ITO Vs S.R.K.M Steels (P) Ltd. (ITAT Guwahati)
Project Completion Method Prevails, No Double Taxation: Guwahati ITAT Upholds Deletion of ₹2.23 Cr Revenue Recognition Addition
Guwahati ITAT, Guwahati Bench, in ITO Vs S.R.K.M Steels (P) Ltd. (ITA No.274/GTY/2018; AY 2015-16; order dated 18-12-2025), dismissed the Revenue’s appeal and upheld the CIT(A)’s order deleting the addition of ₹2.23 crore made on account of alleged premature revenue recognition in a real estate project.
The Assessing Officer sought to substitute the assessee’s consistently followed Project Completion Method with Percentage of Completion Method, alleging that more than 25% of the saleable area stood sold and that revenue ought to have been recognized under ICAI guidelines. The Tribunal concurred with the CIT(A) that the 25% threshold was not crossed through legally enforceable agreements, and that mere allotment letters cannot be equated with agreements to sell as per the ICAI Guidance Note on Real Estate Transactions. Further, the AO had ignored the twin conditions of AS-7—namely, minimum realization of 10% of sale consideration and enforceable contracts.
The Tribunal also noted that the assessee had offered the entire project revenue to tax in subsequent assessment years (AYs 2016-17 & 2017-18) when the threshold was actually crossed, and tax of about ₹90 lakh was duly paid. Any forced recognition in AY 2015-16 would therefore result in impermissible double taxation. Applying the doctrines of consistency and revenue neutrality, and relying on Supreme Court rulings in Radhasoami Satsang, Bilahari Investment and Excel Industries, the ITAT held that the Revenue cannot disturb a consistently accepted method of accounting without demonstrating distortion of profits.
On the related-party interest issue, the Tribunal also upheld deletion of ₹3.93 lakh, holding that the transactions with the sister concern were in the nature of current account adjustments, and in any case, the interest had been capitalised and not claimed as revenue expenditure.
Accordingly, the Revenue appeal was dismissed in toto, reaffirming that accounting methods consistently followed and accepted cannot be arbitrarily replaced, especially where it leads to double taxation
FULL TEXT OF THE ORDER OF ITAT GUWAHATI
