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

The assessee has raised the following grounds of appeal:

The Appellant firm which consistently follows project 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 given. Therefore, the order passed by the Ld. CIT (A) is unjustified.

We have heard Ld. Authorized Representative (AR) of the assessee and Ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The Ld.AR of the assessee 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 project consists of nine blocks/building consisting of residential-cum-commercial buildings. The assessee since beginning has been following the ‘Project Completion’ method of accounting and treated all building as its one project. Therefore, the income generated and the expenditure made to entire project cannot be bifurcated on the basis of total area of constructed premises, possession of which was given. The project of the assessee was completed 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 rejecting the project completion method adopted by assessee. In support of his submission, the ld. AR of the assessee relied upon the decision of Tribunal in 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. It was argued that the assessee has undertaken the construction of nine building consisting of five residential and four commercial building. The assessee has received entire consideration in respect of four residential building and two commercial building. The assessee has not offered income on the ground of project completion method. No measure construction was pending. The AO has made a reasonable estimation of income. In the rejoinder and in alternative argument, the ld. AR of the assessee argued that the AO be directed to set off the income which may be offered by assessee in subsequent year for remaining units.

We have considered the rival submissions of the parties 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 considered as have been sold by the assessee. As after giving the possession the title has been passed on the purchaser (transferee). The profit arising therefrom 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 of those flats/ units. For remaining flats/ units possession of which is not handed 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 income 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 consideration, to grant the set- off of the income of units/ flats in the subsequent year in which the same is offered by the assessee. With this direction the appeal of the assessee is partly allowed.