ACIT, Bangalore V. M/s Pragathi Group, Bangalore

ITA 1135/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0312 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: V SHRIDAR
• Keywords: Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1135/BANG/2015 ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(2)(1), BANGALORE. VS. M/S. PRAGATHI GROUP, 28/2, 2 ND D FLOOR, CUNNINGHAM ROAD, BANGALORE 560 052. PAN: AAIFP 6186E APPELLANT RESPONDENT APPELLANT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) RESPONDENT BY : SHRI V. SHRIDAR, CA DATE OF HEARING : 15.06.2016 DATE OF PRONOUNCEMENT : 24.06.2016 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER D ATED 18.05.2015 OF THE CIT(APPEALS)-1, BENGALURU FOR THE ASSESSMENT YE AR 2009-10 ON THE FOLLOWING GROUNDS OF APPEAL:- 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVEL OPMENT OF RESIDENTIAL LAYOUTS AND REAL ESTATE OPERATIONS AND HAS TAKEN UP THE PROJECTS ITA NO.1135/BANG/2015 PAGE 2 OF 12 UNDER THE NAMES PRAGATHI NAGAR PROJECT, PRAGATHI PARADISE PROJECT AND 'PRAGATHI GARDEN PROJECT. THE ASSESSEE HAS BEEN FO LLOWING THE PERCENTAGE COMPLETION METHOD FOR RECOGNITION OF REV ENUE. FINANCIAL YEAR 2008-09 (AY 2009-10) IS THE FIRST YEAR OF RECOGNITI ON OF INCOME FROM THE BUSINESS OPERATIONS IN RESPECT OF PRAGATHI NAGAR PR OJECT AND NO INCOME IS RECOGNISED FROM OTHER PROJECTS. THE ASSESSEE HAS FI LED ITS RETURN OF INCOME FOR THE ASST. YEAR 2009-10 DECLARING A TOTAL INCOME OF RS.21,96,668/-. THE ASSESSING OFFICER IN HIS ASSESS MENT ORDER U/S 143(3) OF THE INCOME TAX ACT DISALLOWED THE FOLLOWI NG SUMS AND ADDED THE SAME TO THE RETURNED INCOME:- SL. NO. PARTICULARS AMOUNT IN RS. A. BROKERAGE PAID TOWARDS PRAGATHI PARADISE PROJECT 46,89,104 B. PROJECT EXPENSES OF PRAGATHI GARDEN PROJECT 58, 77,997 C. DISALLOWANCES OF TRAVELLING EXPENSES 12,17,679 D. DISALLOWANCES OF SALES PROMOTION EXPENSES 3,00, 972 E. INTEREST ON LOANS PERTAINING TO OTHER PROJECTS 1 ,90,61,055 TOTAL 3,11,46,812 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(APPEALS) AND SUBMITTED WITH RESPECT TO BROKERAGE AND COMMISSION EXPENSES OF RS.46,89,104 AS FOLLOWS:- AS CAN BE SEEN FROM THE EXPENSES DEBITED TO THE PR OFIT & LOSS ACCOUNT DURING THE YEAR, AS AGAINST THE REVENUE REC OGNISED IN RESPECT OF PRAGATHI NAGAR PROJECT, EXPENDITURE TOWA RDS BROKERAGE AND COMMISSION ON PURCHASE OF LANDS IS ONLY A SUM O F RS. 18,75,731/-, WHICH COMPRISE OUT OF THE TOTAL EXPEND ITURE CATEGORISED UNDER THE PROJECT EXPENSES OF PRAGATHI NAGAR PROJECT OF RS. 1,64,67,311/- VIDE SCH 10 OF THE AUDITED STA TEMENTS. ITA NO.1135/BANG/2015 PAGE 3 OF 12 PROJECT WISE BREAKUP OF THE SAID EXPENDITURE IS SUB MITTED AS UNDER:- DESCRIPTION PRAGATHI NAGAR PROJECT PRAGATHI PARADISE PROJECT TOTAL AMOUNT INCURRED UP TO 31- 03-2009 2,00,148,869 46,89,104 2,47,03,973 LESS: AMOUNT APPORTIONED AS A MATCHING COST ON THE