Vastukar Township Pvt Ltd Jaipur v. Dcit Jaipur

Vk Dj Vihyh Vf Kdj K T Iqj U K Ihb T Iqj In The Income Tax Appellate Tribunal Jaipur Benche S Jaipur Jh Dqy Hkkjr U Kf D Lnl Oa Jh Foe Flag Kno Ys Kk Lnl Ds Le K Before Shri Kul Bharat Jm Shri Vikram Singh Ya Dav Am Vk Dj Vihy La Ita No 105 Jp 2017 Fu Kzkj K Ok Z Assessment Year 2012 13 M S Vastukar Township Pvt Ltd G 3 4 Geetanjali Tower Ajmer Road Sodala Jaipur Cuke Vs Dcit Circle 2 Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aaccv 1577 C Vihykfkhz Appellant Izr Fkhz Respondent Vk Dj Vihy La Ita No 119 Jp 2017 Fu Kzkj K Ok Z Assessment Year 2012 13 Ito Ward 2 1 Jaipur Cuke Vs M S Vastukar Township Pvt Ltd 710 A Rani Sati Nagar Ajmer Road Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aaccv 1577 C Vihykfkhz Appellant Izr Fkhz Respondent Vk Dj Vihy La Ita No 172 Jp 2017 Fu Kzkj K Ok Z Assessment Year 2011 12 M S Shakuntalam Colonisers Pvt Ltd 103 104 Geetanjali Tower Ajmer Road Jaipur Cuke Vs Acit Central Circle 2 Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aakcs 2988 N Vihykfkhz Appellant Izr Fkhz Respondent Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 2 Vk Dj Vihy La Ita No 106 Jp 2017 Fu Kzkj K Ok Z Assessment Year 2012 13 M S Vastukar Colonisers Pvt Ltd G 304 Geetanjali Tower Ajmer Road Sodala Jaipur Cuke Vs Dcit Circle 2 Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aaccv 1576 D Vihykfkhz Appellant Izr Fkhz Respondent Vk Dj Vihy La Ita No 120 Jp 2017 Fu Kzkj K Ok Z Assessment Year 2012 13 Ito Ward 2 1 Jaipur Cuke Vs M S Vastukar Colonizers Pvt Ltd C 477 Nirman Nagar Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aaccv 1576 D Vihykfkhz Appellant Izr Fkhz Respondent Fu Kzkfjrh Dh Vksj L S Assessee By Shri P C Parwal Ca Jktlo Dh Vksj Ls Revenue By Shri R A Verma Addl Cit Lquokbz Dh Rkjh K Date Of Hearing 22 12 2017 Mn Kksk Kk Dh Rkjh K Date Of Pronouncement 22 12 2017 Vknsk Order Per Vikram Singh Yadav A M These Are Cross Appeals Filed By The Respective Ass Essees And Revenue Against The Orders Passed By Ld Cit A 1 Jaipur Involving Similar Fact Pattern And Identical Questions Relati Ng To Recognition Of Revenues Hence All These Appeals Were Taken Up Fo R Hearing Together And Are Being Disposed Off By This Consolidated Ord Er Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 3 2 At The Outset The Ld Ar Submitted That The Mat Ter Relating To Vastukar Township In Ita No 105 Jp 2017 119 Jp 2 017 For A Y 2012 13 May Be Taken As A Lead Case With The Consent Of Both The Parties The Matter Pertaining To Vastukar Township Has Been Taken As A Lead Case For The Purpose Of Present Discussion A Nd Adjudication Of The Issues That Have Been Raised Before Us In This Case The Respective Grounds Of Appeal Taken By The Assessee And The Rev Enue Are As Under Assessees Grounds Of Appeal Ita No 105 Jp 17 1 The Ld Cit A Has Erred On Facts And In Law In Determining The Gross Profit In Respect Of The Sale For Which Regis Try Has Been Executed At Rs 1 17 80 367 As Against Gross Profit Of Rs 1 17 24 318 Declared By The Assessee And Thus Confirming The Ad Dition Of Rs 56 049 2 The Ld Cit A Has Erred On Facts And In Law In Confirming The Action Of The Ao In Holding That Revenue On Percent Age Completion Basis Should Be Recognized In Respect Of Advance Re Ceived From The Customers Where Such Advance Is More Than 10 Of Th E Consideration Even When The Conditions Of Revenue Recognition Are Not Satisfied And Thereby Determining The Income In Respect Of Such A Dvance At Rs 1 73 71 778 Revenues Grounds Of Appeal Ita No 119 Jp 17 1 Whether On The Facts And Circumstances Of The Case And In Law The Ld Cit A Has Erred In Reducing Profit From Rs 2 29 91 672 To Rs 1 17 80 367 From Sale Proceeds Without Appreciati Ng The Facts Of The Case Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 4 2 Whether On The Facts And In The Circumstances O F The Case And In Law The Ld Cit A Has Erred In Estimating Profit O F Rs 1 73 71 778 From Sale Proceeds In Absence Of Any Substantial Ev Idence To Prove The Claim Of Incomplete Work 3 All These Grounds Of Appeal Relates To Recogniti On Of Revenues By The Assessee Company Which Is Engaged In Developmen T Of Township Project In Collaboration With M S Shakuntalam Colon Izers Pvt Ltd And M S Vastukar Colonizers Pvt Ltd During The Course Of Assessment Proceedings The Assessing Officer On Perusal Of R Ecords Observed That The Assessee Follows Percentage Completion Method But Recognises Only Part Of The Sales As Revenue And No Income I S Offered For Tax In Respect Of The Amount Of Advance Received From Cus Tomers He Therefore Issued A Show Cause As To Why Provisions Of Section 145 3 Should Not Be Applied And Why The Profits Should No T Be Determined By Applying Percentage Completion Method As Per Acco Unting Standards Issued By Icai 4 In Response To The Show