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TMI Blog2016 (6) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... . project completion method was correct and recognized one and AO was wrong in rejecting the same while accepting the same method in the earlier and preceding years - Decided in favour of assessee. - I.T.A. No 6787/Mum/2012, I.T.A. No 6774/Mum/2012 - - - Dated:- 25-4-2016 - SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shri J.P. Bairagra For The Respondent : Shri S.S. Kemwal ORDER PER RAJESH KUMAR, A. M: These cross appeals filed by the assessee and revenue directed against the order dated 22/08/2012 of Commissioner of Income Tax (Appeals)-40, Mumbai (Hereinafter called as the CIT(A)) for assessment year 2009-10. a. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made of ₹ 52,71,02,218/- by holding that the three projects were not complete during the year and hence the profit worked out from the same is not the income of the year under consideration without appreciating the fact that the said projects were already complete and the assessee was merely deferring the payment of taxes on the same. b. On the facts and in the circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order. 3.2 Aggrieved by the order of AO the assessee preferred appeal before the CIT(A) who allowed the appeal of the assessee by holding as under:- 3.6 Considering all the arguments given by the Id.AO in the assessment order and by the AR of the appellant in the submissions revealed that the main point of difference between the Ld. AO and the appellant is on account of the definition or completion of project. In respect of Sai Ashish project, the fact is that the appellant has completed the project as per the approved plan and sold them out to prospective buyers. While doing so, due to certain progress in litigation in respect of DC Rules, the appellant received approval for additional floors and has therefore, treated the construction and sale of additional floors as part of the original project. On the other hand, the Id .AO has treated the completion of the original approved plan as the completion of the project. So, the issue to be considered in respect of the project is whether a further extension by adding additional floors could be taken as an additional project, or- mere extension of the original project. In respect of the projects, viz., tile Harikunj Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Wazarina Estate Investment P. Ltd V/s. ACIT dated 29.01.2004 in ITA.No.2107 3934/Mum/2000 for A.Yrs 1996-97 and 1997-98. The appellant's submission in respect of other two projects namely Chembur Heiqhts and Harikunj Heights further build up the concept of completion of project. In respect of these two projects, the Id.AO has mainly relied on the Inspector's report which reads as under: a. The Chembur Heights is a stilt plus 14 floor building and there are two wings namely A and B in the said building with four flats on each wing. On a spot enquiry, the watchman has stated that the building Chembur Heiqhts is 3 to 4 years old. There is a landscaped garden. Photographs of the site as well as the name plate displayed in each wing has been taken. b. The Harikunj building is situated near Chembur Heights and it is a stilt plus 14 floor building having stilt area for parking. Building has single wing of 84 flats. Landscaped garden is located in the premises. On a spot enquiry, the watchman has stated that the building Harikunj is 4 to 5 years old. Photographs of the site as well as the name plate displayed in each wing have been taken. c. The Sai Ash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even the ratio of the Champions Construction Co v/s. ITO (5 ITD 495 Bom), which is a very conservative view, also does not support the view that the project is completed, Until Champion Construction's ratio was being followed, the project was taken to be complete when substantial construction had been completed and/ or substantial advance against sales had been received, Subsequently, the ITAT has been supporting the view that the issue date of last of the Occupation Certificates should be taken to be the date of completion of project. Even Section 80IB( 10) defines the completion of project to be the date of Occupation Certificate. 3.10 Having analysed the facts in respect of 3 projects, it is amply clear that there is no material reason to treat the three project complete during the year under consideration Merely because the advance against sales exceeds the work in progress in a particular year, cannot lead anyone to (.l conclusion that the project is complete or that excess of advance received over work in progress is income of the appellant. In fact, a large part of the excess is appellant's liability even if percentage completion method was to be followed. In S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that Sai Ashish project has two buildings with building no 1 which has 179 flats and no 2 which has 20 flats. The second project Hari Kunj has three buildings 1, 2 3 each having 82; 84; and 60 flats and Chembur Heights projects comprised of two buildings with second building having 4 wings namely A,B,C D and having 101 and 302 flats respectively. The Ld. AR filed detail workings of total sanctioned flats; flats under construction; flats sold and flats remaining to be sold as on 31.03.2009 in respect of all these three projects. It was also pointed out that spot verification by inspector was wrong as the said report pertained to the completed towers/buildings only and not for ones which were under construction. The ld. AR also filed the details of advance received and cost incurred qua these three projects for the assessment year 2009-2010 to 2012-2013 to prove that the assessee incurred various expenditure on the construction of these flats and also received advances against booking/ sale of flat in these projects meaning thereby that these were in progress. The advance received was ₹ 22,01,81,404/-, whereas the expenditure was ₹ 11,26,98,112/- on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of developing various residential and commercial projects of which some projects were eligible u/s 80-IB(10) of the Act, whereas some were not. The assessee was following