THE COMMISIONER OF INCOME-TAX vs. M/S S N BUILDERS & DEVELOPERS

4 derivation of profit based on percentage completion method by the assessee is correct and the assessee is entitled to proportionate deduction under Section 80IB(10) of the Act in respect of those flats which conform to the limits prescribed under the relevant provisions of the Act. 3. The Commissioner of Income Tax (Appeals) accordingly allowed the appeal preferred by the assessee. Being aggrieved, the assessee as well as the revenue filed appeals before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). The revenue filed an appeal on the issue pertaining to proportionate deduction under Section 80IB(10) of the Act whereas the assessee filed an appeal before the Tribunal on the issue of project completion method instead of percentage completion method to be adopted. The Tribunal, by an order dated 11.04.2014, dismissed the appeal filed by the revenue by placing reliance on the decision of this Court in 'CIT Vs. SJR BUILDERS' in ITA No.32/2010 dated 19.03.2012 and confirmed the order passed by the Commissioner and held that the assessee is eligible for deduction under Section

5 80IB(10) of the Act proportionately. In the aforesaid factual background, the revenue has filed this appeal. 4. Learned counsel for the revenue submitted that the Tribunal grossly erred in holding that the assessee is entitled to the benefit of proportionate deduction under Section 80IB(10) of the Act in respect of the facts which is confirmed to the limits under the relevant provision of the Act. It is further submitted that the assessee is not eligible for proportionate deduction under Section 80IB(10) of the Act since the provisions of Section 80IB(10) of the Act do not envisage such deduction and one of the conditions which is required to be fulfilled for claiming deduction is that the total built up area of the residential units in the housing project shall not exceed 1500 square feet, which has not been satisfied by the assessee. It is also urged that the Tribunal erred in holding that the project completion method is a recognized method of accounting without examining as to whether the assessee is entitled to project completion method in the absence of regular books of accounts required to be maintained by the assessee. It is also pointed out that

6 the Tribunal has relied on the decision in its order in 'M/S. PRESTIGE ESTATE PROJECTS PVT. LTD. Vs. DCIT' in respect of Assessment Year 2005-06. However, the aforesaid order of the Tribunal was the subject matter of the appeal before this Court in ITA No.84/2010 which was decided by a Division Bench of this Court vide judgment dated 05.05.2020 in which it was held that for the Assessment Year 2005-06, the percentage completion method is applicable and therefore, the assessee has to follow the percentage completion method for the Assessment Year 2009-10 as well. 5. On the other hand, learned Senior counsel for the assessee submitted that the first substantial question of law involved in this appeal is no longer res integra and has already been answered by this Court in decisions of this Court namely 'CIT Vs. BRIGADE ENTERPRISES LTD.' (2020) 120 TAXMANN.COM 346 (KAR) and 'CIT Vs. SJR BUILDERS', supra and the decision of Madras High Court in 'CIT Vs. ARUN EXCELLO FOUNDATIONS (P) LTD.' (2013) 259 CTR 362. Learned Senior counsel has further

7 submitted that during the course of the proceedings, the assessee submitted that it was following project completion method and the Tribunal by placing reliance on the decision of PRESTIGE ESTATE PROJECTS, supra, for the Assessment Year 2005-06, has held that the Accounting Standard 7 was not applicable to real estate developers. Therefore, percentage completion method cannot be thrust upon the assessee and the assessee was right in following the project completion method of accounting as per Accounting Standard 9. It is further submitted that the aforesaid decision has been upheld by the Division Bench of this Court in 'CIT Vs. PRESTIGE ESTATE PROJECTS (P) LTD.' (2020) 116 TAXMANN.COM 554 (KAR) as well as the decision of this Court in 'CIT Vs. BANJARA DEVELOPERS & CONSTRUCTIONS P. LTD.' (2020) 117 TAXMANN.COM 747 (KAR). Learned Senior counsel has also invited our attention with regard to the clarification issued by the Institute of Chartered Accountants with regard to applicability of revised Accounting Standard 7 to enterprises undertaking construction activities on their own account as a venture of commercial nature and has invited

8 our attention to paragraph 6 as well as paragraph 11 of the aforesaid clarification in support of his submission. 6. We have considered the submissions made on both sides and have perused the record. On close scrutiny of the judgment rendered by this Court in BRIGADE ENTERPRISES LTD., supra, it is evident that the first substantial question of law involved in this appeal is no longer res integra. Therefore, the first substantial question of law is answered against the revenue and in favour of the assessee. 7. Now we may deal with the second substantial question of law. The Tribunal relied upon the decision in the case of 'PRESTIGE ESTATES PROJECTS LTD. Vs. DCIT', rendered by it and held that for the Assessment Year 2005- 06 the Accounting Standard 7 was not applicable to the real estate developers. Therefore, percentage completion method cannot be thrust upon the assessee and the assessee was right following the project completion method of accounting as per Accounting Standard 9. The aforesaid decision has

9 been upheld by this Court in 'CIT Vs. PRESTIGE ESTATES', supra. Besides it, once the first substantial question of law is answered in favour of the assessee, the second substantial question of law is otherwise even rendered academic. The Institute of Chartered Accountants has issued a clarification wherein it has been clarified that revised Accounting Standard 7 is not applicable to the enterprises undertaking construction activities. Therefore, the second substantial question of law is also answered against the revenue and in favour of the assessee. In the result, the appeal fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE RV