Revenue recognition for plot sales follows registered conveyance and transfer of title, not mere receipt of consideration.

Income from sale of plots held as stock-in-trade was to be recognised only when the conveyance deed was registered and title passed to the buyers, not merely when sale consideration was received. Section 2(47) of the Income-tax Act was held inapplicable to stock-in-trade in immovable property, and transfer of ownership had to follow the Transfer of Property Act through a registered conveyance. Support was drawn from Accounting Standard 9, under which revenue arises only when risks, rewards and ownership pass. The matter was remanded for fresh examination, with development expenditure to be allowed on the matching principle.

---

---

Issues: Whether income from sale of plots held as stock-in-trade was to be recognised on receipt of sale consideration during the year or only on registration of the conveyance deed and transfer of title.

Analysis: The dispute concerned the correct method of recognising income from sale of plots forming part of stock-in-trade. The assessee followed the completed contract method and recognised revenue only when plots were sold and conveyance was registered, while the Assessing Officer brought the receipts to tax on a year-to-year basis on the premise that consideration received during the year should be taxed irrespective of transfer of title. It was held that section 2(47) of the Income-tax Act, 1961 had no application to stock-in-trade in immovable property, and that title in immovable property passes only in accordance with the Transfer of Property Act through a registered conveyance deed. The reasoning also drew support from Accounting Standard 9, under which income from transfer of immovable property is recognised only when risks, rewards and ownership pass to the buyer.

Conclusion: The matter was remanded to the Assessing Officer for fresh examination, with a direction that income from sale of plots be recognised only in the year of registration of the conveyance deed in favour of the buyers and that the related development expenditure be allowed in accordance with the matching principle.

---