Case Law Details
ITO Vs Toucan Real Estates Pvt. Ltd. (ITAT Delhi)
Total estimated construction cost the percentage of the completion works out to 24.89% which is less than the 25%, being the limit prescribed for recognition of Revenue.
Facts-
Assessee electronically filed its ROI declaring total income at Rs.4,06,880/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 29.12.2016 determining the total income at Rs.13,63,41,560/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 30.01.2019 in Appeal No.9/10774/2017-18 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal on the ground of deleting addition amounting to Rs.13,59,34,679/- to the income of the assessee company as percentage completion of the project has reached 28.63% which is more than 25% and therefore, the revenue needs to be recognized.
Assessee contended that the same is only 24.89% of the project was completed and therefore no revenue recognition was called for.
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Author Bio
The subject itat Order brings to limelight /the center stage, one more arbitrary fixation to revenue recognition!?
IRRESOLTE PROBLEM , – Norm of not less than 25% ; how to ascertain in a fool proof indisputable manner ??
If ‘revenue’ (profits) is not to be recognised /accounted for until the 25% completion is reached, that means the invoice raised by seller and collected from buyer might have to be only for the ‘actual cost’ of goods and services incurred up to that stage. Therefore, that will result/lead to an added hurdle in arriving at the ‘VALUE’ to be deducted for the LAND component. To be precise, that will have the woeful effect of introducing one more spoke in the ‘wheel’ (mechanism) for quantifying the amount on which GST has to be billed and collected from BUYER – Agree!?!
Regrettable that all and sundry, including high profile cum leading GST law practitioners (lawyers and CAs, alike), have remained muted to the Pr. Posts on the related controversy. That is, why, as in any case, for several enumerated reasons, the value of land component is not at all determinable, and, therefore, GST Levy on sale and buy of a Flat/Apartment is bound to prove a nonstarter.
In own well-founded perspective, the subject controversy, instead of being prolonged any more, stupidly so, ought to be set at rest/ given a decent burial, sooner the better.
Experts, to prove their own competence and mettle, so that discharge their loyalty to the adversely impacted clientele are hereby earnestly urged to strive and put in their efforts to accomplish the indicated end for THE COMMON GOOD!