TaxTMI 
TaxTMI 
2019 (8) TMI 1843
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....ng certain residential towers. During the year, the assessee purchased land costing Rs.2,70,18,398/- and incurred direct and indirect expenses of Rs.4,50,71,261/- on the said project. As against the development work, the assessee has collected an amount of Rs.5,52,70,410/- from its customers who had given advances against purchase of sale of units of total consideration of Rs.10,35,96,192/-. The assessee company filed return of income declaring taxable income of Rs.49,637/- which was subjected to scrutiny assessment. It was noticed by the AO that the assessee has received advances from its customers amounting to Rs.5,52,70,410/-. The AO also observed that assessee has completed substantial and considerable work on the project which has enabled him to collect such huge amount from his customers aggregating to Rs.5.52 Crores which is nearly 53% of the sale consideration of Rs.10.35 Crores. The AO accordingly show caused the assessee to explain as to why profit should not be held to have crystalized during the year as worked out on percentage of work completion method in respect of project already and nearly (2/3rd of the total) executed on which the assessee has also collected a sign....
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....stimated the profit of the appellant company at 15% of the gross receipt equal to the amount collected. The A.O has observed that as against the final sales consideration of Rs. 10,35,96,192/- agreed between the appellant and its customers, the appellant has received an amount of Rs. 5,52,70,410/- from the customers. The A.O has observed that the appellant has completed the construction nearly 82% of the project. Accordingly, the A.O was of the view that the revenue is to be recognized to the extent of amount already collected from the customers on percentage completion method. Further, the A.O has invoked the provisions of section 145(3) of the Act for the purpose of estimating the profits from the project. The appellant company is a real estate developer, developing the scheme on its own land. The appellant has rightly contended that the revised AS-7 is not applicable to the appellant company as it is applicable to contractor. Accounting Standard - 9 is applicable to the appellant company. The A.R has also relied upon the decision in the case of Awadhesh Builders vs. Income Tax Officer 37 SOT 122 (Mumbai) in support of the contention that the Accounting Standard - 7 is not appl....
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....Ahmedabad Municipal Corporation for its approval within a period of 3 months from the date of said agreement. After getting the approval from the Ahmedabad Municipal Corporation, the project was supposed to be completed within a period of 9 months and accordingly, by 31-3-2008, it is not possible to complete substantial work as observed by the A.O. On the basis of the all the above factual evidences placed on the record in the form of Paper Book, the appellant has rightly contended that these evidences establishes beyond doubt that as on 31-3-2003, no major work was completed as alleged by the A.O. The appellant has further contended that booking amount received from the prospective buyer for any identifiable towers is only a proposal made by the prospective buyer to the appellant company which is subject to finalization by the appellant company only when the prospective buyer makes the full payment as per the terms and conditions of the appellant company and the prospective buyer is finally willing to fake the possession of the ur.it which has been proposed to be booked and acquired by the prospective buyer, it was submitted that if the prospective buyer after paying a booki....
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....tio of the above decision is applicable in appellant company's case. Further, it is seen that the appellant company has recognized the revenue from the project in the subsequent assessment year i.e. A.Y. 2009-10 on the completion of the project while executing conveyance deed in favour of the prospective buyers and giving them the physical possession of the units. In view of the above facts, I hold that the addition made by the A.O of Rs. 82,90,562/- at 15% of the gross receipts being the amount collected by the appellant is factually incorrect and is therefore directed to be deleted. The ground of appeal, is therefore, allowed." The CIT(A) accordingly observed that the significant risk and rewards was not passed to the prospective buyers and therefore the assessee was right in applying completed project method. The CIT(A) accordingly reversed the action of the AO and granted relief in terms of observations noted above. 5. Aggrieved, the Revenue is in appeal before the Tribunal. 6. The learned DR for the Revenue relied upon the order of the AO and submitted that the action of the assessee in not declaring the profits from the construction project in progress is not justi....
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....x Act. It was further emphasized that the assessee is a builder and developer developing the Real Estate Scheme on its own land and selling the Real Estate units and not merely a Civil Contractor. It was submitted that in the case of a developer/builder, accounting standard - 9 (AS-9) is applicable for revenue recognition. The action of the assessee is thus in tune with AS-9 as applicable to the assessee. The learned AR also disputed the substantial completion of construction work as observed by the AO and referred to the findings of the CIT(A) in this regard. The learned AR referred to various case laws to support the order of the CIT(A). "1. Awadhesh Builders vs. ITO, ITAT, Mumbai (2010) 37 SOT 0122 2. Nandi Housing (P) Ltd. vs. DCIT, ITAT, Bangalore, (2003) 80TTJ 0750 3. Dy.CIT vs. Shapoorji Pallonji Biotech Park (P) Ltd. ITAT, Hyderabad, (2011) 138 TTJ 0062 4. M/s. Unique Enterprises vs. ITO, ITAT, Mumbai, (ITA No. 5109/Mum/2008) 5. ACIT vs. M/s.Vraj Developers, ITAT Ahmedabad (ITA No. 19/Ahd/2008) 6. Krish Infrastructure (P.) Ltd. vs. ACIT, Alwar, ITAT Jaipur, 35 taxmann.com 38 (2013) 7. Prem Enterprises vs. ITO -22(2)(2)-2, Vashi ITAT Mumbai (2012) 25 taxm....