BASIS OF REVENUE RECOGNIZED (CHARGED TO P&L ACCOUNT) 18,75,731 NIL 18,75,371 BALANCE CARRIED AS CLOSING WIP AS ON 31-3-2009 1,81,39,138 46,89,104 2,28,28,242 IT CAN BE SEEN THAT THE CLOSING WORK IN PROGRESS A S ON 31-3-2009 CARRIES THE AMOUNT SPENT ON PRAGATHI PARADISE PROJE CT. HOWEVER AS PER THE NOTING OF THE ASSESSING OFFICER VIDE ITE M (A) PAGE 5, THE ASSESSING OFFICER MISCONSTRUED THAT THE EXPENSE S WERE CHARGED TO PROFIT AND LOSS ACCOUNT AND DISALLOWED T HE SAME, THOUGH NO SUCH QUANTUM OF EXPENDITURE HAS BEEN CHAR GED TO PROFIT AND LOSS ACCOUNT DURING THE YEAR AGAINST THE REVENUE RECOGNISED FROM THE RESIDENTIAL PROJECT NAMELY PRAG ATHI NAGAR PROJECT. THE ASSESSING OFFICER'S CONTENTION THAT T HE AMOUNT OF RS.46,89,104/- BELONGS TO PRAGATHI PARADISE PROJECT WAS NEVER BEEN DISPUTED DURING THE COURSE OF ASSESSMENT PROCE EDINGS AND APPELLANT HAS ALSO AGREED ON THE SAME BUT HAS DISAG REED WITH DISALLOWANCE OF THE SAME AS IF IT HAS BEEN CHARGED TO PROFIT & LOSS ACCOUNT. 4. THE CIT(APPEALS) WENT THROUGH THE ACCOUNTS OF TH E ASSESSEE AND OBSERVED THAT IT WAS PRUDENT TO ACCOUNT THE BROKERA GE AND COMMISSION ON LAND PROCUREMENT OF RS.46,89,104 FOR PRAGATHI PARAD ISE PROJECT AS PROJECT EXPENSES AND THAT THE SAME HAS BEEN CORRECTLY RETAI NED AS WIP PROJECT EXPENSES AS A BALANCE SHEET ITEM. THE CIT(A) FURTHE R OBSERVED THAT THE ASSESSEE HAD RIGHTLY CHARGED THE SAME AGAINST THE R ESPECTIVE REVENUE, ITA NO.1135/BANG/2015 PAGE 4 OF 12 WHEN REVENUE RECOGNITION TAKES PLACE FROM THE PROJE CT IN THE SUBSEQUENT YEARS. THE CIT(A) CONCLUDED THAT THE AO IS NOT CORR ECT IN DISALLOWING A SUM OF RS.46,89,104 WHEN THE SAME IS RETAINED AS WIP PR OJECT EXPENSES AS PART OF THE WIP. 5. AGGRIEVED, THE DEPARTMENT HAS COME UP IN APPEAL BEFORE THE TRIBUNAL AND RAISED GROUND NO.2 WHICH IS AS FOLLOWS : 2. THE CIT(A) ERRED IN DIRECTING THE AO TO REDUCE THE BROKERAGE PAID TOWARDS PRAGATHI PARADISE PROJECT FR OM TOTAL PROJECT COST OF PRAGATHI NAGAR PROJECT AND TO RECOM PUTED THE PROJECT REVENUE WITHOUT APPRECIATING THE FACT THAT THE DEBITING OF THE IMPUGNED EXPENDITURE WAS WRONG AND THE SAME VIE W WAS ACCEPTED BY THE AR DURING THE ASSESSMENT PROCEEDING S. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(APPEALS) BEFORE US. THE LD. COUNSEL ALSO PRODUCED THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT BEFORE US. WE ARE OF THE OPINION THAT THE ASSESSEE HAS CORRECTLY RETAINED AS WIP PRO JECT EXPENSES AS A BALANCE SHEET ITEM AND CHARGED THE SAME AGAINST THE RESPECTIVE REVENUE. THE ASSESSEE HAS CORRECTLY ACCOUNTED THE BROKERAGE AND COMMISSION ON LAND PROCUREMENT OF RS.46,89,104 FOR THE PRAGATHI P ARADISE PROJECT AS PROJECT EXPENSES. HENCE, WE CONFIRM THE ORDER OF C IT(APPEALS) IN ALLOWING A SUM OF RS.46,89,104. 