TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 1324
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....ed to as 'the Act') and the case was subsequently taken up for scrutiny. During the year under consideration, the assessee was engaged in the development of a residential building project 'Raj Lake View' in two Phases I and II, commenced in the financial years 2006-07 and 2009-10 respectively. The assessee followed the 'Project Completion Method' for recognising revenues, costs and profits / losses from the development and construction of real estate projects. The assessment was completed u/s.143(3) of the Act vide order dt.28.2.2013 wherein the assessee's income was assessed at Rs. 7,62,57,807 as against the returned income of Rs. 72,80,690 in view of an addition thereto of a sum of Rs. 6,89,77,117 as profits assessable under the 'percentage completion method' as the Assessing Officer was of the view that Phase I of the 'Raj Lake View' project had been substantially completed to the extent of 90%. The Assessing Officer, however, did not bring to tax profits of Phase II of this project as he was of the view that Phase II had just commenced in the period under consideration. In doing so, i.e. making the addition, the Assessing Officer followed the order of the CIT(Appeal....
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....f facts and the law applicable the computation as made by Assessing Officer being not correct is to be disregarded. 4. The appellant has rightly computed the profits in accordance with project completion method. On the facts and circumstances of the case, the method adopted by the appellant and the profit computed consequent thereto are to be accepted. 5. The appellant denies the liability to pay interest u/s.234A and 234B of the Act. The interest having been levied erroneously is to be deleted. 6. In view of the above and other grounds to be adduced at the time of hearing, it is requested that the order passed be quashed or atleast the method of accounting followed by the appellant be accepted and the income be computed accordingly and interest levied be also deleted." 6. The grounds raised at S.Nos.1 and 6 are general in nature and therefore no adjudication is called for thereon. 7.1 The grounds at S.Nos.2 to 4, raised by the assessee, challenge the findings and action in the orders of the authorities below to be 'erroneous in holding that the assessee is required to maintain the accounts on the 'Percentage Completed Method' and computing the taxable profits at Rs. 6,89,7....
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.... u/s.145(1) of the Act is either cash system or mercantile system. The method of accounting followed by the Assessee as per the order of Assessment is "Mercantile system". The manner in which the Assessing Officer determined the income of the Assessee for AY 09-10 is not in tune with the mercantile system of accounting. If mercantile system of accounting is to be applied then in theyear of entering into agreement for sale with a prospective purchaser of flat the agreed sale consideration has to be accounted as income/credit side of profit and loss account and the expenses incurred including the cost of construction has to be debited. If that is done than the profits in the initial years of the project, assuming that good number of flats in the project are sold in the first year, would be high and would decline towards the completion of the project. In that view of the matter, the percentage completion method would not be strictly in tune with the mercantile system of accounting. For the very same reason even project completion method of accounting would not be strictly in tune with the mercantile system of account. 17. We are also of the view that the AO cannot thrust any particu....
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.... accepted." Following the decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2009-10 (supra), we allow the appeal of the assessee on this issue, holding that the method of accounting followed by the assessee i.e. 'Project Completed Method' has to be accepted. 8. In the ground raised at S.No.5, the assessee denies its liability to pay interest u/s.234A and 234B of the Act that has been wrongly charged. The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter and in this view of the matter, we uphold his action in charging the said interest. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala & Others reported in 252 ITR 1 (SC). The Assessing Officer is, however, directed to recompute the interest chargeable u/s.234A and 234B of the Act, if any, while giving effect to this order. 9. In the result, the assessee's appeal for Assessment Year 2010-11 is partly allowed. 10.1 In its appeal, Revenue has raised the following grounds :- "1. The order of learned CIT (Appeals) is clearly opposed to law as far as the findings are ....
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....venue is concerned, we are of the view that the question as to whether deduction u/s. 80IB(10) of the Act has to be allowed proportionate to the profits derived from sale of residential units whose built-up area is less than 1500 sq.ft., even though some of the residential units in the very same project exceeds the built-up area of 1500 sq.ft., the same has been decided by the Hon'ble High Court of Karnataka in the case of CIT v. SJR Builders in ITA No.32 of 2010 dated 19.03.12. The Hon'ble High Court has taken the view confirming the order of the Tribunal, by holding that where residential units exceed the built-up area of 1500 sq.ft., such units may be excluded for deduction, but the assessee will not lose the benefit of deduction u/s. 80IB(10) in its entirety. It is only with reference to the flats which is more than the prescribed area that the assessee will lose the benefit of deduction. The Tribunal in its decision had followed the ruling of the Special Bench of the Tribunal in the case of Brahma Associates v. JCIT (313 ITR (AT) 268 (Pune) (SB). Several other decisions of various benches of the Tribunal were filed in the paper book taking similar view. In view of the aforesai....