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TMI Blog2015 (11) TMI 1271X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to book profit at percentage completion of the project when 30% of the project was completed and the assessee had received advance of Rs. 1.85 Crores. 3. On the facts and in the circumstance of the case and in law, the Id. CIT(A) erred in deleting the addition of Rs. 63,52,000/- made by the A. O. without appreciating the fact that the assessee has shown closing WIP as business asset and not as an investment. 4. On the facts and in the circumstance of the case and in law, the Id. CIT(A) erred in deleting the addition of Rs. 63,52,000/- made by the A. O. ignoring the fact that the assessee did not provide details of the development agreement during assessment proceedings. 5. The appellant prays that the order of the ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 2. The facts in brief of the case are that assessee firm is engaged in the business of builders and developers. The assessee firm had undertaken a project of development of commercial building project i.e. Information Technology Park at Chandivli, Powai, for which assessee firm has entered into a development agreement with M/s Pankaj Enterprises on 02.04.2008, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion method basis for recognizing of the revenue , the assessee firm has to show profits on percentage completion basis and offer the same for taxation. The assessee firm is showing closing WIP of Rs. 14.11 crores and advance has been received of Rs. 1.85 crore while no profit is offered for taxation by the assessee firm , hence the assessing officer brought to tax estimated profit @15% on 30% of the total cost of work-in-progress which amounted to Rs. 63.52 lacs as business profit of the assessee firm by adding to the income of the assessee firm. 3. Aggrieved by the order of the assessing officer, the assessee firm carried the matter in appeal before the CIT(A) and reiterated its submissions made before the assessing officer . The assessee firm submitted that it has carried out construction activities of its commercial project at Chandivili. The assessee firm submitted that construction of the project is completed 30% by 31st March 2009.The assessee firm submitted that it has received deposit of Rs. 1.85 crore form Ritesh Exports (which is a sister concern of the assessee firm) on ad-hoc basis while there is no such booking of specific premises in the said project. The assessee fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty. The CIT(A) held that in the case of assessee firm even the units against which the advance of Rs. 1.85 crore was received although refunded have not been identified, nor any agreement has been executed even the sale price is not fixed, the units are in the construction stage and even the stage of construction is only 30% as at 31st March 2009 and the possession has not been given to the buyer and the effective control is also with the seller and as per the CIT(A) even as per the AS 9 or the guidance issued by the ICAI in 2006, it cannot be said that risk and reward of ownership are transferred as on 31.03.2009 by merely receiving deposit of Rs. 1.85 crores. The CIT(A) held that the expenditure incurred till 31.03.2012 was Rs. 28.30 crores whereby the construction was 90% complete till 31.03.2012 and deposit of Rs. 1.85 crores has been received as on 31.03.2009 which is even less than 10% of the total project cost and hence no income can be brought to tax as the contention of securing at least 25% of the project saleable area is not secured by contracts or agreements with the buyers even till date . The CIT(A) held that even by applying matching principles of revenue and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be brought to tax. 7. We have considered the rival contention and perused the relevant material on record and case laws relied upon by the parties. We have observed that the assessee firm has undertaken development of the project Neptune Infotech IT Park during the assessment year 2009-10. The assessee firm has to receive 58% of the area after construction while 42% of the constructed area is to be given to the owners of the land as per agreement with the owners of the land. The assessee firm has spent 14.11 crores till 31.03.2009 and the assessee firm received Rs. 1.85 crores as deposit from its sister concern, Ritesh Exports which was later on refunded to the tune of Rs. 20 lacs in May 2009, while the balance of Rs. 1.65 crores was credited to the partners account. The assessee firm has not sold any unit till assessment year 2011-12 while the total WIP was 28.30 crores as on 31.03.2012 whereby 90% of the project was completed while there was no sale of unit till 31.03.2012. Since the assessee firm has not sold any portion of the constructed area, no hypothetical income can be brought to tax as in fact no real income has accrued to the assessee as per the ratio of decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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