7. GROUND NO.3 RAISED BY THE REVENUE READS AS FOLLO WS:- ITA NO.1135/BANG/2015 PAGE 5 OF 12 3. THE CIT(A) ERRED IN HOLDING THAT THE PROJECT EXPENSES OF PRAGATHI GARDEN PROJECT HAS NEVER BEEN CHARGED TO P &L A/C AND DIRECTING THE AO TO REDUCE THE SAID EXPENDITURE FRO M TOTAL PROJECT COST OF PRAGATHI NAGAR PROJECT AND TO RECOMPUTE THE PROJECT REVENUE WITHOUT APPRECIATING THE FACT THAT THE ASSE SSEE HAS DEBITED THE SAID EXPENDITURE TO P&L A/C BUT THE SAM E HAS NOT BEEN INCURRED TOWARDS PRAGATHI NAGAR PROJECT. 8. WITH RESPECT TO PROJECT EXPENSES OF PRAGATHI GAR DEN PROJECT AMOUNTING TO RS.58,77,997, THE SUBMISSIONS OF THE A SSESSEE WERE AS FOLLOWS:- THE ASSESSING OFFICER HAS OBSERVED A PARTICULAR EX PENSE OF RS. 58,77,997 RELATES TO PRAGATHI GARDEN PROJECT WHICH HAS BEEN PART OF THE DEVELOPMENT EXPENSES OF PRAGATHI NAGAR PROJE CT OF RS.8,15,78,154 AS DISCLOSED IN SCHEDULE NO. 16 OF T HE AUDITED FINANCIALS SUBMITTED. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL TO JUSTIFY THAT THE ABOVE AMOUNT IS NOT CO NNECTED TO PRAGATHI NAGAR PRO JECT . , BUT ASSUMED THAT THE SAME IS CONNECTED TO PRAGATHI GARDEN PROJECT. FURT H ER , THE ASSESSING OFFICER IS NOT CORRECT IN CONCLUDING THE ABOVE AMOUNT IS CHARGED A S EXPENSES FULLY IN THE PROFIT & LOSS ACCOUNT , INSTEAD OF TRE ATING THE SAME AS DIRECT COST OF THE REFERRED PROJECT TO BE INCLUDED AS PART THE CLOSING WIP OF THE PROJECT WHICH IS STILL UNDER IMP LEMENTATION. WITHOUT PREJUDICE TO THE ABOVE , THE COMPONENTS OF THE DIRECT COSTS IF NOT CONSIDERED IN ONE PROJECT , THE SAME WOULD MERIT THE CONSIDERATION OF BEING INCLUDED IN THE OTHER PROJEC T BUT NOT AUTOMATICALLY MERIT A DISALLOWANCE AND AN ADDITION TO INCOME RETURNED. 9. THE CIT(APPEALS) RIGHTLY HELD THAT THE EXPENSES PERTAINED TO PRAGATI NAGAR PROJECT ONLY AND PROPORTIONATE EXPENSES HAVE BEEN CHARGED TO PROFIT & LOSS ACCOUNT AS PER THE REVENUE RECOGNITION METHO D AND THE BALANCE HAS BEEN CARRIED AS CLOSING WIP AS A BALANCE SHEET ITEM . HENCE, WE CONFIRM ITA NO.1135/BANG/2015 PAGE 6 OF 12 THE ORDER OF CIT(APPEALS) IN ALLOWING A SUM OF RS.5 8,77,997 WHICH HAS NOT BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT. 10. THE DEPARTMENT HAS COME UP IN APPEAL IN GROUND NO.4 STATING AS FOLLOWS:- 4. THE CIT(A) ERRED IN DIRECTING THE AO TO EXCLUDE THE INTEREST EXPENSES PERTAINING TO THE OTHER PROJECTS OF RS.25,03,134/- BEING 6.05% OF RS.4,13,74,116/- WITH OUT APPRECIATING THE FACT THAT THE AR FAILED TO PRODUCE THE BREAKUP OF THE SAID EXPENSES SO THAT THE AO WAS FORCED TO ARRI VE AT INTEREST ON LOANS PERTAINING TO OTHER PROJECTS BASED ON THE AREA OF THE PROJECTS. 