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TMI Blog2011 (5) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,88,30,226 which included the year's WIP of Rs.2,73,69,050. The assessee had also received advances of Rs.4,48,33,003 in respect of the project during the previous year. While completing the assessment, the Assessing Officer noticed that neither in this year nor in the assessment years 2005-06 and 2007-08 had the assessee declared any profit from the said project for purposes of the income-tax assessment. He observed that in the previous year ended 3 1-3-2007, relevant to the assessment year 2007-08 the total cost of the project was shown at Rs.5,87,85,212 out of which the assessee had incurred Rs.4,88,30,226 during the year ended 3 1-3-2006 which is the year under appeal and thus about 83% of the total cost of the Matunga project had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to these persons irrespective of the grant of possession and in cases where the full consideration was received there is no justification for postponing the declaration of profits. According to the Assessing Officer, by delaying the handing over of possession the assessee can postpone assessment of the profits which cannot be permitted. He held that the more appropriate criterion would be to see if the buyer has made full payment of the price of the flat and if he has paid it, the assessee is bound to declare the profit on the sale of the flat notwithstanding that possession was not handed over to the buyer. He also noted that it is usual for the buyer to make full payment only when possession is taken; implying that at least in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. c) The project was approved by the Bombay Municipal Corporation by letter dated 20.7.2004, the estimated cost as per architect's certificate dated 1-4-2006 was about Rs.5 crores, the certificate was submitted by the assessee to the BMC authorities on 24-4-2006 for formal approval and all this meant that the project was completed even before the above date. This proves that a substantial part of the construction was completed before 31-3-2006. d) The Assessing Officer's working of the profits is not an estimate, but it is based on the actual sale price received from 13 parties who have paid the full consideration. They would not have paid the full price if the flats were not complete in all respects. e) Even the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In accordance with the method adopted by the assessee, he has shown the profit from the Matunga project in the return filed for the assessment year 2007-08. A perusal of the return (pages 68-93 of the paper book) shows that after claiming depreciation and remuneration paid to partners the profit from the project has been shown at Rs. 14,69,036; before these deductions, the profit is Rs.23,90,873/-. These facts have also been pointed out to the Assessing Officer during the assessment proceedings for the year under appeal, vide letter dated 14-7-2008, a copy of which is placed at pages 31-32 of the paper book. 9. The project ("Maitri Heights") was completed on 24-4- 2006, during the previous year relevant to the assessment year 2007-08. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was completed in 2005 and 1 in which it was completed in 2004. There are totally 40 flats. Registration has not been taken as conclusive as to the assessability of the income because it is the project as a whole that has to be taken into consideration. Even the Assessing Officer did not go by the year of registration of the flats, and rightly so, because by not registering the flats one can delay the taxation of the profits which cannot be permitted. Only two methods are recognized: the project completion method and the percentage on the completion method. Registration of the flats has never been considered to be an effective criterion for assessment of the profits from the housing projects. 12. Another point made by the learned Sr.DR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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