Tribunal allows assessee's appeal on accounting method, interest disallowance, and profit addition.

The assessee's appeal was allowed by the Tribunal, upholding the unit completion method of accounting and deleting the disallowance of interest and gross profit addition on advances. The Tribunal also directed the re-computation of expenses for deduction under section 80IB(10). The Revenue's appeal was partly allowed for statistical purposes.

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Issues Involved:
1. Rejection of method of accounting and estimation of income.
2. Disallowance of interest.
3. Gross profit addition on advances.
4. Deduction u/s 80IB(10) and allocation of expenses.

Summary:

1. Rejection of Method of Accounting and Estimation of Income:
The assessee's appeal challenged the rejection of the unit completion method of accounting by the Assessing Officer (AO), who instead adopted the percentage completion method. The AO's decision was based on the revised Accounting Standard-7 (AS7) effective from 01-04-2003. The assessee argued that the unit completion method was accepted by the Revenue in earlier and subsequent years, and was in accordance with AS-9 issued by ICAI. The Tribunal upheld the assessee's method, citing consistency and previous acceptance by the Revenue, and allowed the assessee's appeal on this ground.

2. Disallowance of Interest:
The AO disallowed Rs. 69,978/- as interest on certain advances, which was reduced to Rs. 34,800/- by the CIT(A). The assessee contended that these advances were business transactions and not loans, and that interest-free unsecured loans were available. The Tribunal found no direct nexus between interest-bearing funds and the advances, and deleted the disallowance of Rs. 34,800/-, allowing the assessee's appeal on this ground.

3. Gross Profit Addition on Advances:
The AO added Rs. 5,75,933/- as gross profit on advances received, using the percentage completion method. The assessee argued that revenue should be recognized upon unit completion, as per the unit completion method. The Tribunal, having upheld the unit completion method, deleted the addition made by the AO, allowing the assessee's appeal on this ground.

4. Deduction u/s 80IB(10) and Allocation of Expenses:
The Revenue's appeal challenged the CIT(A)'s direction to allow deduction u/s 80IB(10) subject to verification of expenses, and the deletion of addition for unutilized FSI. The CIT(A) followed the Tribunal's decision in the case of Radhe Developers. The Tribunal upheld the CIT(A)'s deletion of the addition for unutilized FSI and directed the AO to re-compute the expenses in light of the unit completion method upheld in the assessee's appeal. The Revenue's appeal was partly allowed for statistical purposes.

Conclusion:
The assessee's appeal was allowed, and the Revenue's appeal was partly allowed for statistical purposes. The Tribunal upheld the unit completion method of accounting, deleted the disallowance of interest and gross profit addition, and directed re-computation of expenses for deduction u/s 80IB(10).

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