TaxTMI 
TaxTMI 
2021 (8) TMI 122
X X X X Extracts X X X X
X X X X Extracts X X X X
....oss account even after disallowing the same from the head Finance Cost considering the same as project cost. That the very reason of the Id. AO to disallow the same from finance cost head was for considering it as cost of project. That had the Id. AO allowed the consequent effect of his own actions, then there will be no change in profits of the assessee. As such, the addition of Rs. 1,25,72,260/- may please be deleted. - 42,73,310.00 3. That the Id. CIT(A) has erred in law and on facts, while confirming the addition made by the Id. A.O amounting to Rs. 3,61,56,783/- after re-computing the percentage of completion without properly appreciating the submissions of assessee. As such, the addition of Rs. 3,61,56,783/- may please be deleted.....1,22,89,690.00. 4. That the Id. CIT(A) has erred in law and on facts, while confirming the inclusion of cost of land for the purpose of computation under Percentage of completion method (POCM) without appreciating that the method of POCM as followed by assessee has been consistently followed and the guidance note on accounting for real estate transaction (revised 2012) is only recommendatory in nature. That the Id. AO had only d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amounting to Rs. 3,61,56,783/-. 7. Aggrieved by this, the assessee carried the matter before the ld. CIT(A) but without any success. 8. Before us, the ld. counsel for the assessee vehemently stated that the Guidance Notes are primarily designed to provide guidance and hence the Guidance Notes are recommendatory in nature. It is the say of the ld. counsel for the assessee that the assessee is not required under law to mandatorily follow Guidance Notes on accounting for real estate transactions. It is the say of the ld. counsel for the assessee that by making addition, the Assessing Officer has made the assessee subject of double taxation of same income in different F.Ys. 9. The ld. counsel for the assessee pointed out that the assessee has considered the alleged profit in the subsequent A.Ys. The ld. counsel for the assessee drew our attention to the detailed chart of revenue recognition. It was further brought to our notice that the Assessing Officer, in F.Y. 2016-17 relevant to A.Y 2017-18, accepted the returned income under scrutiny assessment order framed u/s 143(3) of the Act. 10. Per contra, the ld. DR strongly supported the findings of the Assessing Officer. 11....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the department can insist on substitution of the existing method. Further, in the instant case, it was found from the various statements produced that the entire exercise, arising out of change of method from completed contract method to deferred revenue expenditure was revenue neutral. " 14. After carefully perusing the documentary evidences brought to our notice, we find that the undisputed position that emerges is that the assessee is following consistent method of accounting to recognise revenue under the project. No doubt, the assessee has not included cost of land for computation of profit under PoCM, but before completion of project, the entire revenue has been offered for taxation which also included the impugned addition made by the Assessing Officer. We, therefore, do not find any merit in the impugned addition. Considering the facts of the case in totality, we direct the Assessing Officer to delete the addition. This ground is accordingly allowed. 15. Next grievance related to the addition of Rs. 1,25,72,260/- being interest on loan. 16. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed an amo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dated 26.12.2017, the assessee once again reiterated what has been stated by it vide reply dated 27.11.2017. 25. Even before us, no details/documentary evidences regarding claim of interest expenses as revenue expenditure has been furnished. Therefore, the action of the Assessing Officer is found to be correct. Rs. 1,25,72,260/- shall remain added in total project cost. However, in all fairness, we direct the Assessing Officer to consider this enhanced project cost in total estimated cost of project. With these observations, this ground is dismissed. 26. In the result, the appeal of the assessee in ITA No. 3129/DEL/2019 is partly allowed. The order is pronounced in the open court on 03.08.2021. ============= Document 1 A.\. Revenue from operation Cost of project - Gross change in Profit (Rs.) inventories (Rs.) As shown by n assessee (Rs.) cost incurred Percentage Droiect of total Gross Profit by PoCM eligibility for as per the constructio revenue recognition as per PoCM Guidance Note Guidance Note (when % of total construction cost incurred more than 25%) is 2012 ....