TaxTMI 
TaxTMI 
2026 (8) TMI 369
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....L on 30.11.2014. The case was selected for complete scrutiny under CASS by way of issue of notice u/s 143(2) of the Act on 31.08.2015. Thereafter, statutory notices u/s 142(1) alongwith questionnaire were also issued from time to time, in response to which details and documents were filed. Thereafter, the AO concluded the assessment vide assessment order dated 20.12.2017 passed u/s 143(3) of the Act and assessed the income at INR 68,98,66,120/-. 3. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 13.06.2025, dismissed the appeal of the assessee. 4. Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. "On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals), ["CIT(A)"] is bad, both in the eyes of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 69,00,00,000/- made by the AO on account of non-refundable security deposit received from ATS Housing Private Limited treating the same as revenue r....
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....ement project as provided in terms of Accounting Standard-7 ("AS-7") read with Guidance Note on Accounting for Real Estate Transactions issued by ICAI. Ld.AR submits that assessee has entered into sub-lease agreement with Logix Builders and Promoters Pvt. Ltd. and the Noida Development Authority according to which the assessee has to pay INR 175,48,80,962/- which includes moratorium interest of INR 5,55,15,122/-. As per the Agreement dated 09.04.2012, the assessee has paid INR 69.00 crores for transfer of Development rights in the said plot in terms of the Tri-party Agreement executed between them to M/s Logix Builders and Promotors Pvt. Ltd. ("LBPPL"). The AO has referred the matter to the TPO for determination of Arm's Length Price ("ALP") of amount paid to LBPPL who has not proposed any adjustment and accepted the price paid by the assessee. However, the AO treated the said non-refundable securities as revenue of the assessee for the year under appeal and made the addition of the same which is upheld by Ld. CIT(A). Ld.AR submits that since the assessee is following POCM and the Guidance Note issued by ICAI for recognizing its revenue, according to which the assessee has to reach....
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....essee recognizes revenue under the Percentage Completion Method (POCM) in real estate projects as per Accounting Standard 7 (AS-7) read with Guidance Note on Accounting for Real Estate Transactions (Revised 2012) as issued by the ICAI. * Preliminary Background of the case 3. Before coming to POCM on the assessee, the assessee would like to submit that there are four parties involved in the transaction- * Noida Authority * Logix Builders and Promoters Private Limited ("Logix") * Assertive Infrastructure Private Limited (Assessee) * ATS Housing Private Limited 4. The sequence of event along with the facts of the cases are: a. Noida authority vide allotment letter dated 04.05.2011 allotted a plot to Logix Builders and Promoters Pvt. Ltd. through an open tender system. In pursuant to the same, Logix Builders and Promoters Pvt. Ltd. has entered into a lease deed with Noida Development Authority, for the total consideration of Rs. 112,15,17,600/- out of which 11,21,51,760/- was paid by Logix Builders and promoters Pvt. Ltd. at the time of allotment of plot and balance amount of Rs. 100,93,65,840/- was to be paid in i....
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....eceive 20% of Net sale revenue generated from the sale of total saleable Area of the Project. 6. As already explained above that the assessee is governed by the AS-7 and Guidance note on accounting of real estate transaction. In view of the same, the assessee for the year under consideration has applied the percentage completion method and as the year under consideration i.e. AY 2014-15, being the first year of development the company has not achieved the milestone, as prescribed in the guidance note for revenue recognition and hence not recognize the revenue during the year. * Assessment proceedings 7. During the year under consideration, the Id. AO has referred the case to Id. TPO to determine the arm's length price of Rs. 69 crores paid to M/s Logix Builders and Promoters Private Limited. The Ld. TPO passed order u/s 92CA(3) dated 30.03.2017 (PB pg. 118-119) wherein he has accepted the assessee contention. 8. However, the Id. AO has considered the upfront payment of Rs. 69 crores received by the assessee as revenue receipts on the alleged ground that the amount received of Rs. 69 crores has nowhere linked with the generation of revenue fro....