11. BEFORE THE CIT(APPEALS), THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE AO HAS DISALLOWED A SUM OF RS.1,90,61,055 (OUT OF RS.4,13,74,116) ON THE BASIS OF THE LAND AREA UNDER DEVELOPMENT IN THREE DIFFERENT PROJECTS IRRESPECTIVE OF STAGE OF IMPLEME NTATION/DEVELOPMENT OF EACH PROJECT. THE AOS VERSION OF VERSION OF ALLOC ATION OF INTEREST INCURRENCE OF RS. 4,13,74,116 BASED ON THE NUMBER O F ACRES PURCHASED WITH RESPECT TO THE THREE PROJECTS UNDERTAKEN BY TH E FIRM, IS AN ARBITRARY AND STATISTICAL COMPILATION AND TO ATTRIBUTE AN AMOUNT OF INTEREST OF RS. 1,90,61,655 (OUT OF RS.4,13,74,116) TO PRAGATHI PARADISE AND PRAGATHI GARDEN IS NOT CORRECT. THE ASSESSEE FILED A STATEME NT IN RESPECT OF THE TOTAL EXPENSES INCURRED TOWARDS THE PROJECT AND THE EXPEN SES DEBITED TO THE PROFIT & LOSS ACCOUNT DURING THE YEAR AND SUBMITTED THAT AS CAN BE SEEN FROM THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCO UNT DURING THE YEAR, ITA NO.1135/BANG/2015 PAGE 7 OF 12 ONLY A SUM OF RS. 31,41,468/- WAS DEBITED TO THE PR OFIT & LOSS ACCOUNT TOWARDS INTEREST EXPENDITURE AND THE ASSESSING OFFI CER IS NOT CORRECT IN DISALLOWING THE SUM OF RS. 1,90,61,055/- WHEN THE E XPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT UNDER THE HEAD 'INTEREST' IS ONLY A SUM OF RS. 31,41,468/-. COPIES OF THE SANCTION LETTERS FROM TH E BANK IN RESPECT OF FEDERAL BANK AND HUDCO WERE SUBMITTED WHEREIN THE S ANCTION REFERENCES INDICATE THAT THE LOANS WERE SANCTIONED FOR PRAGATH I NAGAR PROJECT ONLY. IT WAS SUBMITTED THAT THE AO HAS NOT BROUGHT OUT ANY E VIDENCE TO SHOW THAT THE MONEY HAS BEEN SANCTIONED/UTILISED FOR OTHER PR OJECTS OTHER THAN FOR PRAGATHI NAGAR PROJECT. IN ALL, THE AO HAS DISALLO WED VARIOUS ITEMS TO THE TUNE OF RS. 2 , 96,28,156 AS AGAINST RS. 1,64,07,311/- DEBITED TO T HE PROFIT & LOSS ACCOUNT. IT WAS SUBMITTED THAT THE AO IS NOT CORRECT IN PRESUMING THAT A PART OF THE CLOSING WIP TO THE EXTENT OF RS. 2,96 ,28,156, AND HAS BEEN SHOWN AS AN ASSET TO THAT EXTENT HAS BEEN DEBITED T O THE PROFIT & LOSS ACCOUNT. 12. THE CIT(APPEALS) AFTER PERUSING THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT BY THE AO HELD THAT THE AOS BASIS FOR DISALLOWANCE OF INTEREST I.E., THE AREA OF THE LAND SOUGHT TO BE DEVELOPED IN DIFFERENT PROJECTS AND TO APPLY THE SAME RATIO TO THE TOTAL I NTEREST INCURRED IN ARRIVING AT THE DISALLOWANCE OF RS.1,90,61,055 IS NOT CORREC T. THE CIT(A) OBSERVED THAT THAT THE FACT THAT THE ASSESSEE HAS NOT MAINTA INED SEPARATE BOOKS FOR UTILIZATION OF FUNDS FOR EACH PROJECT VIS--VIS THE EXPENSES INCURRED DURING THE PERIOD SUCH AS THE SOURCES OF INTEREST BEARING LOAN ACCOUNTS INCLUDING ITA NO.1135/BANG/2015 PAGE 8 OF 12 BANK FUNDS, NON-INTEREST BEARING FUNDS AND CAPITAL OF THE FIRM FOR THE IMPLEMENTATION OF THE PROJECTS UNDERTAKEN BY THE AS SESSEE. THE CIT(A) HELD THAT IN SUCH A SITUATION, IT IS PRUDENT AND LO GICAL TO BIFURCATE THE INTEREST COSTS INCURRED BASED ON THE TOTAL PROJECT EXPENSES INCURRED (EXCLUDING INTEREST COSTS) FOR ALLOCATION OF THE SAME TO THE R ESPECTIVE PROJECTS PROPORTIONATELY. HE FURTHER HELD THAT THE INTEREST BEARING LOANS SOURCED TO MEET THE DEVELOPMENT COSTS OF THE PROJECTS AS PER T HE SUBMISSIONS MADE BY THE ASSESSEE AND ALSO