Desai Builders Pvt. Ltd. v. ACIT (OSD), Range-1, Ahmedabad
[Citation -2016-LL-1013-30]

Citation 2016-LL-1013-30
Appellant Name Desai Builders Pvt. Ltd.
Respondent Name ACIT (OSD), Range-1, Ahmedabad
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 13/10/2016
Assessment Year 2006-07
Judgment View Judgment
Keyword Tags project completion method • method of accounting • work-in-progress
Bot Summary: CIT(A) has erred in law and on facts in confirming the addition of Rs.12,47,022/- on account of net profit calculated on the basis of percentage completion method while making an observation that the appellant postponed the income indefinitely and any construction project cannot be treated as incomplete even after 13 years and the profit from the project should be taxed when it is substantially completed. Counsel for the assessee contends that the assessee was following Project Completion Method which was accepted in earlier years. The Department itself by orders u/s 143(3) for AY 1996-97, 1997-98, 2003-04 and 2005-06 has accepted the assessee s method based on Project Completion Method. There is no reason to reject the assessee s accepted method of accounting in this year since in past number of earlier years for the same project. Further reliance is placed on ITAT judgments in the case of DCIT vs. Shri Umang Hiralal Thakkar in ITA No.560/Ahd/2010 and ACIT vs. M/s. Vraj Developers in ITA No.19/Ahd/2008, holding that Project Completion Method is a recognized method and if the assessee is regularly following that method, then in the intervening period Percentage Completion Method cannot be applied and the income cannot be estimated on the basis of value of work-in-progress. The assessee has placed copies of number of assessment orders in its own case passed u/s 143(3), wherein the Department has accepted the Project Completion Method as assessee s accepted method of accounting. Since the assessee and Department, both have been following Project Completion Method as a recognized method of accounting in assessee s case, there is no justification in rejecting the method of accounting SMC-ITA No. 2120/Ahd/2012 Desai Builders Pvt Ltd vs. ACIT AY : 2006-07 3 in this year and applying the work-in-progress method.


IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ITA No. 2120/Ahd/2012 Assessment Year : 2006-07 Desai Builders Pvt Ltd, ACIT (OSD), Nirav Complex, 1st Floor, Vs Range-1, Navrangpura, Ahmedabad-9 Ahmedabad PAN : AAACD 6916 H (Appellant) (Respondent) Assessee by : Shri Karan Shah, AR Revenue by : Shri Satish Solanki, Sr DR Date of Hearing : 18/08/2016 Date of Pronouncement: 13/10/2016 O R D E R This appeal by assessee is directed against order of Learned Commissioner of Income Tax (Appeals)-6, Ahmedabad dated 20.07.2012 for Assessment Year 2006-07. 2. Following grounds are raised:- 1. ld. CIT(A) has erred in law and on facts in confirming addition of Rs.12,47,022/- on account of net profit calculated on basis of percentage completion method while making observation that appellant postponed income indefinitely and any construction project cannot be treated as incomplete even after 13 years and profit from project should be taxed when it is substantially completed. 2. ld. CIT(A) has erred in law and on facts in failing to consider fact that appellant company has not recognized any revenue from projects carried out during Financial Year 2005-06 relevant to AY 2006-07 as projects were incomplete during previous year relevant to AY 2006-07. 3. ld. Counsel for assessee contends that assessee was following Project Completion Method which was accepted in earlier years. SMC-ITA No. 2120/Ahd/2012 Desai Builders Pvt Ltd vs. ACIT (OSD) AY : 2006-07 2 All Development Agreements were executed by assessee before 01.04.2003, whereas revised AS-7 is applicable for development agreements entered into after 01.04.2003. Department itself by orders u/s 143(3) for AY 1996-97, 1997-98, 2003-04 and 2005-06 has accepted assessee s method based on Project Completion Method. There is no reason to reject assessee s accepted method of accounting in this year since in past number of earlier years for same project. Before ld. CIT(A), assessee relied on catena of judgments, including Hon ble Supreme Court judgment in case of CIT vs British Paints India Limited, 188 ITR 44 (SC). Reliance is placed on all those cases. Further reliance is placed on ITAT judgments in case of (1) DCIT vs. Shri Umang Hiralal Thakkar in ITA No.560/Ahd/2010 and (2) ACIT vs. M/s. Vraj Developers in ITA No.19/Ahd/2008, holding that Project Completion Method is recognized method and if assessee is regularly following that method, then in intervening period Percentage Completion Method cannot be applied and income cannot be estimated on basis of value of work-in-progress. Reliance is placed on written submissions filed before ld. CIT(A). 4. Ld. DR, on other hand, relied on order of ld. CIT(A). 5. I have heard rival contentions, perused material available on record and gone through orders of authorities below. assessee has placed copies of number of assessment orders in its own case passed u/s 143(3), wherein Department has accepted Project Completion Method as assessee s accepted method of accounting. It is not disputed that all development agreements entered into by assessee were prior to 01.04.2003. Since assessee and Department, both have been following Project Completion Method as recognized method of accounting in assessee s case, there is no justification in rejecting method of accounting SMC-ITA No. 2120/Ahd/2012 Desai Builders Pvt Ltd vs. ACIT (OSD) AY : 2006-07 3 in this year and applying work-in-progress method. In view thereof, addition in question is deleted. 6. In result, assessee s appeal is allowed. Order pronounced in Court on 13th October, 2016 at Ahmedabad. Sd/- R.P. TOLANI (JUDICIAL MEMBER) Ahmedabad; Dated 13/10/2016 *Biju T. Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. Concerned CIT 4. CIT(A) 5. DR, ITAT, Ahmedabad 6. Guard file. BY ORDER, TRUE COPY (Dy./Asstt.Registrar) ITAT, Ahmedabad Desai Builders Pvt. Ltd. v. ACIT (OSD), Range-1, Ahmedabad
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