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.... Guidance Note covers all forms of transactions in real estate. An illustrative list of transactions which are covered by this Guidance Note is as under: (a) ..... (b) ..... (c) ..... (d) Acquisition, utilisation and transfer of development rights. (e) .... (f) .... " 17. On perusal of the scope of Guidance note, it becomes clear that assessee is governed by the Guidance note on Accounting of Real Estate Transaction. 18. Further, the attention is invited to the definition of project cost and project revenue as provided by the guidance note, which are extracted below- 2.2 Project Costs - Project costs in relation to a project ordinarily comprise: (a) Cost of land and cost of development rights -All costs related to the acquisition of land, development rights in the land or property including cost of land, cost of development rights, rehabilitation costs, registration charges, stamp duty, brokerage costs and incidental expenses. (b) Borrowing Costs- In accordance with Accounting Standard (AS) 16, Borrowing Costs which are incurred directly in relation to a project or which are apportion....
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....ence the said receipts is in the nature of revenue and shall be taxable in the year of receipt as revenue receipt. 24. However, the said findings of the Ld. AO is in the contradiction of the guidance note on accounting of the real estate transaction which specifically state that any amount received on account of sale of development rights constitutes project revenue and therefore the amount received of Rs. 69 crores shall be taxable as per the percentage completion method. 25. Moreover, without transferring the said rights, assessee would not have received such huge amount of Rs. 69 crores from the ATS Housing Private Limited. The assessee has received such amount only due to transferring the said rights to the ATS Housing Private Limited. Merely the reason that assessee has received this amount of Rs. 69 crores upfront does not make this revenue not linked with the project. AO has consistently accepted the taxability of receipt of 69 crores as per POCM method in subsequent AY 2016-17, AY 2017-18 and AY 2018-19, u/s 143(3) of the Act 26. The assessee duly shown that Rs. 69 crores received from the ATS Housing Private Limited as revenue and duly o....
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.... 30. When in the later years the Ld. AO himself has accepted the contention of the assessee that the said amount should be offered to tax as per the POCM, then there is no point left in adding the same amount in the year under consideration, i.e AY 2014- 15. 31. It is a settled law that where the fundamental facts remained the same in different assessment years it is not open for the Revenue to take one view in certain years and another view in other years. This is against the principle of consistency. Reliance is placed on following judgements- * Radhasoami Satsang V. CIT, 1991 (11) TMI 2 (Supreme Court), Dated: - 15-11-1991 * PCIT-3 V. Banzai Estates P. Ltd., 2024 (8) TMI 365 - Bombay High Court, Dated. July 9, 2024 * AROH FOUNDATION VERSUS COMMISSIONER OF INCOME TAX EXEMPTION & ANR., 2024 (2) TMI 990 - DELHI HIGH COURT, Dated: - 5-2-2024 * M/S. SAT SAHIB SECURITIES PVT. LTD. VERSUS DCIT CIRCLE - 7 (1) NEW DELHI, 2024 (7) TMI 842 - ITAT DELHI, Dated: - 12-7-2024 * THE INSTITUTE OF INDIAN FOUNDRYMEN VERSUS ITO (EXEMPTION), WARD-1 (3), KOLKATA, 2024 (7) TMI 135 - ITAT KOLKATA, Dated: - 28-6-2024 * GECOM INTERNATIONAL PV....
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....s revenue as per the assessee vis-à-vis as per the Id. AO is different. Accordingly, the entire exercise is revenue neutral. Thus, the dispute with regard to the methodology of allocation of revenue is merely academical as the same is revenue neutral over the project life. Your honor, at this point, it is submitted that the Hon'ble Apex Court in the case of Commissioner of Income-tax v. Bilahari Investment (P.) Ltd.CIVIL APPEAL NOS. 1625 TO 1632 OF 2008, held as under: "11. The limited controversy is whether the completed contract method of accounting adopted by the assessees as method of accounting for chit discount is required to be substituted by percentage of completion method. ... 19. In the judgment of the Bombay High Court in Taparia Tools Ltd.'s case (supra) it has been held that in every case of substitution of one method by another method, the burden is on the Department to prove that the method in vogue is not correct and it distorts the profits of a particular year. Under the mercantile system of accounting based on the concept of accrual, the method of accounting followed by the assessees is relevant. In the present case, there is no fi....
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....ely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers." * Delhi High Court in the case of Commissioner of Income-Tax versus Dinesh Kumar Goel, [2011] 331 ITR 10 * Delhi High Court in the case of Commissioner of Income Tax Versus M/s Vishnu Industrial Gases P. Ltd., ITR No. 229/1988 * Delhi High Court in the case of Commissioner of Income-Tax, New Delhi Versus Shri Ram Pistons & Rings Ltd, [2008] 220 CTR 404 (Delhi) 38. In view of the above, it is prayed before your honor to delete the addition made by the Id. AO as the entire exercise performed by the Id.AO is academic in nature and merely a revenue neutral exercise. Without prejudice to the above, the cost incurred by the assessee should be allowed as expense while treating the alleged amount as revenue receipts 39. The Id. AO has made addition of Rs. 69 crores received by the assessee from M/s ATS Housing Pvt. Ltd. as non-refundable security deposit, for developme....
