TaxTMI 
TaxTMI 
2009 (5) TMI 566
X X X X Extracts X X X X
X X X X Extracts X X X X
....g paras of this order. However at the incipience we may like to draw the main issue that whether for the purpose of claim of deduction under s. 80-IB(10) the law permits a claimant assessee to maintain the books of accounts on "percentage completion method". In other words whether the s. 80-IB(10) entitles the deduction only to those claimant asses sees who maintain their books of accounts on "project completion method" basis. 2. Facts in brief related to the main ground as emerged from the corresponding assessment order passed under s. 143(3), dt. 27th Dec., 2006 for asst. yr. 2004-05 were that the assessee is in the business of construction and worked as a promoter and builder of housing projects. The AO has noted that few housing proj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ify the different methods referred to in this judgment. Further, according to AO there was no project-wise P&L a/c. In the absence of any sales pertaining to the said project, the AO has held that the deduction under s. 80-IB(10) was not admissible. On that basis the AO has concluded that the conditions specified under s. 80-IB(10) have not been fulfilled therefore. the assessee is not eligible for the deduction. According to him, though the project was stated to be completed to the extent of 24 per cent but in the absence of actual sales the profit determined was basically on ad hoc method simply by following "percentage completion method". It has also been noted that the assessee was unable to furnish the details of the buyers or the adva....
X X X X Extracts X X X X
X X X X Extracts X X X X
....developing and building housing projects. The conditions are that the approval should have been granted after 1st Aug., 1998. if the approval is granted before 1st April, 2004 the construction should be completed on or before 31st March, 2008. If approval is granted after 1st April, 2004 the construction should be completed within four years of approval. Rest of the conditions are about the built-up area of each residential unit as also the total area of the project. An entrepreneur undertaking the development and construction of a housing project may qualify for deduction subject to completion of the project within the specified period. However, this aspect of an expanded period of completion of the Revenue Department definitely cannot be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ily but to get a fair idea about these two methods. For the purpose of recognition of income in the case of a businessman doing construction work as a builder the guidelines are issued by the ICAI under the head "Accounting for Construction Contracts", Accounting Standard-7. As per cl. 7.1 of AS-7 two methods of accounting for construction, commonly followed by the contractors are prescribed: (i) percentage of completion method; (ii) completed contract method. In common language percentage of completion method is also termed as "work-in-progress" method or "project completion method". Under the cl. 7.2 of AS-7 the method in respect of "percentage of completion method" is prescribed to determine the profits. 5.1 Though we are con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....therwise also the section is to be construed liberally; for this proposition reference is Bajaj Tempo Ltd. vs. CIT (1992) 104 CTR (SC) 116 : (1992) 196 ITR 188 (SC). 6. Not only this, if we accept the suggestion of the Revenue that s. 80-IB(10) is to be granted to those taxpayers who follow only "project completion method" then quite an absurd situation shall arise that the developers following "project percentage method" shall be taxed on time to time declaration of percentage profit but shall not be entitled for the deduction though all other requirements of the section being fulfilled. It would tantamount to denial of exemption to a taxpayer though otherwise admissible being conditions fulfilled but due to not following particular met....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ying "project completion method". 6.1 An apprehension was expressed by learned CIT-Departmental Representative, Shri R. Kaushal that in case of violation of one of the conditions of completion of the project i.e., to complete within the prescribed time the Revenue shall deprive of its legal dues. We are of the opinion that such an apprehension can be said to be ill-founded and premature because the Revenue has enough powers duly supported by several provisions to assess an escaped income or a deduction wrongly granted. Peculiar facts of this appeal revealed as pointed out by learned Authorised Representative, that by the time the assessment was completed in the year 2006. the date of order is 27th Dec., 2006, the project was near complet....