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TaxTMI 
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TaxTMI 
2014 (8) TMI 240
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.... positive income by the Ld. CIT(A) in his order). In the course of assessment proceedings, A.O. noticed that assessee has undertaken two projects viz., Splendour project and Emerald Heights project during the year. He also noticed that assessee has not offered any income as the assessee was following the percentage completion of project method in estimating the income. A.O. further noticed that assessee has completed 13.06% of Splendour project whereas 4.28% was completed in Emerald Heights project. A.O. noticed that assessee has received advances to the tune of Rs. 12,10,75,481/- in the Splendour project and Rs. 6,03,60,507/- in Emerald Heights project. A show cause notice was issued to the assessee why income should not be estimated. Assessee objected stating that it has not completed substantial portion of either of projects and therefore, estimation of income is not correct. It further submitted that assessee is consistently following method of accounting in the books of accounts as prescribed under Company Law. Therefore, rejection of books of accounts is not appropriate. In the alternate, assessee also submitted that its project is covered by the provisions of section 80IB an....
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....ed that revenue is to be recognised only after 30% of the work is completed. This is clearly the appellant's own interpretation having no basis in the statute. I find that the Assessing Officer's estimation at 8% of the advances received is reasonable and does not need to be interfered with. Accordingly, both the grounds are decided in favour of the revenue". 6. On the issue of deduction under section 80IB(10), Ld. CIT(A) rejected the contention by stating as under m: "6.1. I have seen carefully the facts and evidence. There was no occasion for the Assessing Officer to examine the claim u/s 80IB( 10) because the appellant has not disclosed any income. Therefore, the claim was not in question at all. I also find that the appellant had not demonstrated to the Assessing Officer that each and every condition as specified in the aforementioned section had been satisfied. Even during appeal proceedings, the appellant has not provided all details regarding satisfaction of the conditions laid down in section 8018(10). Therefore, I see no reason how the same can be granted. Accordingly, this issue is decided in favour of revenue." 7. On the issue of interest income taxed as incom....
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....mating income on percentage completion method. Further, he also submitted that both A.O. and Ld. CIT(A) did not consider the assessee's alternate claim of deduction under section 80IB which was entitled. He referred to the orders of A.O. in later two years, in not only accepting the book results but also allowing the deduction under section 80IB. Further, with reference to the income under 'other sources' being separately brought to tax, it was submitted that these are nothing but business profits and these are set off to the other administrative expenditure which was not capitalized to the project. Therefore, the loss in the year should be allowed as such. 9. Learned D.R. however, supported the orders of the A.O. and Ld. CIT(A) and submitted that since assessee has received substantial advances the same was correctly estimated. 10. We have considered the rival contentions and perused the paper books placed on record including the orders of A.O. in the later years. As seen from the order for A.Y. 2009- 10, A.O. accepted the book results and also allowed 80IB and he has given detailed reasoning in para-2 of the order how the assessee was eligible for the deduction- analysed point ....
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....e on percentage completion method was elaborately discussed by the Coordinate Bench of the Tribunal in the case of Lingtec Constructors LP vs. ITO (2013) 156 TTJ 76 (Mum.) wherein it was held as under : ". Under provisions of AS-7, percentage of completion method has been accepted as one of the methods for recognizing revenue on construction contracts. Under this method, amount and revenue recognized is determined by referring to stage of completion of contract activity at end of each accounting period. Under this method, there is a periodic recognition of income in order to reflect profits and revenue recognized on basis of stage of completion of contract. Stage of completion is measured under this method by taking into consideration proportion of cost incurred to date which bears estimated total cost of the contract. This method of accounting has also been recognized by the Hon'ble Supreme Court in Bilahari Investment P. Ltd. (supra). Therefore, it cannot be held that AS-7 is against provisions of law or profits cannot be determined for purpose of taxability. Under a contract, project is spread for several years and actual profit can only be determined after completion of pr....