Case Law Details
Vastukar Township Pvt. Ltd Vs. DCIT (ITAT Jaipur)
The issue in dispute relates to recognition of revenue by the assessee, which has been categorized into two broad categories – revenues where the assessee has entered into registered sale deeds with the plot buyers and secondly, where certain advances have been received from the plot buyers, where the assessee is following percentage completion method of accounting.
The assessee is engaged in development of residential township project “South City” located in village Jaisinghpura/Rampura Bujurg, near Chaksu, Tonk road, Jaipur in collaboration with M/s Shakuntalam Colonisers Pvt ltd and M/s Vastukar Colonizers Pvt Ltd. In terms of plot buyers agreement, the buyer agrees to purchase a plot of specified size and location and the agreed price covers development of internal services such as roads, electricity, water and drainage system within the peripheral limits of township. The nature of transaction under consideration is therefore sale of plots of land with development of internal common facilities within the township.
The assessee has contended that by following consistent accounting policy where the revenues are recognized on percentage completion method, during the year under consideration, revenues for the year are recognized at Rs. 2,11,38,286/- as per registered sale deeds and no revenues are recognized against the advance/booking amount of Rs. 4,44,28,514/- received from customers. The said accounting policy has been duly reflected in Schedule 11 of its audited financial Statement and the same is in accordance with Paras 10 and 11 of AS-9 issued by the ICAI as well as Guidance Note on “Recognition of Revenues by the Real Estate Developers” issued by the ICAI in the year 2006. The AO has also referred to the said guidance note issued by ICAI while arriving at his findings that the whole of sale proceeds in respect of registered sale deeds should be recognized as revenues and secondly, the advance received from the customers should be recognized to the extent of percentage of work completed in the township project.
Please become a Premium member. If you are already a Premium member, login here to access the full content.