The Tax Publishers2020 TaxPub(DT) 2141 (Karn-HC) : (2022) 440 ITR 0343 : (2020) 274 TAXMAN 0006

INCOME TAX ACT, 1961

Section 145A

Where assessee was engaged in undertaking construction activities for those persons to whom it intended to sell super built area along with undivided share of land in a project that it was developing as a developer, the AO was not justified in rejecting the 'Complete Contract Method' as adopted by the assessee for its real estate projects.

Accounting method - Complete Contract Method or Percentage Completion Method - Assessee engaged in business of real estate -

Assessee-company was carrying on business of real estate. It adopted 'Completed Contract Method' for its real estate projects. However, AO did not accept the same on the ground that provisions of AS-7 issued by ICAI, was to be followed and thereby 'Percentage Completion Method' was held to be the recognized procedure to be adopted. Further, Tribunal concluded that the AO ought to have followed 'Complete Contract Method' as claimed by the assessee. Aggrieved, Revenue was in appeal. Held: It was not disputed that assessee was in the activity of projects and was not a construction contractor. Further, the revised AS-7 would be applicable to an enterprise undertaking construction activities on their own account as a venture of commercial nature, whereas, the assessee was engaged in undertaking construction activities for those persons to whom it intends to sell super built area along with undivided share of land in a project that it was developing as a developer. Further, Revenue accepted the method of accounting adopted by the assessee for previous years. Accordingly, the Tribunal was justified in holding that the AO ought to have followed 'Complete Contract Method' as claimed by the assessee.

REFERRED : CIT v. M/s. Bilahari Investment (P) Ltd. (2008) 299 ITR 1 (SC) : 2008 TaxPub(DT) 1709 (SC).

FAVOUR : In assessee's favour.

A.Y. : 2005-06


INCOME TAX ACT, 1961

Section 14

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