TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1538
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....in deleting the addition of 10% of work in Progress at Rs. 1,23,39,676/- made by the Assessing Officer following percentage completion method as against the project completion method adopted by the assessee which led to postponement of tax liability. 2. 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 be restored." 3. The brief facts of the case are that the assessee is engaged in the business of construction of building. The assessee has undertaken a project in the name of 'Quantum Tower', Rambaug, S.V. Road, Malad (W), Mumbai. The construction of the project was commenced in the financial year 2008-09. The assessee is following 'project completion method' of accounting and has claimed to have offered to tax income on completion of the project by following 'project completion method' , while revenue is contending that the assessee has postponed its tax liability by following 'project completion method' and instead the assessee should have followed 'percentage completion method' to offer income for taxation.....
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....sessee which has been accepted by the Revenue in the two immediately preceding years i.e. assessment year 2009-10 and 2010-11. The A.O. rejected the contention of the assessee and computed the income @ 10% of the closing work-in-progress held by the assessee as at year end of Rs. 39,93,42,253/-, wherein income was worked out to be Rs. 3,99,34,225/- and the same was added to the income of the assessee by the AO vide assessment order dated 24-02-2014 passed by the AO u/s 143(3) of the Act. 4. Aggrieved by the assessment order dated 24-02-2014 passed by the A.O. u/s 143(3) of the Act, the assessee filed appeal before the ld. CIT(A). 5. The ld. CIT(A) accepted the contentions raised by the assessee and held that consistency has to be followed and since the Revenue has accepted the method of accounting followed by the assessee in the earlier years, the Revenue cannot be allowed to change the method of accounting in the impugned assessment year by shifting from the 'project completion method' to 'percentage completion method' for offering income to tax. The learned CIT(A) also accepted the contention of the assessee, that in case of builder project completion method can be followed by ....
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....d the commencement certificate in the month of January, 2009 and the construction work also started immediately. We find that the assessee is consistently following 'project completion method' of accounting and the same was accepted by the Revenue in the preceding two years i.e. assessment year 2009-10 and 2010-11 and the ld. DR could not controvert the same before us. The 'project completion method' of accounting has been consistently followed by the assessee in the earlier years for offering income to tax which was accepted by Revenue in the preceding years 2009-10 and 2010-11 , and it is the contention of the assessee that no prejudice has been caused to the Revenue as all due taxes have been paid to Revenue in respect of the said project 'Quantum Tower', Rambaug, S.V. Road, Malad (W), Mumbai , albeit in the subsequent years when project was completed. The project is stated by the assessee to have been completed in the financial year 2013-14. The assessee has placed on record the copy of provisional Profit & Loss account for the financial year 2013-14 (paper book/page 23) which was also submitted before learned CIT(A)(paper book/page 22) , whereby the profit earned by the assess....
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....diately preceding two years i.e. assessment year 2009-10 and 2010-11. It is also not shown by learned DR that the project completion method of computing income is not allowed by the provisions of the Act or it does not yield in computing correct income of the assessee. It is well settled that project completion method is one of recognized method of accounting. The above view is supported by decision of Hon'ble Delhi High Court in the case of CIT v. Manish Build Well Private Limited(supra), wherein Hon'ble Delhi High court observed as under: "8. It is well settled that the project completion method is one of the recognized methods of accounting. In CIT v. Hyundai Heavy Industries Co. Ltd. [2007] 291 ITR 482 / 161 Taxman 191 (SC) the Supreme Court held as follows:- "Lastly, there is a concept in accounts which is called the concept of contract accounts. Under that concept, two methods exist for ascertaining profit for contracts, namely, "completed contract method" and "percentage of completion method". To know the results of his operations, the contractor prepares what is called a contract account which is debited with various costs and which is credited with revenue associated ....
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....stion of law. Further, the Tribunal has also found that there was no justification on the part of the assessing officer to adopt the percentage completion method for one year (the year under appeal) on selective basis. This will distort the computation of the true profits and gains of the business. For these reasons, we are of the view that no substantial question of law arises. We, therefore, decline to admit question Nos. 2 and 3." We have also observed that the tribunal in the case of Awadhesh Builder v. ITO(supra) held as under: "2.6 We have perused the records and considered the rival contentions carefully. The assessee is a builder and real estate developer. The dispute is regarding year of accounting of income. The dispute is not whether the assessee had underestimated the income in a particular year. The assessee has been following project completion method as per which income has to be accounted in the year in which project is complete and the flats are sold. The assessee in the earlier two years followed the same method which has been accepted by the department. Though the earlier returns were accepted summarily under section 143(1), the fact is that these assessments....
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.... 1983 for accounting of income in respect of real estate projects and in terms of AS-7 which was applicable to both contractor and real estate developer, a person is free to follow either of project completion method or percentage completion method depending upon the nature of project. The assessee, in this case, has followed project completion method which is one of the prescribed methods by the Institute of Chartered Accountants of India. The accounting standard AS-7 was subsequently revised and revised statements were made applicable to housing projects undertaken on or after 1-4-2003 and as per the revised standards, revised AS-7 was applicable only to a contractor and in case of real estate developer, revised AS-9 was prescribed as per which the income has to be accounted only on completion of project when the flats are sold, i.e., when legal title passes to the buyer or when seller enters into agreement with the buyer for the sale and gives possession to the buyer under the agreement. In this case, the project was not complete during the year and, therefore, there was no question of passing on of the title of ownership or handing over of the possession. Thus, even in terms of....