SHREE SAI DEVELOPERS, MUMBAI V. DCIT 23(1), MUMBAI

ITA 1247/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8516 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 04-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.1247/MUM/2012 (ASSESSMENT YEAR- 2008-09) M/S. SHREE SAI DEVELOPERS 109, BHARAT INDUSTRIAL ESTATE, LBS MARG, BHANDUP (WEST), MUMBAI 400 078. PAN: AAOFS9233R VS. DCIT-23(1) MUMBAI . (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. GOPAL (AR) REVENUE BY : SHRI V.JUSTIN (DR) DATE OF HEARING : 02.11.2017 DATE OF PRONOUNCEMENT : 10.11.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY THE ASSESSEE UNDER SECTION 253 OF T HE INCOME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSI ONER OF INCOME TAX (APPEALS)-36, MUMBAI DATED 15.12.2011 FOR ASSESSMEN T YEAR (AY) 2008- 09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [H EREINAFTER REFERRED TO AS 'LD. CIT(A)] ERRED IN PASSING THE ORDER DATED 15.12 .2011 DIRECTING THE LD AO TO COMPUTE THE APPELLANTS INCOME ON THE BASIS OF GR OSS INCOME RECEIVED UPTO YEAR END AND ALLOWING PROPORTIONATE EXPENSES AGAINS T SUCH INCOME. 2. THE APPELLANT FIRM WHICH CONSISTENTLY FOLLOWS PR OJECT COMPLETION METHOD OF ACCOUNTING HAS TREATED ALL THE BUILDINGS OF ITS PROJECT ALONGWITH VARIOUS AMENITIES PROVIDED TO THE RESIDENTS. THEREFORE, THE INCOME GENERATED .AND EXPENSES INCURRED FOR THE ENTIRE PROJECT CANNOT BE BIFURCATED ON THE BASIS TOTAL AREA OF FLATS/ OFFICES FOR WHICH POSSESSION WAS GIV EN. THEREFORE, THE ORDER PASSED BY THE LD. CIT (A) IS UNJUSTIFIED. 2 ITA NO.1247/M/2012 M/S. SHREE SAI DEVELOPERS 3. IN THE ORDER DATED 15.12.2011, THE LD CIT HAS CO NCLUDED THAT IN THE INSTANT CASE OF THE APPELLANT, ALL NINE BUILDINGS IN THE PR OJECT ARE TO BE TREATED AS A SINGLE PROJECT. IT WAS ALSO STATED IN THE ORDER BY THE LD CIT THAT PROJECT COMPLETION METHOD FOLLOWED BY THE APPELLANT FOR REC OGNIZING REVENUE IN THE BOOKS OF ACCOUNTS CANNOT BE REGARDED AS UNREASONABL E. INSPITE OF ACCEPTING THE APPELLANT'S METHOD OF REVENUE RECOGNITION, THE LD. CIT(A) HAS DIRECTED TO COMPUTE HIS INCOME ON THE BASIS OF PROPORTIONATE CO MPLETION OF POSSESSION GIVEN. THEREFORE, THE ORDER OF THE LD CIT(A) IS INC ORRECT . 4. MERELY BECAUSE THE APPELLANT HAS COMPLETED MORE THAN HALF OF ITS PROJECT (61 % AS ON 31.3.2008) DOES NOT MEAN THAT THE PROJECT I S COMPLETED IN MOST ASPECTS AND THE INCOME SHOULD BE RECOGNIZED ON THE BASIS OF ADVANCES/PAYMENTS RECEIVED. 5. CALCULATION OF INCOME ON THE BASIS OF FLAT SOLD UPTO 31.3.2008 DEFEATS THE PURPOSE OF PROJECT COMPLETION METHOD WHEREIN THE AS SESSEE DECLARES THE INCOME OF HIS ENTIRE PROJECT AFTER SUBSTANTIAL COMP LETION. THE APPELLANT IN THE INSTANT CASE HAD MADE VERY LITTLE PROGRESS OVER THE PAST TWO YEARS I.E FROM 55% IN A.Y 2006-07 TO 61 % IN A.Y 2008-09 AND THERE WAS SIGNIFICANT AMOUNT OF WORK THAT WAS PENDING TO BE PERFORMED. THEREFORE, T HE LD CIT'S DECISION TO WORK OUT TAXABLE INCOME ON THE BASIS OF AMOUNTS REC EIVED TOWARDS POSSESSION GIVEN AND ALLOWING PROPORTIONATE EXPENSES AGAINST T HE SAME IS INCORRECT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPER/ BUILDER FILE D ITS RETURN OF INCOME FOR RELEVANT AY ON 31.07.2008. THE ASSESSMENT WAS C OMPLETED ON 27.12.2010 UNDER SECTION 143(3) OF THE ACT. THE ASS ESSING OFFICER (AO) WHILE PASSING THE ASSESSMENT ORDER ESTIMATED THE IN COME AT 12% OF WORK- IN-PROGRESS AND MADE THE ADDITION OF RS. 17,06,54,1 16/-. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF AO WAS CONFIRMED. THU S, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE 3 ITA NO.1247/M/2012 M/S. SHREE SAI DEVELOPERS MATERIAL AVAILABLE ON RECORD. THE LD.AR OF THE ASS ESSEE ARGUED THAT DURING THE RELEVANT PERIOD, THE ASSESSEE UNDERTAKEN CONSTRUCTION WORK IN THE PREMISES OF M/S GOLDEN DYES CORPORATION (INDIA) PRIVATE LIMITED AT THANE. THE PROJECT WAS STARTED IN AY 2003-04. THE P ROJECT CONSISTS OF NINE BLOCKS/BUILDING CONSISTING OF RESIDENTIAL-CUM-COMME RCIAL BUILDINGS. THE ASSESSEE SINCE BEGINNING HAS BEEN FOLLOWING THE PR OJECT COMPLETION METHOD OF ACCOUNTING AND TREATED ALL BUILDING AS IT S ONE PROJECT. THEREFORE, THE INCOME GENERATED AND THE EXPENDITURE MADE TO EN TIRE PROJECT CANNOT BE BIFURCATED ON THE BASIS OF TOTAL AREA OF CONSTRUCTE D PREMISES, POSSESSION OF WHICH WAS GIVEN. THE PROJECT OF THE ASSESSEE WAS CO MPLETED ONLY 60% UP TO 31.03.2008, ON THE BASIS OF WHICH INCOME CANNOT BE RECOGNIZED. IT WAS FURTHER ARGUED THAT THE AO ESTIMATED THE INCOME ON ADHOC BASIS WHICH IS NOT JUSTIFIED. THE AO WAS NOT JUSTIFIED IN REJECTIN G THE PROJECT COMPLETION METHOD ADOPTED BY ASSESSEE. IN SUPPORT OF HIS SUBMI SSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF TRIBUNAL I N AWADHESH BUILDERS VS. ITO (2010) 37 SOT 122(MUM). ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. I T WAS ARGUED THAT THE ASSESSEE HAS UNDERTAKEN THE CONSTRUCTION OF NINE BU ILDING CONSISTING OF FIVE RESIDENTIAL AND FOUR COMMERCIAL BUILDING. THE ASSES SEE HAS RECEIVED ENTIRE CONSIDERATION IN RESPECT OF FOUR RESIDENTIAL BUILDI NG AND TWO COMMERCIAL BUILDING. THE ASSESSEE HAS NOT OFFERED INCOME ON TH E GROUND OF PROJECT 4 ITA NO.1247/M/2012 M/S. SHREE SAI DEVELOPERS COMPLETION METHOD. NO MEASURE CONSTRUCTION WAS PEND ING. THE AO HAS MADE A REASONABLE ESTIMATION OF INCOME. IN THE REJO INDER AND IN ALTERNATIVE ARGUMENT, THE LD. AR OF THE ASSESSEE ARGUED THAT TH E AO BE DIRECTED TO SET OFF THE INCOME WHICH MAY BE OFFERED BY ASSESSEE IN SUBSEQUENT YEAR FOR REMAINING UNITS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO MUCH DISPUTE ON SO FAR AS COMPLETION OF VARIOUS BLOCKS/ BUILDING. IN OUR VIEW THE UNIT/ FLATS, WHICH THE POSSESSION HAS BEEN GIVEN, IS TO BE CONSI DERED AS HAVE BEEN SOLD BY THE ASSESSEE. AS AFTER GIVING THE POSSESSION THE TITLE HAS BEEN PASSED ON THE PURCHASER (TRANSFEREE). THE PROFIT ARISING THER EFROM IS ELIGIBLE TO BE TAXED IN THE YEAR IN WHICH THE POSSESSION WAS GIVEN . ACCORDINGLY, WE CONFIRM THE ORDER PASSED BY LD CIT (A) IN RESPECT O F THOSE FLATS/ UNITS. FOR REMAINING FLATS/ UNITS POSSESSION OF WHICH IS NOT H ANDED OVER, THE AO WAS NOT CORRECT IN ESTIMATING THE INCOME. THE LD AR FOR THE ASSESSEE SUBMITTED THAT THE INCOME ASSESSED DURING THIS YEAR SHOULD BE GIVEN SET-OFF IN THE SUBSEQUENT YEAR IN WHICH THE ASSESSEE HAD OFFERED I NCOME FROM THOSE FLATS/ UNITS. WE FIND MERIT IN THE SUBMISSION OF LD. AR FOR THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO EXCLUDED THE INCOME , WHICH HAS BEEN ASSESSED BY HIM DURING THE YEAR UNDER CONSIDERATIO N, TO GRANT THE SET- OFF OF THE INCOME OF UNITS/ FLATS IN THE SUBSEQUENT YE AR IN WHICH THE SAME IS 5 ITA NO.1247/M/2012 M/S. SHREE SAI DEVELOPERS OFFERED BY THE ASSESSEE. WITH THIS DIRECTION THE AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED. IN THE RESULT, APPEAL FILED BY ASSESS EE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF NOVEMBER, 2017 . SD/- SD/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 10/11/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/