THE AO DID NOT DISPUTE THE INTEREST EXPENSES OF RS.4,13,74,116 UPTO 31.3.2009. THE CIT(A) FURTHER HELD AS FOLLOWS:- . THE PROPORTION OF INTEREST BIFURCATION BETWEE N THE PROJECTS HAS TO BE COMPUTED BASED ON THE TOTAL PROJECT EXPEN SES INCURRED AMONG THE PROJECTS UNDERTAKEN BY THE APPELLANT. FROM THE DETAILS PLACED ON RECORD EXTRACTED BELOW) IT IS NOTED THAT THE TOTAL PROJECT EXPENSES INCURRED UP TO 31.03.200 9 BEFORE CHARGING INTEREST EXPENDITURE IS PROPORTIONED AT 93 .95% AND 6.05% TO PRAGATHI NAGAR PROJECT AND OTHER PROJECTS RESPECTIVELY. SL. NO. PARTICULARS AMOUNT BELONGS TO PRAGATHI NAGAR PROJECT AMOUNT BELONGS TO OTHER PROJECTS TOTAL 1 TOTAL PROJECT EXPENSES INCURRED 16,41,48,234 (93.95%) 1,05,67,101 (6.05%) 17,47,15,335 (100%) 2 THE INTEREST EXPENSES ALLOCATION 3,88,70,982 25,03,134 4,13,74,116 THUS IT IS DIRECTED TO EXCLUDE THE INTEREST EXPENSE S PERTAINING TO THE OTHER PROJECTS COMPUTED AS ABOVE OF RS. 25,03,1 34/ - FROM THE TOTAL PROJECT COSTS OF 'PRAGATHI NAGAR PROJECT OF RS.25,03,134/- AND TO RECOMPUTE THE PROJECT REVENUE, MATCHING COST S FOR THE REVENUE RECOGNISED AND THE CLOSING WIP BASED ON THE PERCENTAGE COMPLETION METHOD AS FOLLOWED BY THE APP ELLANT AND ALSO AGREED BY THE ASSESSING OFFICER. ITA NO.1135/BANG/2015 PAGE 9 OF 12 13. AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE U S. 14. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT T HE CIT(APPEALS) HAS CORRECTLY DIRECTED TO EXCLUDE THE INTEREST EXPENSES PERTAINING TO OTHER PROJECTS COMPUTED AT RS.25,03,134 FROM THE TOTAL PR OJECT COSTS OF PRAGATHI NAGAR PROJECT OF RS.21,60,89,451. THE CIT(A) RIGHTL Y DIRECTED THE AO TO RECOMPUTE THE PROJECT REVENUE, MATCHING COSTS FOR T HE REVENUE RECOGNIZED AND CLOSING WIP BASED ON PERCENTAGE COMPLETION METH OD WHICH IS BEING FOLLOWED BY THE ASSESSEE. HENCE WE CONFIRM THE ORDE R OF THE CIT(APPEALS). 15. GROUND NO.5 OF THE DEPARTMENT IS AS UNDER:- 5. THE CIT(A) FAILED TO APPRECIATE THAT THE WORK ING OF THE TAXABLE PROFITS, PROJECT REVENUE, MATCHING COSTS AN D THE CLOSING WIP, EXCLUDING THE EXPENDITURE OF RS.1,30,70,235/- IS UNWARRANTED AS THE ORDER GIVING EFFECT TO THE ORDER OF CIT(A) RESULTS IN LESSER INCOME THAN THE RETURNED INCOME. 16. THE POWER OF THE CIT(A) IS COTERMINOUS WITH THA T OF THE AO. THEREFORE, THE CIT(A) NOT ONLY HAS THE POWER TO ENH ANCE THE ASSESSMENT OF INCOME WHICH IS NOT PART OF THE RETURNED INCOME, BUT ALSO TO ALLOW DEDUCTION OR DELETE THE INCOME WHICH WILL RESULT IN THE INCOME BEING COMPUTED AT LESS THAN THE RETURNED INCOME. THE OBJ ECT OF THE APPELLATE PROCEEDINGS IS TO DETERMINE THE CORRECT TAX LIABILI TY OF THE ASSESSEE. THE HONBLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. V. CIT, 284 ITR 323 (SC) HAS HELD THAT THE CLAIM MADE BY AN ASSESSEE OTHERW ISE THROUGH A ITA NO.1135/BANG/2015 PAGE 10 OF 12 RETURN/REVISED RETURN CANNOT BE ENTERTAINED BY THE AO, BUT SUCH FETTERS WILL NOT APPLY TO APPELLATE AUTHORITIES. THE CIT(A) OUG HT TO GRANT DEDUCTIONS, IF CLAIMED BY THE ASSESSEE FOR THE FIRST TIME IN APPEA L, IF IT IS OTHERWISE ALLOWABLE IN LAW, NOTWITHSTANDING THE FACT THAT AS A RESULT, THE INCOME OF THE ASSESSEE WOULD BE LESS THAN THE RETURNED INCOME. 