9911796707
TMI Blog2020 (5) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner holding that the Completed Contract Method of accounting followed by the assessee did not reflect the correct profits and percentage method of accounting as prescribed by accounting standard AS3 7 issued by ICAI after amendment to Section 145 of the Act, was erroneous? Matter was taken up for final hearing on 04.12.2019 and during the course of arguments, we noticed that following two additional substantial questions of law would also arise for consideration: (2) Whether tribunal was correct in holding rental income received from Forum Mall should be considered as "Income from business" and not "Income from house property", though agreement between landlord and tenant contemplating relationship of landlord and tenant and as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, by order dated 07.01.2009 dismissed said appeal filed by the assessee. Hence, assessee filed an appeal before Income Tax Appellate Tribunal, Bangalore Bench 'B' in ITA No.218/Bang/09. Tribunal, by order dated 11.09.2009 partly allowed the appeal and held that assessing officer ought to have followed "Complete Contract Method' as claimed by the assessee and rental income received from Forum Mall should be brought to tax under the head "profits and gains from business" and income from fit outs should be brought to tax under the head 'income from other sources'. Hence, revenue is in appeal. 4. We have heard the arguments of Sri K.V.Arvind, learned Standing Counsel appearing for appellant-revenue and Sri Ashok Kulkarni, learned Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. He would draw the attention of the Court to reply given by the Expert Committee on the queries raised by companies which resulted in the said committee opining that such enterprises undertake construction activities on their own account as a venture of commercial nature and as such, revised AS-7 was not required to be followed for the assessment year under reference. Hence, he prays for answering substantial questions of law in favour of the assessee and against revenue by dismissing the appeal. RE: SUBSTANTIAL QUESTION OF LAW NO.1. 7. The assessee is engaged in the business of Builders and Developers. For the assessment year 2005-2006, the assessee had adopted Completed Contract Method for all its real estate projects. The revenue did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty, the owner and the developer were entitled to a specified percentage of super built area and both were free to sell the super built area allotted to their respective shares before construction of the built up area fallen to the share of the assessee, it (assessee) entered into agreement with the proposed buyer to construct the portion as per their specification. In other words, construction is undertaken by the assessee on behalf of the proposed buyer. However, for the purposes of stamp duty payable on the sale of undivided share of land sold to the buyer, only value of the land is taken and assessee had followed consistently this method of accounting to declare the profit namely, on project completion method as per the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Standard uses the recognition criteria established in the Framework for the Preparation and Presentation of Financial Statements to determine when contract revenue and contract costs should be recognized as revenue and expenses in the statement of profit and loss. It also provides practical guidance on the application of these criteria." Thus, assessee - company which is required to follow Standard as prescribed by ICAI will have to necessarily take into account the reply furnished by the Institute for the Expert Committee, which reads as under: (i) the seller of the goods has transferred to the buyer the property in the goods for a specific price or on significant risks and rewards of ownership has been transferred to the buyer and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue is not recognized until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last accounting period and transferred to the profit and loss account. The said method determines results only when the contract is completed. This method leads to objective assessment of the results of the contract. On the other hand, the percentage of completion method tries to attain periodic recognition of income in order to reflect current performance. The amount of revenue recognized under this method is determined by reference to the stage of completion of the contract." 12. In the instant case, the Tribunal has rightly held that in case of revised AS-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
