TaxTMI 
TaxTMI 
2024 (4) TMI 1359
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.... fact that the provisions of section 43CB provides that the profit and gain arising from construction contract or a contract for providing services shall be determined on the basis of percentage of completion method in accordance with Income Computation and Disclosure Standard (ICDS) with effect from 01/04/2017. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering decision of Champion Construction Co. Vs First Income-tax Officer (l983) 5 ITD 495 (BOM), while deciding the case of the assesses. 3. The appellant craves leave to add, modify or alter any of the grounds." 3. Mr. Murkunde next took us to the Ld. CIT(A)'s detailed discussion reversing the assessment findings invoking sec.43CB of the Act and making the impugned addition of Rs.1,97,12,000/- as under : "6.1. Vide this ground of appeal the appellant contended that the AO has erred in making addition of Rs. 1,97,13,000/- without appreciating the facts of the case in proper perspective. Hence, the appellant has requested to delete the addition. In support of the grounds raised the appellant submitted as under. "Submission of Appell....
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....ns sanctioned on his own, starts construction on his own and later on the flats are offered for sales. When any prospective buyer likes the flat and the cost offered, he enters into an agreement to sales (ATS). Hence both are very different. After the said ATS, Builder continue doing construction of entire Building as per plans sanctioned and complete the construction. During this period the amounts are received from buyers as per stage of work completed. This is the modus operandi followed by all the Builders all over the world. If view of Learned AO holds good, than there are no builders in our country. All are construction contractor. b. Even the Income Tax Department has distinguished between a Contractor and a Builder. ICDS III (Construction contract) is already made effective for a construction contractor. Further Since this ICDS was not applicable to the Builders, hence another ICDS was proposed for real estates transactions which is not yet notified. If the Builder is a construction contractor than there was no need for a separate ICDS on Real Estates transaction. This clearly shows that a clear cut distinguish is made between a construction contractor and a builde....
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.... to Question No.12) that this ICDS is not applicable to real estate developers'. f. Proposed ICDS by CBDT A draft ICDS on Real Estate Transactions has been published for public comment on 11th May, 2017. The said ICDS is in sync with the guidance note for accounting for real estate transactions issued by ICAI which only permits percentage completion method as a method for a computation of business income for real estate developers. The said ICDS is still under discussion. g. In view of the above discussion, we submit that the provisions of section 43CB read with ICDS III and IV does not apply to Real Estate Developer h. Since it is very clear that the provisions of section 43 CB are not applicable to a builder and appellant is a firm of promoter builder and developer therefore any addition made on the basis of provisions of section 43 CB needs to be deleted therefore it is requested that the addition made by applying section 43 CB may please be deleted. i. Without prejudice to above, it is further submitted that the assessee since its inception is following Project Completion method and the same is accepted by the depar....
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....t 62/75% = 82.00% 5. % of total Revenue Offered (69.01 +20.86)/112% = 80.24% 6. Total Income as shown in ITR for AY 2020-21 Rs. 11,70,84,960/- Further, the appellant was issued notice u/s 142(1) on 25.08.2022 asking whether revenue was offered in accordance to section 43CB. In response to the same, appellant stated in its submission dated 08.09.2022 that the firm is a promoter, builder and developer and not executing any type of construction contract hence section 43CB is not applicable to it. The said section is applicable to a construction contractor. The appellant also stated that it has adopted completed contract method for recognition of revenue since last more than 15 years /beginning of the firm and was duly accepted by the department as well as in all earlier year assessment. Under the completed contract method the revenue on account of sales is recognized in P&L account on the basis of possession given to customers with undisputed amount of consideration. Vide notice u/s 142(1) issued to the appellant on 16.09.2022 the AO had asked for a sample copy of prospective buyer agreement duly signed by the buyer and to provide the details about the pr....