M/s. Sai Hari Krupa Developers, Pune V. Deputy Commissioner of Income-tax, Circle - 7, Pune

ITA 673/PUN/2018

AI Insights

The case involves M/s. Sai Hari Krupa Developers, a company engaged in construction and real estate development, which appealed against the order of the CIT(A)-8, Pune. The dispute centered on the addition of Rs.6,69,36,944 to the assessee's income for the assessment year 2014-15, which was added by the Assessing Officer (AO) due to a discrepancy between the declared income and the total sale consideration as per the executed agreements. The Tribunal examined whether the revenue from these transactions was correctly recognized in the year of the agreements or should be deferred to the subsequent year when the conditions for recognition were met. The Tribunal's decision was influenced by the precedent set in CIT Vs. Excel Industries Limited, which clarified that the year of taxability is not material if the tax rate is the same and the income has been taxed in a subsequent year.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137228 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 11-04-2018
• Other Referred Cases: CIT Vs. Excel Industries Limited (2013) 358 ITR 295 (SC)
• Laws Referred To: Guidance note on real estate transactions issued by Institute of Chartered Accountants of India, CIT Vs. Excel Industries Limited (2013) 358 ITR 295 (SC)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. /ITA No.673/PUN/2018 िनधा रण वष / Assessment Year: 2014-15 M/s. Sai Hari Krupa Developers, 5, San Mahu Complex, Bund Garden Road, Opp. Poona Club, Pune 411 001 PAN : ABUFS7145K Vs. DCIT, Circle-7, Pune Appellant Respondent आदेश / ORDER PER R.S.SYAL, VP : This appeal by the assessee is directed against the order dated 16-01-2018 passed by the CIT(A)-8, Pune in relation to the assessment year 2014-15. 2. The only issue raised herein is against the confirmation of addition of Rs.6,69,36,944/-. 3. Briefly stated, the facts of the case are that the assessee is engaged in the business of construction and real estate development. A return was filed declaring total income at Assessee by: Shri Krishna V. Gujarathi Revenue by: Shri Keyur Patel Date of hearing 22-02-2023 Date of pronouncement 27-02-2023 ITA No.673/PUN/2018 M/s. Sai Hari Krupa Developers 2 Rs.9.20 crore with reference to sales agreements executed worth Rs.34,00,17,935/-. The Assessing Officer (AO) observed that the total sale consideration was Rs.41,90,36,885/- in terms of the agreements executed up to 31-03-2014. The differential amount of Rs.6.69 crore was added to the assessee’s total income. No relief was allowed in the first appeal, against which the assessee has approached the Tribunal. 4. Having heard both the sides and gone through the relevant material on record, it is seen that the assessee is a builder following ‘percentage completion method’. The assessee followed the Guidance note on real estate transactions issued by Institute of Chartered Accountants of India for offering the revenue of Rs.34.00 crore. The disputed amount of Rs.6.69 crore added by the AO, did not pass one of the relevant tests for recognition as revenue in the year under consideration. The ld. AR submitted that revenue of Rs.6.69 crore was offered for taxation in the immediately succeeding year, when the requisite condition was fulfilled. The bench directed the ld. AR to share necessary details with the ld. DR for demonstrating that revenue of Rs.6.69 crore was offered for taxation in the succeeding year. ITA No.673/PUN/2018 M/s. Sai Hari Krupa Developers 3 During the course of appellate proceedings before the Tribunal today, the ld. DR fairly admitted that the revenue of Rs.6.69 crore was duly offered for taxation by the assessee in the succeeding year. The difference in recognising revenue of Rs.6.69 crore in the year under consideration arose because of the same did not accrue to the assessee in terms of the Guidance note issued by ICAI, which was offered for taxation in the immediately succeeding year. The Hon’ble Supreme Court in CIT Vs. Excel Industries Limited (2013) 358 ITR 295 (SC) has held that year of taxability is not material if tax rate is same and once income has been taxed in subsequent year, the same cannot be charged to tax for the relevant year if the rate of tax is same or there is some minor tax effect. Here is a case in which the rate of tax and all other attending facts do not make any difference irrespective of the fact that the income is taxed in the year under consideration or in the succeeding year. It goes without saying that an assessee has a choice of following either ‘project completion method’ or the ‘percentage completion method’ for income computation. Had the assessee followed the ‘project completion method’ instead of the ‘percentage completion ITA No.673/PUN/2018 M/s. Sai Hari Krupa Developers 4 method’, the entire revenue, including the income offered during the year, would have fallen for taxation in the succeeding year only. In view of the foregoing discussion, we are satisfied that the addition of Rs.6.69 crore does not deserve to be sustained. The same is, ergo, directed to be deleted. 5. In the result, the appeal is allowed. Order pronounced in the Open Court on 27 th February, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 27 th February, 2023 Satish आदेश की ितिलिप अ ेिषत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. थ / The Respondent; 3. 4. The Pr.CIT-4, Pune िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, पुणे “A” / DR ‘A’, ITAT, Pune 5. गाड फाईल / Guard file आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA No.673/PUN/2018 M/s. Sai Hari Krupa Developers 5 Date 1. Draft dictated on 22-02-2023 Sr.PS 2. Draft placed before author 22-02-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *