Under project completion method entire project as a whole is to be seen and hence transfer of some flats via registration is not conclusive of the year in which the income attributable to the project is to be taxed

M/s Maitri Developers Vs ITO (ITAT Mumbai)– Project completion method is well recognised method as per AS- 7. Under project completion method entire project as a whole is to be seen and hence transfer of some flats via registration is not conclusive of the year in which the income attributable to the project is to be taxed. Completion certificate is also not conclusive of the fact that the project was completed when the facility of drinking water shows it otherwise.

IN THE INCOME TAX APPELLATE TRIBUNAL ‘F’ BENCH, MUMBAI.

I.T.A. No. 2819/Mum/2010

(Assessment Year: 2006- 07)

ORDER

Per R.V.Easwar, President: This is an appeal filed by the assessee and it relates to the assessment year 2006- 07. The assessee is a partnership firm carrying on business in Mumbai as builder-developer. The appeal arises out of the assessment order passed on 22-12-2008 u/s. 143(3) of the IT Act.

2. The only ground in this appeal relates to the assessment of the business income of the assessee. The dispute arises this way. In the return of income the assessee showed work-in-progress relating to is Matunga project at Rs. 4,88,30,226 which included the year’s WIP of Rs. 2,73,69,050. The assessee had also received advances of Rs. 4,48,33,003 in respect of the project during the previous year. While completing the assessment, the Assessing Officer noticed that neither in this year nor in the assessment years 2005- 06 and 2007- 08 had the assessee declared any profit from the said project for purposes of the income-tax assessment. He observed that in the previous year ended 3 1-3-2007, relevant to the assessment year 2007-08 the total cost of the project was shown at Rs. 5,87,85,212 out of which the assessee had incurred Rs. 4,88,30,226 during the year ended 3 1-3-2006 which is the year under appeal and thus about 83% of the total cost of the Matunga project had been incurred in the year under appeal. The assessee had also received substantial advances during the said year. The Assessing Officer, on these facts, called upon the assessee to show cause why the profit from the project should not be brought to assessment in the year under appeal.