17. GROUND NO.6 RAISED BY THE REVENUE READS AS UNDE R:- 6. THE ASSESSEE IS DECLARING INCOME ON PERCENTAGE COMPLETION METHOD AND THE CIT(A) OUGHT TO HAVE APPR ECIATED THAT THE EXPENSES RELATING TO OTHER PROJECTS WHICH HAVE NOT COMMENCED, CANNOT BE ALLOWED FROM THE INCOME SO COM PUTED BECAUSE THE CORRESPONDING INCOME OF THESE PROJECTS IS NOT OFFERED TO TAX. 18. THE ASSESSEE IS CARRYING ON THE BUSINESS OF DEV ELOPMENT OF RESIDENTIAL LAYOUTS AND REAL ESTATE OPERATIONS AND HAS TAKEN UP THE PROJECTS UNDER THE NAMES PRAGATHI GARDEN PROJECT, PRAGATH I PARADISE PROJECT AND PRAGATHI NAGAR PROJECT. THE ASSESSEE HAS BEEN FOL LOWING THE PERCENTAGE COMPLETION METHOD FOR RECOGNITION OF REVENUE. FINAN CIAL YEAR 2008-09 (AY 2009-10) IS THE FIRST YEAR OF RECOGNITION OF INCOME FROM THE BUSINESS OPERATIONS IN RESPECT OF PRAGATHI NAGAR PROJECT AND NO INCOME IS RECOGNIZED FROM OTHER PROJECTS. THE FIRST APPELLAT E AUTHORITY AFTER EXAMINATION OF RECORDS AND SUBMISSIONS HAS COME TO THE FACTUAL FINDING THAT THE ALLOCATION OF EXPENDITURE AMONG THE PROJEC TS WERE PROPER. THE PROFIT OFFERED FOR THE PRAGATHI NAGAR PROJECT UNDER THE PERCENTAGE COMPLETION METHOD IS IN ACCORDANCE WITH THE ACCEPTE D METHOD OF ACCOUNTING. EXPENSES INCURRED FOR THE PROJECT HAS BEEN ADDED TO THE WIP ITA NO.1135/BANG/2015 PAGE 11 OF 12 AND ONLY THAT PROPORTION OF EXPENSE AND INCOME BASE D ON THE PERCENTAGE OF COMPLETION OF PROJECT HAS BEEN INCORPORATED IN T HE PROFIT AND LOSS DETERMINATION. THE ASSESSEE HAS ALSO ESTABLISHED TH E METHOD OF ALLOCATING INTEREST AND OTHER PROJECT EXPENSES ON THE BASIS OF TOTAL PROJECT EXPENSES AND PROPORTION ALLOCABLE TO INDIVIDUAL PROJECTS. TH E AO HAD DISALLOWED EXPENSES MORE THAN THE AMOUNTS IN THE CASE OF INTER EST AND OTHER PROJECT EXPENSES DEBITED TO THE P&L, WHICH IS NOT CORRECT. IN THE CIRCUMSTANCES WE FIND THAT THE ORDER OF THE FIRST APPELLATE AUTHORIT Y DEALING WITH THESE DISALLOWANCE/ADDITION IS BASED ON FACTS AND DOCUMEN TS AND IS IN ACCORDANCE WITH ACCEPTED ACCOUNTING PRINCIPLES REGA RDING REVENUE RECOGNITION IN RESPECT OF HOUSING CONSTRUCTION AND DEVELOPMENT BUSINESS. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE. 19. GROUND NOS. 1, 7 & 8 ARE GENERAL IN NATURE REQ UIRING NO SPECIFIC ADJUDICATION. 20. IN THE RESULT, THE APPEAL BY THE DEPARTMENT IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF JUNE, 2016. SD/- SD/- ( INTURI RAMA RAO ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 24 TH JUNE, 2016. /D S/ ITA NO.1135/BANG/2015 PAGE 12 OF 12 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.