Court affirms AS-9 over AS-7 for Real Estate Developer in tax assessment

The court upheld the Income Tax Appellate Tribunal's decision accepting the project completion method (AS-9) for a Real Estate Developer over the Contractor method (AS-7) for the assessment year 2013-14. It emphasized the importance of maintaining a consistent view unless compelling reasons exist to alter it, citing Commissioner of Income Tax Vs. Excel Industries Limited. The court found that the Real Estate Developer's use of AS-9 was valid as there was no evidence of profit distortion or statutory provisions mandating AS-7 usage, ultimately dismissing the appeal.

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Issues:
1. Recognition of accounting method - AS-9 vs. AS-7
2. Nature and status of business - Real Estate Developer vs. Contractor

Recognition of accounting method - AS-9 vs. AS-7:
The case involved a dispute regarding the acceptance of the accounting method by the Income Tax Appellate Tribunal for the assessment year 2013-14. The respondent-assessee, a Real Estate Developer, maintained accounts using the project completion method (AS-9). The Tribunal accepted AS-9 as a recognized method of accounting and overturned the Assessing Authority's rejection based on AS-7, confirmed by the Commissioner (Appeals). The appellant argued that upon entering into a sale agreement, the respondent's status changed to that of a Contractor, necessitating the use of AS-7. However, the consistent acceptance of the Real Estate Developer status by the Department in previous years was deemed conclusive. The court referenced the decision in Commissioner of Income Tax Vs. Excel Industries Limited, emphasizing the importance of maintaining a consistent view unless compelling reasons exist to alter it.

Nature and status of business - Real Estate Developer vs. Contractor:
The second issue revolved around whether the respondent-assessee was required to maintain accounts under AS-7 or AS-9. The Tribunal found that the respondent had consistently followed the project completion method (AS-9), which was recognized by the Institute of Chartered Accountants of India. Citing precedents, the court held that when an assessee consistently follows a recognized accounting method accepted by the Department, it is unfair to compel a change unless there is a distortion of profits. The absence of evidence indicating profit distortion or statutory provisions mandating AS-7 usage led to the conclusion that the respondent's accounting method was valid. The court reiterated that as a Real Estate Developer, the respondent was not obligated to follow AS-7 and dismissed the appeal, stating that no legal questions warranted consideration based on the facts and findings presented by the Tribunal.

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