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of <h1>Tribunal rules in favor of assessee on revenue recognition method and deduction under</h1> <h3>M/s. S.N. Builders Versus Dy. Commissioner of Income Tax, Circle 4 (1).</h3> M/s. S.N. Builders Versus Dy. Commissioner of Income Tax, Circle 4 (1). - TMI Issues Involved:1. Method of accounting for revenue recognition.2. Deduction under section 80 IB(10) of the Income Tax Act.3. Liability to pay interest under sections 234A and 234B of the Income Tax Act.Detailed Analysis:1. Method of Accounting for Revenue Recognition:The primary issue was whether the assessee should follow the 'Percentage Completion Method' or the 'Project Completion Method' for recognizing revenues, costs, and profits/losses from the development and construction of real estate projects. The assessee consistently followed the 'Project Completion Method,' while the Assessing Officer (AO) insisted on the 'Percentage Completion Method,' assessing the income at Rs. 7,62,57,807 instead of the returned income of Rs. 72,80,690. The CIT (Appeals) upheld the AO's view.Upon appeal, the Tribunal referenced its earlier decision for Assessment Year 2009-10, which favored the assessee, stating that the AO cannot impose a particular method of accounting on the assessee. The Tribunal reiterated that the 'Project Completion Method' is a recognized method of accounting under section 145 of the Act, and the AO's jurisdiction is limited to verifying if the method is consistently followed. The Tribunal allowed the assessee's appeal, holding that the 'Project Completion Method' followed by the assessee must be accepted.2. Deduction under Section 80 IB(10) of the Income Tax Act:The second issue concerned the assessee's claim for deduction under section 80 IB(10), which the AO denied because 26 flats exceeded the prescribed limit of 1500 sq. ft. The CIT (Appeals) allowed proportionate deduction for the flats within the limit.The Tribunal upheld the CIT (Appeals)'s decision, citing the Karnataka High Court's ruling in CIT v. SJR Builders, which supported proportionate deduction under section 80 IB(10) for compliant flats, even if some units exceeded the size limit. The Tribunal dismissed the Revenue's appeal, affirming that the assessee is entitled to proportionate deduction.3. Liability to Pay Interest Under Sections 234A and 234B:The assessee contested the liability to pay interest under sections 234A and 234B. The Tribunal held that charging interest is consequential and mandatory, as upheld by the Supreme Court in Anjum H Ghaswala & Others. The AO was directed to recompute the interest while giving effect to the Tribunal's order.Conclusion:- The assessee's appeal was partly allowed, affirming the 'Project Completion Method' for revenue recognition.- The Revenue's appeal was dismissed, confirming the proportionate deduction under section 80 IB(10).- The assessee's stay petition was dismissed as infructuous.
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