the project completion method to recognize the income from various projects undertaken by the assessee. The said method of accounting stands accepted by the department in the preceding and succeeding years as is clear from the records and various assessment orders passed u/s 143(3) for assessment years 2006-07 to 2008-09 and assessment years 2010-11 to 2012-13 (filed at page no. 113 to 148 and 212 to 254 of the paper book). Ld. AO during the year has observed that the assessee had substantially completed the construction of three projects namely Sai Ashish , Hari Kunj and Chembur Heights , and so was the position of sale on the basis of spot verification report by the inspector which is reproduced as under for the sake of convenience: 7.4 Spot verification by Inspector In order to verify the status of the project and buildings in respect of which the assessee has received entire sale amount along with society charges, Inspector was deputed to make inspection on the spot and submit his r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort that stilt parking area has been constructed in the inner side of the premises whereas in the outer side shops were constructed. Most of the shops were also sold and project was completed 3 to 4 years back and flats were occupied by the buyers of the flats. The findings of the spot inspection report of the inspector has been rebutted by ld. AR before us. He referred to the project wise status of flats which has been summarized as under:_ Project Total flats constructed Total flats under construction Total flats Total Flats Sold/advance received Flats unsold SAI ASHISH (1) (2) (1+2) (4) (5) Building No.1 155 24 179 121 58 Building No.2 0 20 20 0 20 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from assessment year 2009-10 to 2012-13 to substantiate the fact that these projects were under construction and not completed as observed by AO. The ld. AR also pointed out that the inspector report pertains to only completed buildings in these projects and did not deal with the flats/towers/buildings which were under construction. The year wise details filed by the ld. AR is reproduced as under:- SAI ASHISH PROJECT : Assessment Year Advance received Work in progress 2009-10 22,01,81,404/- 11,26,98,112/- 2010-11 28,61,61,248/- 14,63,65,013/- 2011-12 36,70,86,670/- 16,69,78,226/- 2012-13 39,99,38,320/- 18,28,92,916/- HARIKUNJ PROJECT: Assessment Year Advance received Work in progress 2009-10 28,34,91,801/- 13,97,48,363/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd merits in the arguments of the ld. AR that Sai Ashish project could not completed as envisaged originally due to stay order by the Bombay High court on the debit of TDR in the restricted zone and original plan were approved subjected to stay order and construction was undertaken accordingly. It is only after the end of the litigation and vacation of the stay order the assessee got the occupation certificate on 18.02.2010 for the additional floors. We also find that the possession were given to the buyers of the flats as per the original sanction plan whereas the additional floors were still under construction during the year. The total number of flats as per the original plan were 155 to which 44 flats were added after revised occupation certificate obtained from the BMC. In view of above facts, we do not find any infirmity in the order of CIT(A) and further the case of the assessee is fortified by the various decisions relied and referred by the ld. AR during the course of hearing before us. In the case of Hawala Construction Private Ltd. in ITA No5601/Mum/2009 AY 2005-06 dated 05.08.2011, the Tribunal held that a project is completed when a occupation certificate is received i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the project Sai Deep on account of other income of 7,46,332/-. 5. The ground No. 1 is against the confirmation of disallowance u/s 40A(2) of the Act in respect of business centre and administrative charges paid to M/s. Kukreja Services Pvt. Ltd. a sister concern of the assessee of ₹ 7,50,000/- as against ₹ 9,30,000/- made by AO in assessment order. 5.1 The ld. Counsel at the outset pointed out that the issue involved in this ground has been settled by the decision of ITAT in assessment year 2006-07 in assessee s own case in AY 2007-08 and 2008-09 vide order dated 16.01.2015 in ITA No. 1068/Mum/2010, ITA No. 1736/Mum/2010, ITA No. 5536/Mum/2010, ITA No. 5977/Mum/2010 and ITA No. 6180/Mum/2011 and therefore the issue is fully covered in favour of assessee by the decision of the coordinate bench and hence the ground of the revenue be dismissed by following the same. Per contra, ld. DR appeared to be reasonably agreed with the arguments of the ld. AR. 5.2. We have considered the rival submissions and perused the material on record. We find that the similar issue had arisen during the assessment year 2006- 07, 2007-08 and 2008-09 which was decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80-IB(10) of the Act accordingly on the ground that the department was in appeal before ITAT against the said order of CIT(A). 6.1 Ld. AR pointed out that the issue stands decided in favour of assessee by the Tribunal in its own case in ITA No. 1068/Mum/2010 for A.Y. 2006-07 and therefore fully covered in its favour. We have considered the rival submissions and perused the material on record. We find that similar issue also arose in assessment year 2006-07 which was decide by the coordinate bench in favour of assesee vide order dated 16.01.15. The relevant para of the said order is reproduced below. The assessee received various charges namely development charges, electric meter charges, extra work charges, grill charges, legal charges, water meter charges, share money charges and society formation charges, Gas charges, car parking charges, interest received on delayed payments, video door monitor and maintenance for 12 months charges. The assessee claimed deduction u/s 80-IB in respect of these charges received from buyers of the flat. The Assessing Officer disallowed the claim of the assessee on the ground that above said items of other income had no direct nexus wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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