TMI Blog2012 (4) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... ty ORDER Shamim Yahya (Accountant Member) These appeals by the Revenue are directed against the order of the Ld. Commissioner of Income Tax (Appeals), New Delhi for assessment year 2006-07 2007-08. Since the issues are common and the appeals were heard together and hence, these are being consolidated and disposed off by this common order for the sake of convenience. 2. The grounds raised in ITA No. 4572/Del/2009 read as under:- 1. Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts and circumstances of the case, in deleting the addition of ₹ 49,55,725/- made by Assessing Officer on account of method of accounting adopted by the assessee company for revenue recognition. 2. The appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the significant risks and rewards of ownership of the property are transferred to the buyer, which is stated to be in accordance with Accounting Standard -9 i.e. Revenue Recognition and also further mandated by ICAI by way of a Guidance note on Recognition of revenue by Real Estate Developers. Advance received from buyers of the flats, if any is stated to be shown as advance from customers. The Assessing Officer was of the view that revenue recognition should be on the basis of AS-7 (Revised) i.e. Construction Contracts which requires revenue to be recognized on Percentage Completion Method and hence made the additions while computing the total income of the assessee company. The additions so made were ₹ 4955725/- for Assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich relates to the construction contractor is not applicable to the assessee company. He opined that the distinction between the construction contractor and real estate developer has not been kept in mind while framing the assessment. Ld. Commissioner of Income Tax (Appeals) further held that keeping in view the facts and circumstances of the case, it is held that the Assessing Officer was not correct in applying the percentage completion method in order to arrive at the net profit of the assessee company. Since the assessee company has been consistently following accepted method of accounting for a number of years, the Assessing Officer was also not justified in rejecting the assessee s method of accounting u/s. 145. Accordingly, Ld. Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has expounded as under:- 8. It is well settled that the project completion method is one of the recognized methods of accounting. In Commissioner of Income Tax and Another vs. Hyundai Heavy Industries Co. Ltd. (2007) 291 ITR 482 (SC) the Supreme Court held as follows:- Lastly, there is a concept in accounts which is called the concept of contract accounts. Under that concept, two methods exist for ascertaining profit for contracts, namely completed contract method and percentage of completion method . To know the results of his operations, the contractor prepares what is called a contract account which is debited with various costs and which is credited with revenue associated with a particular contract. However, the rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proportion that costs incurred to date bears to the estimated total costs of contract. The above indicates the difference between the completed contract method and the percentage of completion method. (underlining ours) 9. After the above judgements of the Supreme Court it cannot be said that the project completion method followed by the assessee would result in deferment of the payment of the taxes which are to be assessed annually under the Income Tax Act. Accounting Standards 7 (AS7) issued by the Institute of Chartered Accountants of India also recognize the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method. In view of the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ware Construction Pvt. Ltd. vs. ITO in ITA No. 5601/Mum/2009 vide order dated 5.8.2011. In this case it was held that assessee is regularly following the project completion method and has offered the income in the year of completion of project. There was no reason as to why the same should be rejected and percentage completion method should be followed. 10. In the background of the aforesaid discussion and precedents and case laws, it is apparent that project completion method is established method of accounting which the assessee has been following consistently from the preceding so many years and the same has never been disturbed by the Revenue. Under the circumstances, in the background of the aforesaid discussion and precedents, we d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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