Project completion income and cash payment disallowance require factual verification before tax treatment and Rule 6DD relief

Project income under the Project Completion Method must be determined on verified facts, including the actual year of receipt, sale agreements, TDR cost and related expenditure; the Tribunal therefore restored the matter for de novo verification. Cash expenditure disallowed under section 40A(3) also required fresh examination because the assessee's claim that the payments fell within Rule 6DD exceptions had not been properly tested on evidence. Both issues were sent back to the Assessing Officer for fresh adjudication after giving the assessee an opportunity to substantiate its claims.

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Issues: (i) Whether the profit from the real estate project could be reworked for the year under consideration on the basis of sales allegedly completed in later years and whether the matter required fresh examination of actual sale consideration, TDR and related expenses; (ii) Whether the disallowance of cash expenditure under section 40A(3) could be sustained without examining the assessee's claim that the payments fell within the exceptions under Rule 6DD.

Issue (i): Whether the profit from the real estate project could be reworked for the year under consideration on the basis of sales allegedly completed in later years and whether the matter required fresh examination of actual sale consideration, TDR and related expenses.

Analysis: The dispute turned on the year in which project receipts and related costs could be brought to tax where the assessee claimed to follow the Project Completion Method. The available material showed that the lower authorities had proceeded on the footing that the project was complete on the basis of the completion certificate, while the assessee contended that the consideration was actually realised only in later years and that the project expenses had to be matched with the year of realisation. The appellate tribunal found that the taxable figure could be determined only after verifying the agreements, the actual sale consideration received up to the year under consideration, and the related expenditure and TDR cost.

Conclusion: The issue was restored to the jurisdictional Assessing Officer for de novo adjudication, and the assessee's claim on this aspect was allowed for statistical purposes.

Issue (ii): Whether the disallowance of cash expenditure under section 40A(3) could be sustained without examining the assessee's claim that the payments fell within the exceptions under Rule 6DD.

Analysis: The cash payment disallowance required examination of whether the impugned payments satisfied any exception under Rule 6DD. Since the assessee was not afforded a further opportunity before the final determination at the appellate stage, the matter was considered fit for fresh verification with supporting documents, so that the applicability of the exception could be tested on the evidence.

Conclusion: The issue was sent back to the Assessing Officer for fresh adjudication after giving the assessee an opportunity to substantiate the claim under Rule 6DD, and the assessee's claim was allowed for statistical purposes.

Final Conclusion: The appeal did not succeed on merits in a conclusive sense, but the impugned order was set aside and both surviving grounds were restored for fresh decision after verification.

Ratio Decidendi: Taxability of project receipts and disallowance of cash expenditure must be determined on verified facts, with project income brought to tax only on the basis of actual year-wise completion and receipts, and cash payments examined against the statutory exception framework.

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