Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (11) TMI 1271 - ITAT MUMBAI

2015 (11) TMI 1271 - ITAT MUMBAI - TMI - Accrual of income - income of the assessee firm as business profit of the assessee firm made by the assessing officer by estimating profit @15% on 30% of the total cost of work-in-progress - CIT(A) deleted the addition - Held that:- The assessee firm has undertaken development of the project Neptune Infotech IT Park during the assessment year 2009-10. The assessee firm has to receive 58% of the area after construction while 42% of the constructed area is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as on 31.03.2012 whereby 90% of the project was completed while there was no sale of unit till 31.03.2012. Since the assessee firm has not sold any portion of the constructed area, no hypothetical income can be brought to tax as in fact no real income has accrued to the assessee as per the ratio of decision of Hon’ble Supreme Court in the case of CIT v. Bokaro Steel Ltd. (1998 (12) TMI 4 - SUPREME Court)

No infirmity in the order of the CIT(A) qua this issue and upheld the same. Hence .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er This is an appeal filed by the Revenue against the order passed by Commissioner of Income Tax(Appeals)-32,Mumbai (Hereinafter called the CIT(A) ) dated 23.5.2012 for assessment year 2009-10. The Revenue has raised the following Grounds of Appeals filed in the memo of appeal:- 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of ₹ 63,52,000/- made by the A. O. who estimated the profit of the assessee on the project by adopt .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the case and in law, the Id. CIT(A) erred in deleting the addition of ₹ 63,52,000/- made by the A. O. without appreciating the fact that the assessee has shown closing WIP as business asset and not as an investment. 4. On the facts and in the circumstance of the case and in law, the Id. CIT(A) erred in deleting the addition of ₹ 63,52,000/- made by the A. O. ignoring the fact that the assessee did not provide details of the development agreement during assessment proceedings. 5. T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h is known as Neptune Infotech IT Park . The Assessing Officer observed that the assessee firm has completed 30% of the project as shown in the computation of income but no proportionate revenue is recognized and offered for taxation in spite of the fact that there is ₹ 14.11 crores closing WIP as per balance sheet. On being show-caused by the assessing officer that profit on percentage completion method need to be brought to tax as 30% project is complete based on the percentage completio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

redited to the assessee s firm partner s account which was done prior to finalization of the accounts of the assessee firm for the year ending March 2009. The assessee firm has not received any other booking/advance against this project from any other party for which facts are evident in the financial statements for the year ended 31st March 2010 and 31st March 2011. The assessee firm has to give 42% of constructed area to the owners of the land as per agreements with the owners of the land and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd the balance 58% of the area belong to the assessee firm and 30% of the completed construction will lead to 15.6% of the area being constructed remaining in the hands of the assessee firm. The assessing officer , however , rejected the contention of the assessee firm and held that since the project is complete 30% and the assessee firm is following mercantile system of accounting and following percentage completion method basis for recognizing of the revenue , the assessee firm has to show pro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e order of the assessing officer, the assessee firm carried the matter in appeal before the CIT(A) and reiterated its submissions made before the assessing officer . The assessee firm submitted that it has carried out construction activities of its commercial project at Chandivili. The assessee firm submitted that construction of the project is completed 30% by 31st March 2009.The assessee firm submitted that it has received deposit of ₹ 1.85 crore form Ritesh Exports (which is a sister co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt of ₹ 20 lacs by cheque to Ritesh Exports on 15th May 2009 while ₹ 1.65 crores is credited to the assessee firm s partner s capital account. The assessee firm submitted copies of bank accounts of the said firm and the ledger accounts copies to evidence the same. The assessee firm submitted that it has not received any booking till the assessment year 2011-12. The assessee firm also submitted that the total cost as on 31.03.2009 is ₹ 14.11 crores while, without prejudice , eve .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed by ICAI, no revenue can be brought to tax. The CIT(A) held that the revenue is to be booked as per Accounting Standard 9 and guidance notice issued by the Institute of Chartered Accountants of India in 2006 which was issued after considering Accounting Standard 9 issued by ICAI which stipulate in real estate sector, the revenue is to be recognized only when seller has transferred sufficient and significant risks and rewards of ownership in the goods, to the buyer and the seller retains no eff .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

materially affect his right to benefit in the property. The CIT(A) held that in the case of assessee firm even the units against which the advance of ₹ 1.85 crore was received although refunded have not been identified, nor any agreement has been executed even the sale price is not fixed, the units are in the construction stage and even the stage of construction is only 30% as at 31st March 2009 and the possession has not been given to the buyer and the effective control is also with the s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd hence no income can be brought to tax as the contention of securing at least 25% of the project saleable area is not secured by contracts or agreements with the buyers even till date . The CIT(A) held that even by applying matching principles of revenue and expenses, no revenue can be recognized in the instant case keeping in view the facts and circumstances of the case. Hence, The CIT(A) deleted the additions of ₹ 63,52,000.00 made by the assessing officer by estimating the net profit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be given to the owners of the land as per agreement entered by the assessing firm with the owners of land and hence the assessing officer has rightly brought to tax the said amount of ₹ 63.52 lacs being 15% of the 30% of the construction which is completed on percentage completion method basis.. 6. The assessee firm on the other hand, relied upon the order of the CIT(A). The assessee firm submitted that the CIT(A) has rightly deleted the addition made as the assessee firm has received  .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase the said units to earn rental income. The total work in progress being 90% of the work completed as on 31.03.2012 was 28.07 crores , while without prejudice ,it was submitted that assessee firm has only received ₹ 1.85 crores from sister concern which was even refunded in the next year, hence, he submitted that no income can be brought to tax as assessee firm has not sold any unit during the assessment year. He relied upon the decision of Hon ble Supreme Court of India in the case of C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to receive 58% of the area after construction while 42% of the constructed area is to be given to the owners of the land as per agreement with the owners of the land. The assessee firm has spent 14.11 crores till 31.03.2009 and the assessee firm received ₹ 1.85 crores as deposit from its sister concern, Ritesh Exports which was later on refunded to the tune of ₹ 20 lacs in May 2009, while the balance of ₹ 1.65 crores was credited to the partners account. The assessee firm has n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version