DCIT Vs Sashwat Construwell Private Limited (ITAT Mumbai)
ONE WING MAY FLY, BUT PROFITS CANNOT—PROJECT COMPLETION METHOD PREVAILS WHERE ALL WINGS FORM ONE INTEGRATED PROJECT
The Mumbai ITAT has held that where different wings of a real-estate development constitute one integrated project & the assessee has consistently followed the Project Completion Method, profit from one wing cannot be independently brought to tax merely because that wing has received the Occupancy Certificate & some units therein have been sold. Following its decision in the assessee’s own case for the preceding year, the Tribunal upheld the deletion of an addition of ₹7.86 crore.
Facts of the case
The assessee, Sashwat Construwell Private Limited, was engaged in the business of builders, developers & dealers in real estate. It had undertaken a project known as “Bhoomi Celestia” at Malad West, Mumbai.
The project consisted of three wings, namely A, A1 & B. Under a development arrangement entered into with American Springs and Pressings Works Private Limited, the assessee was entitled to a specified share in the saleable area of the project.
Wing B of the project received its Occupancy Certificate in December 2021. During the year, the assessee had sold part of the area falling to its share in Wing B.
The AO proceeded on the footing that since Wing B had received the Occupancy Certificate & units pertaining to that wing had been sold, income relating to those units had accrued during AY 2023-24. On the basis of the sale consideration & the cost adopted by him, the AO computed a profit of ₹7,86,58,640 & brought the same to tax.
Assessee’s contention
The assessee contended that “Bhoomi Celestia” was not a collection of separate projects. It was one integrated project comprising Wings A, A1 & B. All the wings formed part of the same development & shared common facilities, approvals, commencement certificate & amenities.
The assessee had consistently followed the Project Completion Method. Consequently, the profit of the development was required to be recognised only upon completion of the project as a whole. The AO could not carve out Wing B from the integrated project & separately determine profit merely because an Occupancy Certificate had been obtained for that wing.
The assessee also challenged the AO’s computation of profit. It was contended that the cost attributable to the area sold in Wing B had not been correctly determined. Even if the profitability of Wing B were to be independently computed, no taxable profit would arise during the relevant year after properly allocating the project cost.
CIT(A) deletes the addition
The CIT(A) examined the nature of the development & accepted that the three wings constituted one composite & integrated project. The wings shared common facilities & amenities, while the relevant approvals & commencement certificate were also common to the project.
The CIT(A) further noted that the assessee had consistently recognised revenue by following the Project Completion Method. An identical addition relating to Wing B of the same project had already been deleted in appellate proceedings for the earlier assessment year.
It was also noticed that the assessee had ultimately offered the income from the project upon its completion. Further, even under the alternative computation furnished by the assessee, Wing B did not generate any taxable profit during the year under consideration.
Accordingly, the CIT(A) directed the AO to delete the addition of ₹7,86,58,640.
Revenue’s appeal before the ITAT
The Revenue challenged the deletion primarily on the ground that Wing B had already received the Occupancy Certificate & units in that wing had been sold. According to the Revenue, the corresponding income had accrued & was liable to be recognised in AY 2023-24.
The assessee pointed out that the very same controversy had been decided by the coordinate Bench in the assessee’s own case for AY 2022-23 in ITA No. 6826/Mum/2025, dated 25.06.2026. That decision concerned the same project, the same Wing B & the same dispute regarding recognition of profits under the Project Completion Method.
ITAT’s decision
The Tribunal observed that the controversy was confined to the addition of ₹7.86 crore representing the alleged profit from Wing B. While the AO treated Wing B as independently completed upon receipt of the Occupancy Certificate, the assessee had consistently treated “Bhoomi Celestia” as a single project comprising all three wings.
The coordinate Bench had already considered the identical question in the assessee’s own case for AY 2022-23. The earlier decision related to the same assessee, same project, same wing & same method of accounting.
The Revenue could not point out any distinguishing fact in AY 2023-24 which could justify taking a different view. Judicial consistency therefore required the Tribunal to follow the coordinate Bench’s decision.
Respectfully following its earlier order, the ITAT found no infirmity in the CIT(A)’s decision deleting the addition. The Revenue’s appeal was accordingly dismissed.
Author’s comments
The decision reiterates that an Occupancy Certificate for one wing does not automatically convert that wing into a separate project for income-recognition purposes. The real enquiry is whether the wings are commercially, legally & functionally independent or constitute parts of one integrated development.
Where common approvals, facilities, amenities & development arrangements demonstrate a composite project & the assessee has consistently followed the Project Completion Method, the AO cannot selectively apply a completion test to one wing merely to accelerate taxation.
Equally important is the principle of consistency. Once the Tribunal has decided the identical issue concerning the same project in an earlier year, a different conclusion cannot ordinarily be reached in a subsequent year unless the Revenue establishes a material change in facts or law. A completed wing may open its doors to purchasers, but it does not necessarily open the door to premature taxation of the entire alleged profit.
