TMI Blog2011 (12) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... swati, Rakhi, Golden Willows, Beau monde projects and having noticed that the assessee has completed 57% of the project, brought the following amounts as an addition to the profits: i) ₹ 15,67,33,801/- as income from Saraswati and Rakhi Project. ii) ₹ 12,81,15,367/- as income from Golden Willows Project iii) ₹ 33,21,57,324/- as income from Beau monde Project. 3. The reasons for the Assessing Officer for bringing the amounts is reliance on the accounting standard AS 7 and 9 and the quantum of advances received by the assessee against these projects. The assessee preferred appeal before the CIT (A), who after analyzing the facts of the case and also the legal principles deleted the additions by his 69 page order. The revenue accordingly raised 3 grounds in respect of various additions made in different projects. 4. The learned Departmental Representative reiterated the facts and relied on the orders of the Assessing Officer to submit that since substantial advances have been received and project was substantially completed, the Assessing Officer was correct in invoking the percentage completion method in bringing the amounts to tax. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of accounting in respect of each project undertaken by the company and completion of each building (not project) was based on either completion certificate issued by the Chief Engineer/the Architect of the assessee or on receipt of occupation certificate from Municipal Corporation. It was further submitted that revenue was recognized in respect of the building completed by way of receipts of units sold. The unsold portion is valued at lower of cost or market rate prevailing as at the date of balance sheet. The amounts collected till the date of revenue recognition was disclosed as advance from customers. Project expenses are booked on accrual basis and income and expenses pertaining to building completed during the year were transferred to P L Account. Accordingly, the assessee was offering the incomes on the basis of building completion method and this method of accounting was consistently being followed by the assessee which the Revenue has not disturbed in any year, except in this year. 8. The learned Counsel distinguished the cases relied upon by the learned Departmental Representative and referred to the findings of the order of the CIT (A) while deleting the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the next Assessment Year which was also accepted as such. As far as the Beau Monde is concerned, it declared an amount of ₹ 58,27,32,149 as income in Assessment Year 2009-10 after completion of the project. Since the assessee is consistently following the project completion method, consistently offering incomes from such method and the method of accounting being followed regularly was also accepted under section 143(3) by the Revenue, there is no question of considering percentage completion method. The Revenue has not made out any case that the assessee is intentionally postponing the income on this method of accounting. 10. The accounting principles do permit the assessee to follow percentage completion method or project completion method and both methods are having its own advantage and disadvantage in its working. Since the assessee is consistently following the project completion method with certain modifications (as stated the assessee is recognizing income on completion of the building itself and not completion of project as such), in our view there is no postponement of income in this method of accounting. Moreover, as rightly pointed out by the CIT (A), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Desai Real Estate Developers vs. Income Tax Officer 44 SOT 7, the decision in fact support assessee s case. In that case the assessee even though completed the project have not offered incomes on the reason that the project was not completed pending execution of final sale. The Assessing Officer did not accept the stand as the project was substantially completed and even the possession of flats and shops were handed over to the purchaser, after obtaining occupancy certificate. On those facts, the ITAT accepted the Assessing Officer s stand that income has accrued when project was completed. 14. In the case of Ramniklal Nathwani 28 SOT 276 also the facts are similar to the earlier case wherein the assessee having completed the project and not incurring any other expenditure in respect of completed project during the period, did not offer any income. The Assessing Officer held that the project was completed and income was estimated by adopting percentage completion method. However, the fact was that the project was completed in all respects and no further expenditure was incurred in subsequent years. Therefore, on given facts, the ITAT accepted that the Assessing Officer wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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