2009 (2) TMI 840 - AT - Income Tax

Summary

Issues Involved:
1. Estimation of profit from Ruia Park, Mittal Park, Megh Apartments, and Ocean View projects.
2. Whether the projects Mittal Park and Megh Apartments were complete.
3. Whether the loss from Ocean View project should be considered separately or merged with other projects.

Summary:

1. Estimation of Profit:
The assessee objected to the CIT(A)'s decision to estimate profit from Ruia Park at 20% and Ocean View at 5% of recoveries, against the assessee's estimation of 5% for both projects. The department objected to the CIT(A) directing the AO to estimate profit at 20% for Ruia Park instead of the AO's estimation.

2. Completion of Mittal Park and Megh Apartments:
The AO argued that Mittal Park and Megh Apartments were complete and should be assessed separately on an actual profit basis. The AO relied on the BMC occupation certificate and the possession of flats to conclude completion. The assessee contended that further expenses were required for construction of a club house, underground car parking, and ground floor work, supported by an architect's certificate.

3. Loss from Ocean View Project:
The AO contended that the loss from Ocean View should not affect the assessment of income from other projects and should be assessed separately. The CIT(A) held that Ocean View was a distinct project and should be estimated at 5% profit, while Mittal Park and Megh Apartments should be estimated at 20%.

Tribunal's Decision:
The Tribunal agreed with the CIT(A) that the AO wrongly relied on the decision in Champion Construction Co., as the facts were different. The Tribunal held that the projects Mittal Park and Megh Apartments were not complete during the year under consideration, as significant construction work was pending.

Regarding the estimation of profit, the Tribunal found that if Mittal Park and Megh Apartments were assessed separately, the loss from Ocean View should be allowed. The Tribunal noted that the assessee had consistently followed a method of estimating profit at a percentage of recoveries and had reduced the rate to 5% due to a market crash. The Tribunal directed that the uniform rate of 5% for all three projects, as offered by the assessee, should be accepted.

Conclusion:
The appeal filed by the assessee was allowed, and the department's appeal was dismissed. The Tribunal directed that the income of the assessee be computed based on a uniform rate of 5% for all three projects.