TaxTMI 
TaxTMI 
2014 (3) TMI 498
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.... independent assessment unit as envisaged by Supreme Court in the case of CIT v/s British Indian Paint 188 ITR 441 and the accrued income can not wait for taxation. " 3. "On the facts and in the circumstances of the case and law, the Learned CIT (A) has erred in law as well as on the facts by giving adverse finding against the A. O. 's finding on the points of allowability of section 80 IB(10) without appreciating the full facts after it has given the finding that no income has accrued for assessment year 2007-08 based on the project completion method & it was consequential. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. The Appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. ITA No. 3559/M/2011-AY-2008-09 1. "On the facts and in the circumstances of the case and law, the Learned CIT(A) has erred in law as well as on the facts in deleting the addition of Rs. 14. 72 crores based on finding that the assessee is following project Completion Method ignoring the fact that the assessee is following Mercantile System of accounting and substantial part of ....
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.... property for development was more than an acre, that the total area of construction involved FSI of 159651 Sq. ft. including TDR to be uploaded on the property, that the project was approved by issue of commencement certificate on 16. 12. 2004 by the Municipal Corporation of Greater Mumbai, that the sanctioned plan envisaged A wing with 96 flats in 24 storeys of the building and B Wing with 95 flats in 24 storeys, that the project was completed and the occupation certificates were obtained in respect of A Wing on 08. 12. 2008 and in respect of B Wing occupation certificate upto the 20th floor was issued on 21. 03. 2009, that for the balance project the certificate was issued on 30. 03. 2009, that EPT was entitled to 45% share in the total project which worked out to 90% of the share of the premises in the B Wing of GE, that the area belonging to EPT in B Wing was demarcated and was allotted as such, that EPT bore the cost of development rights, being Rs. 2. 50 Crores, was to be paid to BL and the cost of TDR was to be uploaded on the property for development, that AEPPL was to bear the costs initially and same was to be adjusted against the sale proceeds of the premises belonging ....
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....on the cases of N. M. Associates(256 ITR141, Shri Sukhdeodas Jalan(26ITR 617), Ram Chandra Singh Ramnik Lal (42ITR780) and Janatha Contract Co. (105 ITR 627). 3. Assessee preferred an appeal before the First Appellate Authority(FAA). Before him it was contended that the assessee had followed proper, defectless and most recognized method of accounting i. e. Project Completion Method(PCM)duly approved by ICAI, that the AO had not pointed out any defects in books of account and had merely changed the opinion for estimating the profit on notional basis ignoring the decision of preceding AO. s, that while dealing with the issue, AO had ignored the basic facts of the case, that the assessee took up a residential project which got ompleted in the year relevant to the assessment year 2009-10, that the assessee followed the PCM of accounting for determining the profits from the project in the previous assessment years, that the said method was accepted by the AO in the assessment years 2005-06 and 2006-07 and the assessment orders had been passed accordingly, that PCM was one of the recognised methods, that the Department also had accepted the method, that the assessee had the prerogative ....
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....such circumstances, the assessee might keep a small portion not sold or not completed to postpone assessments for payment of taxes, that it was not the case with the assessee when the project could be said to have been complete only to the extent of 40%, that the project was not a contract but a unified work of development, that project was completed in about 3 years and was not a long drawn project. As to a query by the FAA as to whether the two buildings called A Wing and B Wing did not constitute two different projects, it was submitted that the plot of land being one, the access, infrastructure and various benefits and logistics being common, a building with two wings A and B were constructed on the same plot and the same had been sanctioned as one project by the authorities and further developed as one such project, that the two buildings were taken up simultaneously and had been completed in the same assessment year 2009-10. Assessee filed the sanctioned plan approved by the MCGM with the occupation certificates issued and submitted that there was no dispute on this account even as per the AO. 5. After considering the facts and circumstances of the case, he held that the AO ....
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....r appeal assessee had taken up development of the project on a part of single plot, that the assessee was a joint venture AOP carrying out the project with specified shares defined to the account of the three members constituting the AOP as mentioned in the Developm - ent agreement, that the assessee followed PCM and had worked out profits from the project for the AY. 2009-10, that the Return of income had been filed although the assessee had argued that the project was exempt from tax u/s. 80IB(10) of the Act, that the AOs had accepted the PCM of accounting for the previous two AYs. i. e. 2005-06 and 2006-07, that the cumulative WIP as at 31. 3. 2007 relevant to the asst year in appeal worked out to 37 % of the total WIP at the completion of the project, that as per the Architect's certificate, dated 14. 11. 2009, the work was certified to be complete only about 40% as at 31. 3. 2007, that that unless the project was complete in all respects, allocation of premises to the share of the members was not possible and no profits per se members could be worked out, that the profits from the project in the case of the assessee should be assessed only on PCM followed by it and not oth....
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....s and in such manner as he determines if the accounts are correct and complete but the method adopted is such that, in his opinion, the income cannot properly be deduced therefrom. The jurisdiction can be invoked where he is of the opinion that the income cannot properly be deduced therefrom. He cannot exercise the jurisdiction merely on the ground that the method adopted, which is otherwise regular or fair, is detrimental to the Revenue or advantageous to the assessee. (200 ITR 496-Doom Dooma India Ltd. -Gau. ) ii. Every assessee is entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted. It is only in those cases where the Department records a finding that the method adopted by the assessee results in distortion of profits that the Department can insist on substitution of the existing method. (Bilahari Investment P. Ltd. -299ITR1-SC) iii. The AO's power to choose the basis and manner of computation of income is not an arbitrary power to assess the income, but he must exercise his discretion and judgment judicially. iv. The accounts which are regularly maintained in the course of business and are duly audited, free from....
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....e profit and loss is established in the last accounting period and transferred to the profit and loss account. The said method determines results only when the contract is completed. On the other hand the PCM tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognised under this method as determined by reference to the stage of completion by taking into consideration the proportion that costs incurred to date bears to the estimated total costs of contract. The Hon'ble Delhi High Court while dealing with the similar situation in the case of Manish Buildwell Pvt. Ltd. in ITA No. 928/2011 dated 15. 11, 2011 held that after the judgment of Supreme Court in Bilahari Investment Pvt. Ltd. , (supra)it cannot be said that the PCM followed by the assessee would result in deferment of the payment of taxes which are to be assessed annually under the Act. Accounting Standard AS-7 issued by the Institute of Chartered Accountants of India also recognize the position that in the case of construction contracts, the assessee can follow either the PCM or the percentage completion method. We find that the assessee had constructed the co....
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....ed as one flat for all purposes, that the aggregate area of the same was more than1000 Sq. ft. AO held that it violated the conditions prescribed by the provisions that the built up area of a fiat should not exceed 1000 Sq. ft and therefore, the assessee was not entitled to the benefit of section 80IB(10) claimed. As regards 3 BHK units, AO held that flower bed, dry balcony, window projections should be taken as part of the built up area of the flat, that such total area being in excess of the prescribed limit of 1000 Sq. ft. the assessee was not entitled to the benefit of section 80IB(10) claimed, that Flat No. 1303 and 1304 of B-Wing were sold to related parties and no wall was built in between the two flats, that the combined area of those two flats was 1736 Sq. ft. , that both flats put together should be taken as one flat for the purpose of section 80IB(10), that assessee was not entitled to the benefit of section 80IB(10). 9. Assessee preferred an appeal before the FAA. After considering the submissions of the assessee and the assessment order he held that at the relevant time the assessee sold the flats, there was no bar for the assessee to sell more than one flat to a sing....