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TMI Blog2022 (6) TMI 1490X X X X Extracts X X X X X X X X Extracts X X X X ..... ompletion Method [PCM] as per Accounting Standards [AS] issued by the Institute of Chartered Accountants of India [ICAI]. 3. The assessee is a company engaged in developing property and constructing residential apartments and commercial complex. It filed its return of income for the AY 2015-16 on 25.12.2015 declaring a loss of Rs.94,92,127. The case was selected for scrutiny. 4. The Assessing Officer referred the case to the Transfer Pricing Officer [TPO] to determine the arm's length price [ALP] in respect of the international transaction. No adjustment was determined by the TPO u/s. 92CA of the Income-tax Act, 1961 [the Act]. 5. The AO called for various details with regard to the project 'LAPAPLAZZO'. On a perusal of the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the calculation submitted by the assessee is rejected. Since the percentage of completion of work as on 31.03.2015 is 35.44% as calculated in the proposition dtd: 05.12.2018 reproduced on page 2 86 3 of this letter. . Hence the revenue is recognized as per calculation given on page 2 86 3 of this letter. The calculation of gross profit of Rs. 10,40,17,541/-, is tabulated as under: S1 No. Description Amount 01 Total salable area = 5,26,645 sft 02 Estimated project cost (including land) Rs. 179,02,24,904 03 Estimated project cost(excluding land) Rs. 120,91,19,259 04 Cost incurred( excluding land cost) till end of the reporting period Rs. 42,75,20,083 05 Cost of the land Rs. 58,47,01,271 06 Total area sold till the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led appeal before the CIT(Appeals), who confirmed the order of the AO on the basis that cost of construction has been revised by the assessee for no substantial reason and the same is done only to keep the percentage of the cost attributable to the completion below 25%, thus deferring the payment of tax. The assessee is now in appeal before the Tribunal against the order of the CIT(Appeals). 7. The ld. AR submitted that the cost as a percentage of total projected cost for the year under consideration is less than 25%. The ld. AR also submitted that the total area sold as a percentage of total saleable area is also less than 25%. He drew our attention to the relevant provisions contained in the Guidance Note issued by the ICAI whereby certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o development/ construction. (iv) Change in land use. (b) When the stage of completion of the project reaches a reasonable level of development. A reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to 2.5. (c) Atleast 25% of the saleable project area is secured by contracts or agreements with buyers. (d) Atleast 10 % of the total revenue as per the agreements of sale or any other legally enforceable documents are realised at the reporting date in respect of each of the contracts and it is reasonable to expect that the parties to such contracts will comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,79,02,24,904 1,79,02,24,904 Less: Cost of land *(Refer Note 1 B 58,47,01,271 1,08,54,285 Estimated project cost (excluding cost of land) C=A-B 1,20,55,23,633 1,77,93,70,619 Cost incurred till 31 March 2015 (Refer Page 4, Para 6.3, SI. No. 4 of Table in D 42,75,20,083 42,75,20,083 Percentage D/C 35.46% 24.03% Note: As the percentage of completion of project is less than 25%, no revenue is required to be recognised in accordance with Para 5.3(b) of Guidance Note on Real Estate Transactions read with Accounting Standard - 9. * Note 1 - Cost of land Particulars Amount Amount Sale Deed 14165/2003-2004 dated 20.10.2003 Purchase cost 10,93,000 Add: Registration char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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