Project completion method treats underwritten flat receipts as sale consideration taxable when the housing project is completed.

Under the project completion method, a housing project is treated as completed when construction is substantially over and the flats are habitable; the completion certificate is only procedural and does not determine the completion year. Amounts received from an underwriter were treated as sale consideration because the agreement required phased payments toward the agreed price of the flats, even though possession and sale deeds were executed later. Since the project was completed in the relevant year, income from the underwritten flats became taxable in that year, and later conveyance deeds did not defer accrual.

---

---

Issues: (i) Whether the housing project was completed in the financial year relevant to assessment year 1999-2000; (ii) Whether the amount received from the underwriter was sale consideration of the underwritten flats or merely advance; (iii) Whether the income arising from the underwritten flats was taxable in assessment year 1999-2000.

Issue (i): Whether the housing project was completed in the financial year relevant to assessment year 1999-2000.

Analysis: The project was treated as completed when the construction activities were substantially over and the flats had become habitable. The completion certificate was only a procedural step and its date did not control the year of completion. The finding of the first appellate authority that the project stood completed in the relevant financial year was not challenged in substance.

Conclusion: The project was completed in the financial year 1998-99 relevant to assessment year 1999-2000.

Issue (ii): Whether the amount received from the underwriter was sale consideration of the underwritten flats or merely advance.

Analysis: The agreement showed that the underwriter undertook the responsibility of arranging buyers and paying the agreed price in phased installments. The assessee received the amounts before execution of sale deeds and before handing over possession, but the contractual structure made those receipts part of the agreed price for the flats. The amounts were shown in the books as advance only until the project was completed, after which they represented the sale price of the flats.

Conclusion: The amount received from the underwriter was sale consideration and not a mere advance.

Issue (iii): Whether the income arising from the underwritten flats was taxable in assessment year 1999-2000.

Analysis: The assessee followed the project completion method, under which income becomes taxable in the year the project is completed. Since the project was completed in 1998-99, the receipts relating to the underwritten flats became taxable in that year. Execution of sale deeds was only consequential and did not postpone the accrual of income.

Conclusion: The income from the sale of the underwritten flats was taxable in assessment year 1999-2000.

Final Conclusion: The receipts from the underwriter were held to be taxable sale proceeds of the completed project, and the assessee's relief before the first appellate authority was reversed.

Ratio Decidendi: Under the project completion method, receipts attributable to flats underwritten for sale are taxable as sale consideration in the year the project is completed, even if registered conveyances are executed later.

---