Cases Discussed
- Sashwat Construwell Private Limited’s own case, ITA No. 6826/Mum/2025, dated 25.06.2026 (ITAT Mumbai)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, MUMBAI
1. This appeal has been preferred by the Revenue against the order of the learned Commissioner of Income Tax (Appeals)-50, Mumbai dated 15.01.2026 for the assessment year 2023-24, whereby the learned Commissioner of Income Tax (Appeals) deleted the addition of Rs.7,86,58,640/- made by the Assessing Officer on account of profit allegedly arising from sale of units in Wing B of the project “Bhoomi Celestia”. The Revenue has raised grounds challenging the deletion of the aforesaid addition primarily on the contention that Wing B of the project had received the Occupation Certificate and that income in respect of the units sold therein had accrued during the year under consideration.
2. Briefly stated, the assessee, Sashwat Construwell Private Limited, is engaged in the business of builders, developers and dealers in real estate and had undertaken the project known as “Bhoomi Celestia” at Malad West, Mumbai. The project comprises three wings, namely A, A1 and B. Under the development arrangement entered into with American Springs and Pressings Works Private Limited, the assessee was entitled to its specified share in the saleable area of the project. Wing B had received the Occupancy Certificate in December 2021. The Assessing Officer noted that the assessee had sold part of the area attributable to its share in Wing B and, on the basis of the sale consideration and the cost adopted by him, worked out profit of Rs.7,86,58,640/- and brought the same to tax in the assessment year under consideration. The assessee, however, contended that “Bhoomi Celestia” was one integrated project comprising all the three wings and that it had consistently followed the Project Completion Method, under which the profit of the entire project was to be recognised upon completion of the project as a whole. The assessee further contended that the computation made by the Assessing Officer in respect of Wing B did not correctly determine the cost attributable to the area sold and that, even on an alternative basis, no taxable profit arose in the year under consideration.
3. The learned Commissioner of Income Tax (Appeals), after considering the assessment order and the submissions of the assessee, accepted the contention that the three wings constituted one integrated project. It was observed that the three wings shared common facilities and were part of the same development and that the various approvals, commencement certificate and amenities were common to the project. The learned Commissioner of Income Tax (Appeals) further took note of the fact that the assessee had consistently followed the Project Completion Method and that an identical addition relating to Wing B of the same project had been deleted in the appellate proceedings for the earlier assessment year. It was also noted that the assessee had offered the income from the project upon completion of the project and that, even on the alternative computation, the result in respect of Wing B would not give rise to taxable profit. On these considerations, the learned Commissioner of Income Tax (Appeals) directed the Assessing Officer to delete the addition of Rs.7,86,58,640/-.
4. During the course of hearing before us, the learned Departmental Representative (“ld.DR”) supported the assessment order and relied upon the grounds raised by the Revenue. The learned Authorised Representative (“ld.AR”) of the assessee, on the other hand, submitted that the issue is squarely covered by the decision of the coordinate Bench in the assessee’s own case for the earlier assessment year, being ITA No.6826/Mum/2025 dated 25.06.2026. It was submitted that the issue before the Tribunal in the present appeal arises from the same project, namely “Bhoomi Celestia”, and concerns the same dispute regarding recognition of profit from Wing B while the assessee has consistently followed the Project Completion Method for the project as a whole. The ld.AR accordingly submitted that the decision already rendered by the coordinate Bench in the assessee’s own case governs the issue before us and that the order of the learned Commissioner of Income Tax (Appeals) deserves to be upheld.
5. We have considered the rival submissions and perused the material available on record. The dispute before us is confined to the addition of Rs.7,86,58,640/- made by the Assessing Officer in respect of the alleged profit from Wing B of “Bhoomi Celestia”. The assessment order proceeds on the basis that Wing B had received the Occupancy Certificate and that the assessee had sold units pertaining to its share in that wing, and therefore the corresponding profit was liable to be recognized in the year under consideration. The assessee, however, has consistently maintained that “Bhoomi Celestia” is a single project comprising Wings A, A1 and B and that the Project Completion Method is being followed for the project. The learned Commissioner of Income Tax (Appeals), after examining the factual position and the earlier appellate order concerning the same project, accepted this contention and deleted the addition.
6. We further note that the ld.AR has specifically brought to our notice the decision of the coordinate Bench in the assessee’s own case in ITA No.6826/Mum/2025 dated 25.06.2026 for the assessment year 2022-23. The said decision concerns the assessee and the same project and has dealt with the dispute relating to recognition of profit from Wing B under the Project Completion Method. Since the issue before us is materially the same and arises from the same project and the same factual matrix, we find no reason to take a different view in the present assessment year. The Revenue has not been able to point out any distinguishing feature in the facts before us which would warrant departure from the view already taken by the coordinate Bench in the assessee’s own case.
7. In these circumstances, respectfully following the decision of the coordinate Bench in the assessee’s own case in ITA No.6826/Mum/2025 dated 25.06.2026, we find no infirmity in the order of the learned Commissioner of Income Tax (Appeals) deleting the addition of Rs.7,86,58,640/- made by the Assessing Officer in respect of Wing B of “Bhoomi Celestia”. The grounds raised by the Revenue are accordingly rejected.
8. In the result, the appeal filed by the Revenue for the assessment year 2023-24 is dismissed.
Order pronounced in the open Court on 08.09.2026.
