TaxTMI 
TaxTMI 
2025 (2) TMI 1880
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntial projects, viz., Neelkanth Enclave and Bhaveshwar Arcade. The assessee is following Percentage Completion method for recognizing the revenue. 3. The first issue relates to the determination of percentage of completion in respect of "Neelkanth Enclave" project. Both the parties have followed the revised guidelines issued by Institute of Chartered Accountants of India (ICAI) for the purpose of determining the percentage of completion and consequent recognition of income. However, there is difference of opinion between the assessee and the AO with regard to the "percentage of saleable area" covered by the Contracts or Agreements. As per the Guidance note issued by ICAI, the revenue need not be recognized in a project only if the saleab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....), revenue from a project could be recognized, if the conditions mentioned in paragraph 5.3 of the Guidance note are satisfied. The said conditions, inter alia, include a condition that "Atleast 25% of the saleable project area is secured by contracts or agreements with the buyers". Further, paragraph 3.3 of the Guidance Notes mentions that the revenue should be recognized at that point of time at which all significant risks and rewards of ownership can be considered as transferred. It is further mentioned that the agreement for sale is considered to have the effect of transferring all significant risks and rewards of ownership to the buyer provided the agreement is legally enforceable.. 7. In respect of booking advance received from a c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... buyer booked flat No.704 by paying booking advance, but finally bought flat No.804. Similarly, another buyer booked flat no.1203, but shifted to 1202, meaning thereby, the letter issued on receipt of booking advance does not create any right over the flats. Further, the same is also flexible in the sense, the buyers could change the flats, which is not possible if the agreement or contract is registered. 8. We noticed that the guidance note specifically mentions that the "saleable area covered by the contract or agreement" has to be taken into consideration for determining the percentage of completion. It is further stated that the agreement should have the effect of transferring all significant risks and rewards to the buyers. A perusa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion by way of reducing the same from "Other construction expenses" falling under the head "Project Development and Construction Expenses" explained in Note no.15 of the Annual report. The note no.15 is placed at page 47 of the Paper book No.1. The details of "Other construction expenses" are placed at page 308 of the paper book. It is noticed from the details of "Other construction expenses" given at page 308 that the compensation amount of Rs.1,41,31,004/- has already been reduced and the net amount of "other construction expenses" is carried to the profit and loss account. In that case, there was no necessity to make addition of the very same amount. Accordingly, we are of the view that the tax authorities have fell into error in making ....