TaxTMI 
TaxTMI 
2022 (6) TMI 1490
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....ing recognition of revenue under the Percentage Completion Method [PCM] as per Accounting Standards [AS] issued by the Institute of Chartered Accountants of India [ICAI]. 3. The assessee is a company engaged in developing property and constructing residential apartments and commercial complex. It filed its return of income for the AY 2015-16 on 25.12.2015 declaring a loss of Rs.94,92,127. The case was selected for scrutiny. 4. The Assessing Officer referred the case to the Transfer Pricing Officer [TPO] to determine the arm's length price [ALP] in respect of the international transaction. No adjustment was determined by the TPO u/s. 92CA of the Income-tax Act, 1961 [the Act]. 5. The AO called for various details w....
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....for the purpose , of the calculation of revenue following percentage completion of project. Hence, the calculation submitted by the assessee is rejected. Since the percentage of completion of work as on 31.03.2015 is 35.44% as calculated in the proposition dtd: 05.12.2018 reproduced on page 2 86 3 of this letter. . Hence the revenue is recognized as per calculation given on page 2 86 3 of this letter. The calculation of gross profit of Rs. 10,40,17,541/-, is tabulated as under: S1 No. Description Amount 01 Total salable area = 5,26,645 sft 02 Estimated project cost (including land) Rs. 179,02,24,904 03 Estimated project cost(excluding land) Rs. 120,91,19,259 04 Cost incurred( excluding land c....
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....e indirect expenditure debited in the P&L account of Rs. 94,19,563/-. Accordingly the Income for Rs. 9,45,97,978/- has been added back to the return of Income for AY 2015-16. [Addition : Rs. 9,45,97,978]" 6. Aggrieved, the assessee filed appeal before the CIT(Appeals), who confirmed the order of the AO on the basis that cost of construction has been revised by the assessee for no substantial reason and the same is done only to keep the percentage of the cost attributable to the completion below 25%, thus deferring the payment of tax. The assessee is now in appeal before the Tribunal against the order of the CIT(Appeals). 7. The ld. AR submitted that the cost as a percentage of total projected cost for the year under consideration i....
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....ted. (a) All critical approvals necessary for commencement of the project have been obtained. These include, wherever applicable: (i) Environmental and other clearances. (ii) Approval of plans, designs, etc. (iii) Title to land or other rights to development/ construction. (iv) Change in land use. (b) When the stage of completion of the project reaches a reasonable level of development. A reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to 2.5. (c) Atleast 25% of the saleable project area is secured ....
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....d below:- Computation of stage of completion of project in accordance with Para 5.3(b) of the Guidance Note on Real Estate Transactions Particulars Working by AO Working by Assessee Estimated project cost (including cost of land) (Refer Page 4, Para 6.3, SI. No. 2 of Table in Assessment A 1,79,02,24,904 1,79,02,24,904 Less: Cost of land *(Refer Note 1 B 58,47,01,271 1,08,54,285 Estimated project cost (excluding cost of land) C=A-B 1,20,55,23,633 1,77,93,70,619 Cost incurred till 31 March 2015 (Refer Page 4, Para 6.3, SI. No. 4 of Table in D 42,75,20,083 42,75,20,083 Percentage D/C 35.46% 24.03% Note: As the percenta....