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TMI Blog1988 (9) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... ,871 and the same is shown as work-in-progress without adding the probable profit element. When this was pointed out to the assessee, it is argued that since none of the flats were completed and full amounts were not realised from the flat owners no profit could be estimated at this stage. It is claimed that they were following the practice of arriving at the profit as and when the flats were completed and possession handed over to the owners. I have considered the assessee's contention carefully and I am afraid that its stand is not acceptable. It is incorrect to say that profits arise only when the flats are completed. Assuming that the assessed wished to sell away the entire thing on the last day of the previous year it would be unimaginable that they would not have added their profit margin. It is also a well-settled principle that in construction work profit arises day today and not at the end only. The assessee's other contention that the same system of accounting followed by the assessee is followed by other similar contractors is also incorrect. Instances can be cited where profits have been estimated even though the flats were not completed during the year. I am therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's method of ascertaining the profits after the completion of the contracts, when the flats were handed over to the respective buyers was the correct method. It was further argued that the departmental authorities ought to have accepted the appellant's contentions and completed the assessment by accepting the loss declared by the appellant in its return of income. This argument of the learned Chartered Accountant for the appellant was met by the learned Departmental Representative by relying on the decisions of the Delhi High Court in the case of Tirathram Ahuja (P) Ltd. vs. CIT relied on by the AAC and the decisions of the Tribunal reported in Champion Construction Co. vs. First ITO (1983) 5 ITO 495 (Bom) and in ITO vs. Tirumala Constructors Ltd. (1987) 20 ITD 494 (Hyd) Shri Tilak Chand pointed out that the method of estimating the profit for each year was approved by the Hyderabad Bench of the Tribunal in 20 ITD 494 relied on by him, where the Department sought to assess the entire income after the sales were effected. He pointed out that the same view was also taken by the Tribunal, Bombay Bench 'A' in the case reported in (1983) 5 ITD 495. He further argued that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction of the works during the year amounted to Rs. 5,00,870. which were shown as work-in-progress on the assets side of the balance-sheet. The profit and loss account of the appellant shows that this amount which is shown as work in progress represents the contract expenses incurred by the appellant-firm on the construction of the multi-storeyed flats during the year on behalf of the 22 parties from whom the appellant firm had received Rs. 10,13,750 during the year. There can hardly be any dispute that this amount of Rs. 10,13,150 represented a part of the sale proceeds for the fiats which the appellant had agreed to construct and hand over to the 22 buyers and, therefore normally they should be taken as the basis for estimating the profit of the, appellate-firm as in the case of any other building contractor. However, the depart-mental authorities have been fair and reasonable in estimating the profit with reference to the actual work done by the appellant during the year under appeal as represented by the work-in-progress shown by the assessee itself in its balance-sheet. The contentions put forward on behalf the appellant to distinguish its case from the case of an ordinary b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. (1958) 33 ITR l82 (SC) and in CIT vs. A. Krishnaswami Mudaliar (1964) 53 ITR 122 (SC) and of the Bombay and High Courts in CTR vs. Tata Iron & Steel Co. Ltd. (1977) 106 ITR 363 (Bom) and in CIT vs. K. Sankarapandia Asari & Sons (1980) 19 CTR (Mad) 264 : (1981) 130 541 (Mad). 7. In this collection, we would like to refer to two more decisions of the Madras High Court, which are reported in K. SP. KT. Kalayappa Chettiar vs. CIT (1964) 51 ITR 51 (Mad). In this case it was decided by the Madras High Court that where immovable property acquired in the course of the money lending business and treated as stock-in-trade of the business is sold in portions, the profits can be ascertained as and when each portion is sold and that it is not necessary to wait for the computation of profits until the whole properly is sold. Their Lordships followed their earlier decision in the case of V.R. K.R. S. firm Kuala Kangsar vs. CIT in C.M.P. No. 8125 of 1953, the judgment in which is reported at (1964) 51 ITR 56 (Mad) (Appendix). The said judgment is quoted below: "APPENDIX JUDGMENT C.M.P. No. 8125 of 1953 The immovable properties acquired by the assessee in the course of the money-lending b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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