-2013 - Sh. D. Manmohan And Rajendra,JJ. For the Appellant : Shri J. P. Bairagra For the Respondent : Shri Pitambar Das ORDER Per Rajendra, A. M. Challenging the order dt.07-03-2012 of the CIT(A)-22, Mumbai assessee-company has filed following Grounds of Appeal: "On facts and in circumstances of the case and in law, the Commissioner of Income- tax (Appeals),(CIT (A)) has erred in: 1. Rejecting the project completion method of accounting which has been regularly followed by the appellant in the past. The appellant is a Builders and Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere are three grounds of appeal,but the effective ground of appeal is about adopting of percentage of completion method(PCM)by the AO for determining the tax liability of the assessee for the year under consideration. During the assessment proceedings, AO found that assessee had sold A,B,C and D wings of project Indraprastha at Goregaon and had carried forward unsold stock, that it had claimed that Multiplex Fantasia at Vashi was under construction ,that it had not offered any income under the head 'work-in-progress'(WIP).AO noted that booking advances shown in the balance-sheet in respect of these projects were more than the stock and WIP, that in the previous assessment year,i.e.2008-09,assessee's claim of following PCM was rejected by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully considered the guidance notes issued by ICAI as well as Accounting Standards viz AS-7 9 in the light of provision of section 145 of Income Tax Act. 14. There is no dispute to the fact that assessee is following project completion method which has been accepted by the department in the past. Further Assessee is a builder and developer and in such a case project completion method is accepted method of accounting. AS-7 as discussed by the Assessing Officer and Ld. CIT (A) in their respective orders are applicable only in case of contractors who are engaged in the civil construction business and it does not apply to builder developer.We agree with Ld. DR that both project completion method and percentage completion method are recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result could be attained by any one of the accounting methods. The Completion Contract method is one of such methods. Under the Completed contract method, the revenue is not recognized until the contract is completed. Under the said method, costs are accumulated during the course of the contract. The profit and Loss is established in the last accounting period and transferred to the profit and loss account. The said method determines results only when the contract is completed. The method leads to objective assessment of the results of the contract On the other hand the Percentage of Completion method tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognized under this method a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of co-ordinate Benches of ITAT on similar facts has held that the assessee has to construct the complete building as per specification over a period of time and receive the purchase consideration from time to time from the purchasers and hand over the possession of the building when the building is fully completed, occupancy certificate is received and it is Only at that time the risks and rewards are transferred to the purchaser. The Tribunal has held that the project completion method followed by the assessee is in order and the action of the department to reject the same and to estimate the income by applying project percentage completion method is not justified. 17. In view of the above and considering the entire conspectus of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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