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TMI Blog2010 (6) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... erence is also made to the order of the Mumbai Bench of the Tribunal in the case of Champion Construction Co. vs. ITO (1983) 5 ITD 495 (Mum). 3. The brief facts giving rise to the appeal may be noted. The assessee acquired land in Khar West. It started construction of a building with ground and six floors in the year 1994. In the return of income the assessee did not show any profits for the aforesaid project though six years had elapsed from the commencement of the construction. In the Balance Sheet as on 31.03.2005 filed with the return, the assessee showed advances of ₹ 7,83,48,250/- against booking of flats and sundry advances of ₹ 5,17,86,501/-. The workin- progress was shown at ₹ 5,53,36,058/-. In Schedule G to the Balance Sheet it was stated that the company follows the project completion method of accounting and, therefore, the profits or losses from the Khar project would be recognized only upon completion thereof. It was further stated that since the said project was not completed in the year ended 31.03.2005; no profits therefrom have been offered for taxation. 4. While examining the return the Assessing Officer took the view that so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognized according to the principles of law and not with reference to accountancy practices which cannot override the provisions of the Income Tax Act. Reference was also made to the judgment of the Supreme Court in CIT vs. British Paints India Ltd. (1991) 188 ITR 44 (SC). Some other authorities were also referred to including the order of the Mumbai Bench of the Tribunal in the case of Champion Construction Co. vs. ITO (supra). 6. The Assessing Officer also held that even on facts the project was substantially completed in the current year and for this purpose, as already noted, referred to the receipt of sale consideration of all flats and the registration of the agreements with some purchasers effected during the relevant year. 7. In the course of the assessment proceedings the assessee submitted a copy of the Occupation Certificate and a certificate from the architect stating that even as on 31.03.2005, RCC work up to the sixth floor only was completed, in order to show that the project itself was not completed and what was constructed during the relevant year was only the outer shell of the building. This submission was rejected by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andard-7 was not applicable to the assessee since it was applicable only to construction contracts whereas the assessee was developing the project on its own. He held that the Completion Certificate was obtained from the BMC only on 24.05.2006. From these facts he held that the project was not completed in the relevant accounting year. As there was no change in the facts of the case as compared to the assessment year 2000-01 for which year he had decided the issue in favour of the assessee, he allowed the assessee s appeal. 10. The Revenue is in appeal to reiterate the stand taken by the Assessing Officer. The learned Senior Departmental Representative submitted that the facts for the year under appeal were different from the facts for the assessment year 2000-01 in which year the CIT(A) has decided the issue in favour of the assessee. It was however stated that against the order of the CIT(A) for the assessment year 2000-01 as also the assessment year 2004-05, for which year also the CIT(A) had decided the issue in favour of the assessee, the Department did not file any appeals to the Tribunal. He however contended that each year should be looked at as a separate year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sixth floor of the building was completed as on 31.03.2005. From this certificate it was submitted by the learned counsel for the assessee that when only the shell of the building has been put up as on 31.03.2005, it cannot be said that the project was completed in that year. Our attention was also drawn to the fact that even in the years ended 31.03.2006 and 31.03.2007, the assessee had disclosed the work-inprogress as on these dates, in the Balance Sheets, at ₹ 6,74,65,954/- and ₹ 7,35,68,053/-, which also showed that the project was not completed as on 31.03.2005. It was accordingly contended that the decision of the CIT(A) requires no modification. 12. In his brief reply the learned Senior DR submitted that the nonfiling of appeals against the orders of the CIT(A) for the assessment years 2000-01 and 2004-05 was not fatal to the claim of the Revenue and that if factually the project was substantially completed in the year ended 31.03.2005, the dispute can be independently decided without reference to the conduct of the Income Tax authorities in the earlier years. Reliance was also placed on the order of the Mumbai Bench of the Tribunal in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary of the work-in-progress for the years ended 31.03.2005 to 31.03.2007. The work-in-progress which was ₹ 5,53,36,058/- as on 31.03.2005 increased to ₹ 6,74,65,954/- as on 31.03.2006 and further increased to ₹ 7,35,68,053/- as on 31.03.2007. When the work is in progress, it is not possible to say that the project has been completed. It may be clarified that the work-in-progress of ₹ 7,35,68,053/- has been taken as the final cost of construction of the project and debited to the Profit Loss Account for the year ended 31.03.2007. A copy of the Profit Loss Account for the year ended 31.03.2007 is at page 33 of the Paper Book. After taking credit for the sale of flats of ₹ 7,49,71,250/-, legal charges, electricity water charges and car parking charges, the assessee has set off the expenditure being the cost of construction of ₹ 7,35,68,053/-, audit fees, depreciation, interest on vehicle loan and Directors remuneration and has arrived at a net profit of ₹ 24,58,942/- which has been shown as the assessee s profit from the project in the return filed for the assessment year 2007-08. As already noted, the said return has been examined unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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