TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 579
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.... to the project and should have been capitalized. 2.1 Facts leading to the same are that the assesse being resident Association of Person [AOP] was assessed for impugned AY on 30/03/2013 u/s 143(3) read with Section 153C of the Income Tax Act, 1961. The return of income was field by the assessee on 15/10/2010 declaring loss of Rs. 11,46,68,151/-. The assessee belonged to Rustomjee Group (M/s Keystone Realtors Private Limited & Other Companies). 2.2 Pursuant to search and seizure action u/s 132(1) on 21/10/2010 on Rustomjee Group & Evershine Group, their group concerns, directors and related persons, certain documents relating to assessee were found and consequently, a notice u/s 153A read with Section 153C was issued to the assessee on 04/01/2013. Pursuant to said notice, the original return of income, as filed earlier, was offered by the assessee. 2.3 During assessment proceedings, it was noticed that the only project developed by the assessee during impugned AY was a project called 'Global City' situated at Virar, Thane. The assessee had capitalized entire cost of construction since the project had not generated any taxable income up to 31/03/2010. However, the assessee clai....
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....ing the same period was required to be capitalized. Further, the income of the assessee was to be arrived at independent of Accounting Standards issued by ICAI. 5. Per contra, Ld. Counsel for Assessee [AR] contended that the assessee was mandatorily required to follows Accounting Standard-7 issued by ICAI and it was consistently following the same method of accounting in subsequent years. Reliance was placed on the judgment of Hon'ble Guwahati High Court rendered in MKB (Asia) Private Limited Vs CIT [2006 167 Taxman 256] and Supreme India in CIT Vs. Woodward Governor India Private Limited [2009 179 Taxman 326] for various contentions. Our attention is further drawn to the fact that the assessee followed consistent method of accounting in subsequent year, which has been accepted by the revenue in an assessment u/s 143(3). 6. We have heard the rival contentions and perusal the relevant material on record. The main contention of the assessee is that it is following the method of Accounting as prescribed by Accounting Standard-7 [AS-7] issued by ICAI whereas the stand of the revenue is that since no income from the project has been offered to tax, all expenditure was required to be c....
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....t activity or cannot be allocated to a contract are excluded from the costs of a construction contract. Such costs include: (a) General administration costs for which reimbursement is not specified in the contract; (b) selling costs; (c) research and development costs for which reimbursement is not specified in the contract; and (d) depreciation of idle plant and equipment that is not used on a particular contract. 20. Contract costs include the costs attributable to a contract for the period from the date of securing the contract to the final completion of the contract. However, costs that relate directly to a contract and which are incurred in securing the contract are also included as part of the contract costs if they can be separately identified and measured reliably and it is probable that the contract will be obtained. When costs incurred in securing a contract are recognised as an expense in the period in which they are incurred, they are not included in contract costs when the contract is obtained in a subsequent period. Upon perusal of clause-19, we find that General administration costs and selling costs are generally not considered a part of contract co....
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....opt one method for valuing the opening stock and a different method of valuing the closing stock so as to intentionally suppress the income derived or derivable in the particular previous year. Even where an assessee has adopted a particular method for a period of years, there is no provision of law which prevents him from changing to any other method, provided the changeover is not made in the same assessment year. The proviso to sub-s.(1) empowers the AO to compute the income on such basis 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. If the AO is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting has been regularly employed by the assessee, the AO may make an assessment in the manner pro....