9911796707
TMI Blog2021 (8) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by it. As undisputed position that emerges is that the assessee is following consistent method of accounting to recognise revenue under the project. No doubt, the assessee has not included cost of land for computation of profit under PoCM, but before completion of project, the entire revenue has been offered for taxation which also included the impugned addition made by the Assessing Officer. We, therefore, do not find any merit in the impugned addition. Considering the facts of the case in totality, we direct the Assessing Officer to delete the addition. This ground is accordingly allowed. Addition being interest on loan - HELD THAT:- The assessee was asked to furnish clarification in respect of claim of interest. It is also not in dispute that vide letter dated 27.11.2017, the assessee has simply stated that it has borrowed loan from Prateek Infratech Pvt Ltd and M/s Prateek Buildtech India Pvt Ltd for general purposes. No supporting evidences were furnished by the assessee to substantiate its claim. Even before us, no details/documentary evidences regarding claim of interest expenses as revenue expenditure has been furnished. Therefore, the action of the AO is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is only recommendatory in nature. That the Id. AO had only disputed the percentage of the revenue in the concerned year rather than the total revenue recognizable by the assessee in respect of the project. That the Id. CIT(A) as well as Id. AO has failed to appreciate that the assessee has considered the proportionate revenue of the total revenue in succeeding financial years as well. As such, the addition of ₹ 3,61,56,783/- may please be deleted. 3. Briefly stated, the facts of the case are that the appellant company is engaged in the business of real estate development since its inception. During the year under consideration, the appellant company was carrying out one project, namely, Prateek Edifice. For the purpose of revenue recognition, the appellant company followed Percentage Completion Method [PoCM], duly considering the provisions of Accounting Standards 7 and 9. As a matter of general practice, the appellant company did not consider the cost of land for calculating the percentage of completion of project under consideration. 4. During the course of scrutiny assessment proceedings, the Assessing Officer observed that though the assessee is following PoC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er contra, the ld. DR strongly supported the findings of the Assessing Officer. 11. We have given thoughtful consideration to the orders of the authorities below. It is true that the assessee recognised revenue in A.Y 2014-15 when the project was completed only 18.26% and as per the accounting principles read with Guidance Notes under PoCM, revenue has to be recognised after completion of 25% of the project. Revenue recognition can be understood from the following chart: 12. In our considered opinion, the action of the assessee company on the revenue reported by it on its project Prateek Edifice has not caused any loss to the revenue and the entire exercise is revenue neutral as the assessee has already offered complete amount of tax in the subsequent F.Y., and such completion was before passing of impugned assessment order, which is dated 29.12.2017. These facts clearly show that the Assessing Officer was well aware of the revenue recognised by the assessee from the entire project and the taxes paid by it. 13. It would be pertinent to consider the following decisions of the Hon'ble Supreme Court and the High Court of Delhi: CIT vs Triveni Engg. Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, the Assessing Officer noticed that the assessee has claimed an amount of ₹ 1,25,72,260/- on account of interest expenses in its profit and loss account over and above the above the cost of the project. The Assessing Officer was of the firm belief that as per the Guidance Notes on Accounting for real estate transactions, the interest expenditure is part of borrowing cost which, in turn, is part of total project cost. The assessee was asked to furnish clarification as to why the interest expenses be not added to the project cost. 17. In its reply, the assessee stated that it has borrowed loan from sister concern for general purposes and paid interest to them. It was explained that since these expenses do not directly relate to the ongoing project of the assessee, the same has not been considered as cost of the project. 18. Since no details were provided by the assessee in support of its contention, the Assessing Officer disallowed the claim of ₹ 1,25,72,260/- 19. The assessee agitated the matter before the ld. CIT(A) but without any success. 20. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X
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