Tribunal affirms project completion method, allows deduction under section 80IB(10)

The tribunal upheld the CIT(A)'s decision, rejecting the AO's rejection of the project completion method and allowing the claim of deduction under section 80IB(10) of the Income Tax Act. The tribunal also affirmed the completion date of the project as within the prescribed period and directed the AO to verify the actual plot size to determine eligibility for the deduction. The tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection, emphasizing adherence to statutory requirements and factual accuracy.

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Issues Involved:
1. Rejection of the project completion method by the Assessing Officer (AO).
2. Allowance of the claim of deduction under section 80IB(10) of the Income Tax Act.
3. Rejection of the claim of deduction under section 80IB(10) based on the completion date of the project.
4. Rejection of the claim of deduction under section 80IB(10) based on the size of the plot of land.

Issue-Wise Detailed Analysis:

1. Rejection of the Project Completion Method by the AO:
The AO rejected the project completion method of accounting followed by the assessee, arguing that it did not present a true and fair picture of taxable income and instead adopted the percentage completion method. The AO estimated the profit at Rs. 49,74,650/- by adopting a profit percentage of 21.51%, based on the profit shown by the assessee in the return for the assessment year 2008-09. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the AO was not correct in rejecting the project completion method. The tribunal noted that the project was not completed before 31st March 2008, and only 30% of the work was completed by 31st March 2006. The tribunal concluded that the percentage completion method was misplaced given the facts and upheld the CIT(A)'s order, emphasizing that the income offered by the assessee on project completion was revenue neutral.

2. Allowance of the Claim of Deduction under Section 80IB(10):
The AO denied the deduction under section 80IB(10) on the grounds that the project was not completed by 31st March 2008, as the completion certificate was issued on 11th September 2008. The CIT(A) allowed the claim, stating that the project should be considered approved from the date when the new plans were sanctioned on 28th September 2005, and thus the project was completed within the prescribed period. The tribunal upheld the CIT(A)'s order, noting that the project was sanctioned on 28th September 2005 and completed within four years from the end of the financial year 2005-06, fulfilling the conditions of section 80IB(10).

3. Rejection of the Claim of Deduction under Section 80IB(10) Based on Completion Date:
The AO argued that the project commenced on 12th September 2003 and was not completed by 31st March 2008. The CIT(A) found that the project was substantially changed and approved on 28th September 2005, making the completion date within the permissible period. The tribunal agreed, stating that the project was executed based on plans approved on 28th September 2005, and thus the completion date was within the required timeframe, making the assessee eligible for the deduction.

4. Rejection of the Claim of Deduction under Section 80IB(10) Based on Plot Size:
The AO and CIT(A) denied the deduction, stating that the plot size was less than one acre. The assessee argued that the actual size was 4100 sq.mtrs, supported by a surveyor's report and agreements. The tribunal admitted additional evidence and remanded the issue to the AO to verify the actual plot size through physical verification or other means. The tribunal emphasized that if the actual plot size was more than one acre, the deduction under section 80IB(10) should not be denied based on discrepancies in government records.

Conclusion:
The tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection for statistical purposes, directing the AO to verify the actual size of the plot. The tribunal upheld the CIT(A)'s orders on the project completion method and the deduction under section 80IB(10), emphasizing the importance of the actual facts and compliance with statutory requirements.

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