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....e incurred to earn such revenue must be allowed. Disallowance uls 40(a)(ia) of the Act on the non-deduction of TDS on payment of Rs. 69 crores to Logix Builders & Promoters Pvt. Ltd. 44. The Id. AO on page 16 para 11 of its order has stated that- "11. In view of the above discussion, since the sum of Rs. 69 crore has been treated as revenue receipts, no adverse view is taken u/s 40(a)(ia) of the Income-tax Act, 1961 on the payment of Rs. 69 crore by the assessee to M/s Logix Builders and Promoters Pvt Ltd without deduction of tax. On the contrary, if the above view is not sustained by the Appellate Authorities, in such case applicability of provisions of section 194IA and 40(a)(ia) of the Income-tax Act, 1961 will be taken." 45. The CIT(A) while upholding the above view of the AO has stated on page 79 para 9.15 of its order, as under- 9.15 The cost of said right. being nil, the appellant is not entitled to any deduction. Although, I have clearly opined as above with respect to the cost, I also agree with the finding of the AO that the appellant has failed to deduct tax at source u/s 194IA from the aforesaid cost of acquisition which shal....
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....has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139" The Id. AO has alleged the non-deduction u/s 194IA and section 194IA provides for deduction of TDS on transfer of immovable property which does not come within the scope of section 40(a)(ia) for AY 2014-15. The expansion of Section 40(a)(ia) to cover all payments liable to TDS under Chapter XVII-B (including u/s 194IA) was made only later by Finance Act (No. 2), 2014. The Memorandum to the Finance Bill clearly states the legislative intent: "Further, existing provisions of section 40(a)(ia) of the Act provides that certain payments such as interest, commission, brokerage, rent, royalty fee for technical services and contract payment made to a resident shall not be allowed as deduction for computing business income if tax on such payments was not deducted, or after deduction, was not paid within the time specified under the said section. Chapter XVII-B of the Act mandates deduction of tax from certain other payments such as salary, directors fee, which are currently not specified under section 40(a)(ia) of the Act. The payment....
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....s on similar first-time TDS applicability provisions, reiterating the principle that if the triggering event (credit/payment) occurred before the effective date, no TDS obligation arises. Reliance is placed- * Circular No. 13 of 2021 which deals with section 194Q w.e.f. 01.07.2021. The relevant extract of the circular is- "4.2.2 It hereby clarified that,- (i) Since section 194Q of the Act mandates buyer to deduct tax on credit of sum in the account of seller or on payment of such sum, whichever earlier, the provision of this sub-section shall not apply on any sum credited or paid before 1st July 2021. If either of the two events had happened before 01st July 2021, that transaction would not be subjected to the provisions of section 194Q of the Act." * Circular No. 13 o 2022 which deals with section 194S w.e.f. 01.07.2022. The relevant extract of the circular (Q. No. 6) is- (ii) Since the provision of section 194S of the Act applies at the time of credit or payment (whichever is earlier) of any sum, representing consideration for transfer of VDA, such sum which has been credited or paid before 1st July 2022 would not be subjected to tax d....
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.... paid to LBPPL and moratorium interest of INR 5,55,15,122/- and remaining amount of INR 1,00,93,65,840/- was to be paid in installments to Noida Authority. Accordingly, total consideration was INR 1,75,48,80,962/- which is to be paid by the assessee. 11. In terms of the said agreement, assessee has made initial payment of INR 69 crores during the year under appeal to M/s LBPPL and thereafter, assessee has entered into another development agreement with M/s ATSHPL to develop the said property into commercial building whereas the assessee is entitled for 20% of the net sales revenue and received a sum of INR 69 crores as nonrefundable security which was claimed to be adjusted against the future payments to be made to the assessee as a part of 20% of its revenue. The case of the revenue is that this amount of INR 69 crores is the revenue receipts for the assessment year under appeal as the same is non-refundable and assessee became the absolute owner of this amount. The AO also observed that assessee had made payment of INR 69 crores to M/s LBPPL on which the provision of section 194IA of the Act ware applicable however, no TDS as deducted therefore, in terms of provision of sectio....