1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 04.04.2017 CORAM HONOURABLE MR.JUSTICE RAJIV SHAKDHER And HONOURABLE MR.JUSTICE R.SURESH KUMAR T.C.A.Nos.161 to 164 of 2017 Principal Commissioner of Income Tax Central I No.108, Mahatma Gandhi Road, Chennai 600 034. ... Appellant in all TCAs. Vs. M/s.Santha Build-Tech India Pvt. Ltd, T.S.64, SIDCO Industrial Estate, Guindy, Chennai. Respondent in all TCAs. Common Prayer: Appeals filed under Section 260-A of Income Tax Act, 1961, against order dated 29.04.2016 passed in I.T.A.Nos.2309/Mds/ 2013, 2310/Mds/2013, 949/Mds/2015 and 950/Mds/2015 respectively, by Income Tax Appellate Tribunal, Madras C Bench. For Appellant : Ms.R.Hemalatha COMMON JUDGMENT (Judgment of Court was delivered by RAJIV SHAKDHER,J.) These are appeals pertaining to Assessment Years (AY) 2007- 08, 2009-10, 2010-11 and 2011-12. 2 2.These appeals have been filed under Section 260 of Income Tax Act, 1961, (in short, Act), whereby, challenge is laid to judgment and order dated 29.04.2016, passed by Income Tax Appellate Tribunal (in short, Tribunal). 3.The Revenue is aggrieved by fact that Tribunal has sustained method of accounting followed by Assessee as against one reflected in orders passed by Assessing Officer. 3.1.To be noted, Assessee has followed method of accounting, which is referred to as Project Completion Method whereas, Revenue seeks to profess that it ought to have followed Percentage of Completion Method . 4.It is not disputed before us, by learned counsel for Revenue that Assessee has been consistently being following 'Project Completion Method'. 4.1.It is also not disputed before us, by learned counsel for Revenue that Assessee is developer and not contractor and that project is not complete in as much as flats have not been constructed. 3 4.2.Furthermore, learned counsel for appellant also concedes that Judgment of Tribunal i.e., Mumbai Bench, in matter of Awadhesh Builders Vs. ITO, (2010) 37 SOT 122 (Mum), has not been challenged by Revenue in any superior Court. 5.We may, however, record that it is contention of learned counsel for Revenue, that on facts, said judgment of Tribunal is distinguishable. 5.1.It is, in this regard, that learned counsel for appellant seeks to bring to our notice, fact that land on which, building i.e., flats had to be constructed has been transferred to prospective owners of flats, albeit, on pro rata basis. 6.The learned counsel for appellant says that as against sum of Rs.1,05,30,703/- shown as work in progress on 31.03.2007, Assessee has received towards advance from its customers, sum of Rs.2,89,08,177/-. 6.1.It is stated by learned counsel that, it is, in this background, that Assessing Officer while passing order dated 30.03.2013, pertaining to Assessment Year 2007-08 has calculated income of Assessee at rate of 8% of cost of 4 construction, which was quantified, as Rs.1,05,30,703/-. 6.2.Accordingly, we are informed that amount equivalent to Rs.8,42,456/- was added to income of Assessee by adopting 'Percentage of Completion Method' qua, Assessee. 6.3.This method of accounting, as is indicated above, stands replicated by Assessing Officer in other Assessment Years. 7.The Assessee, being aggrieved, had preferred appeals with Commissioner of Income Tax (Appeal) (in short, CIT(A)), qua, each of Assessment Years, which were rejected. In other words, method adopted by Assessing Officer was sustained by CIT(A). 7.1.The Tribunal, however, via impugned order, based on appeals preferred by Assessee, reversed view of Authorities below. 8.In arriving at its conclusion, Tribunal has made following observations in paragraphs 5 and 7 of impugned order. For sake of convenience, same are replicated hereafter: 5. We have heard rival contentions, perused materials on record and gone through orders of authorities below. main dispute in this case is for computation of profits, whether Project 5 Completion Method adopted by assessee is correct or Percentage of Completion Method adopted by Assessing Officer is correct to determine revenue and costs of project. Both Assessing Officer and id.CIT (A) have observed that Project Completion Method adopted by assessee has no existence at all since 01.04.2003. We find that before id. CIT (A), assessee has relied on various decisions including decision in case of Unique Enterprises v. ITO [2010-TIOL-737-ITAT-Mum] for assessment year 2005-06, wherein, it was held that Accounting standards (AS) 7 Construction Contract (revised) issued by Institute of Chartered Accountants of India (ICAI) is applicable only to contractors and not to builders and real estate developers. Accordingly, project completion method followed by tax payer for recognizing revenue in books of accounts cannot be regarded as unreasonable. Further, tax department cannot change method of accounting. Despite not controverting decisions of Mumbai Benches of Tribunal in case of Unique Enterprises 6 v. ITO (supra), Id. CIT(A) could not distinguish as to what was revenue loss by following Project Completion Method adopted by assessee. assessment order is very cryptic and not given complete facts and figures to demonstrate impugned method of accounting adopted by assessee results in underestimation of profit and therefore, Assessing Officer and Id. CIT(A) rejected method adopted by assessee. 7.Thus, in our opinion, profits in case of trade adventure/project may be determinable in each year without waiting for whole adventure/project to be finally completely, yet there is also another method of accounting for profits of adventure/project referred to as completed project method of accounting, which too is recognized method, which assessee has been following consistently. It may be quite relevant to observe here that one needs be consciously aware that profits of each year being determinable at year end is one thing and that profits of each year are essentially to be 7 determined at end of each year is another thing. mere fact that there does exist method of accounting for profits of each year is no justification for rejecting equally recognized method of accounting whereby profits of adventure/project are determined when whole adventure/project is completed; being consistently followed by assessee, without suffering from infirmity/ defect calling for rejection of same for reason that true/fair profits of adventure/project being not deducible thereby. Assessing Officer having not drawn any finding that accounts of assessee suffer from any defect nor that from method of accounting followed by assessee, true/correct profits of assessee cannot be deduced and assessee having been following completed project method consistently, which being recognized method of accounting, assessee's method of accounting cannot be rejected nor is there any justification for estimating assessee's profits of year from assessee's business activity of building construction by resorting to applying of percentage of profit to 8 work-in-progress of year. (emphasis is ours) 8.1.Being aggrieved, Revenue, as indicated at outset, has preferred instant appeals. 9.Ms.Hemalatha, who appears for Revenue, says that since title in underlying land has already been transferred, on pro rata basis, to prospective owners of flats, method adopted by Assessing Officer ought to have been sustained by Tribunal. 9.1.It is also submission of learned counsel that said method is realistic and therefore, brings to fore for purposes of assessment, income of Assessee for relevant assessment year. 10.We have heard learned counsel for Revenue. 11.According to us, as indicated right at outset, it is not disputed by Revenue that Assessee has been consistently following 'Project Completion Method', for accounting its income. 11.1.It is also, not disputed before us, by learned counsel for Revenue that, except for assessment years in issue, said method of accounting has not been assailed by Revenue. 9 11.2.There is no dispute that project has not been completed as yet. 12.Therefore, having regard to aforesaid circumstances, in particular, that method of accounting followed by appellant is recognised method of accounting, which has not led to escapment of income, we see no reason to interfere with impugned judgment and order of Tribunal. 12.1.According to us, as indicated by Tribunal, method of accounting is reasonable and recognised, and therefore, requires no interference by this Court. 12.2.In our view, no question of law, much less substantial question of law, arises for our consideration. 13.Accordingly, appeals are dismissed. However, there shall be no order as to costs. [R.S.A.,J.] [R.S.K.,J.] 04.04.2017 pri/kv Speaking order / Non Speaking order Index: Yes / No Internet: Yes / No 10 RAJIV SHAKDHER,J. AND R.SURESH KUMAR,J. pri/kv To Income Tax Appellate Tribunal, Madras 'C' Bench. T.C.A.Nos.161 to 164 of 2017 04.04.2017 http://www.judis.nic.in Principal Commissioner of Income-tax Central I, Chennai v. Santha Build-Tech India Pvt. Ltd