Cause The Assessee Vide Letter Dated 22 03 2015 Submitted That The Accounting Policy Fol Lowed By The Assessee Is Given In Schedule 11 Of The Audited Fin Ancial Statement And The Same Is In Accordance With Paras 10 And 11 Of A S 9 Issued By The Institute Of Chartered Accountants Of India Icai As Well As Guidance Note On Accounting For Real Estate Transactions Iss Ued By The Icai It Was Submitted That By Following The Consistent Acco Unting Policy Sales For The Year Are Recognised At Rs 2 11 38 286 As Against The Sale Proceeds Of Rs 4 50 18 026 And No Sales Is Recogn Ised Against The Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 5 Advance Booking Amount Of Rs 4 44 28 514 Received From Customers The Sales And The Corresponding Expenditure Recogni Sed In The Profit And Loss Account Is As Under Particulars Amount Rs Amount Rs Direct Expenses Including Cost Of Land Till 31 03 2012 Less Cost Incurred On Unapproved Land Purchase Cost Registry Cost Conversion Cost Actual Cost Incurred Till 31 03 2012 On Approved Area A Exp Enditure To Be Incurred In Future B Total Cost Of Project C A B Percentage Of Work Completed D A C 100 Projected Sales Revenue Of The Project E Sales Proceeds Realised Till 31 03 2011 F Sales Proceeds Realised During The Year G Total Sales Realisation Up To 31 03 201 2 8 70 501 86 603 1 52 333 94 28 079 4 50 18 026 3 27 65 943 11 09 437 3 16 56 506 3 75 69 614 6 92 26 120 45 73 15 63 59 936 5 44 46 105 Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 6 H F G Sales To Be Recognised Till Date I H D Sales Already Recognised Till 31 03 2011 Sales To Be Recognised In The Current Year J Unearned Revenue To Be Carry Forward In Next Year K H I Percentage Of Cost L C E 100 Total Expenditure To Be Booked Against The Total Sales M L I Expenditure Already Booked Till 31 03 2011 N Expenditure To Be Booked Against Current Year Sales O M N Profit J O 2 48 98 204 37 59 918 2 11 38 286 2 95 47 901 44 27 1 10 23 323 16 09 355 94 13 968 1 17 24 318 5 The Ao However Didnt Find The Submission Of The Assessee As Acceptable He Rejected The Books Of Accounts Of As Sessee And Calculated Profit On The Sales As Per The Registere D Sale Deeds And On Advance Received From Customers By Giving The Follo Wing Findings Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 7 In Case Of Booking Of Revenue Out Of Receipt In Res Pect Of Sale Of Plots As Per Registered Sale Deeds 6 The Guidance Note Issued By The Icai Specificall Y States That The Revenue Recognition In Respect Of Real Estate Devel Opers Builder Should Be As Per Provisions Of As 9 Which Requires The Fol Lowing Three Conditions To Be Fulfilled Before Revenue Is To Be Recognised I The Seller Has Transferred To The Buyer All Signifi Cant Risk And Rewards Of Ownership And The Seller Retain No Effective Con Trol Of The Real Estate To A Degree Usually Associated With The Owne Rship Ii No Significant Uncertainty Exists Regarding The Amo Unt Of Consideration That Will Be Derived From Real Estate Sales Iii It Is Not Unreasonable To Expect Ultimate Collectio N In Case Of Sale Of Plots Through Registered Sale De Ed It Is Amply Clear That The Entire Ownership Has Been Transferred To T He Buyer Hence There Is No Justification For Not Recognising The E Ntire Receipts From Such Sales As Revenue As All The Three Conditions Mentio Ned Above Have Been Unequivocally Fulfilled To The Satisfaction Of Both Seller As Well As Buyer The Ao Also Drawn Reference To Assessees Su Bmission Dated 22 03 2015 Wherein It Was Admitted That Where Tran Sfer Of Legal Title Is A Condition Precedent To The Buyer Taking On The Si Gnificant Risks And Rewards Of Ownership And Accepting Significant Comp Letion Of The Sellers Obligation Revenue Should Not Be Recognis Ed Till Such Time Legal Title Is Validly Transferred To The Buyer Hence Sale Proceeds Received Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 8 During The Year Amounting To Rs 4 50 18 026 Are C Onsidered And Gross Profit On Such Sales Of Rs 4 50 18 026 Was Computed At Rs 2 29 91 672 As Under Working Of Profit In Respect Of Registered Sale Deeds Amount Rs Registry Of Sales Made 4 50 18 026 Less Sales Already Booked Till 31 03 2011 37 59 918 Sales To Be Recognised During The Year A 4 12 58 108 Less Corresponding Cost 44 27 Of The Sales To Be Recognised I E 44 27 Of Rs 4 12 58 108 B 1 82 66 436 Profit On Above C A B 2 29 91 672 Working Of Cost Percentage Total Projected Cost 6 92 26 120 Total Projected Sales 15 63 59 936 Percentage Of Cost 44 27 In Case Of Booking Of Revenue On Advance Received From Customers 7 The Assessee Follows Mercantile Accrual System O F Accounting Income Is Said To Be Received When It Reaches The A Ssessee When The Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 9 Right To Receive Income Become Vested In The Assess Ee It Is Said To Accrue Or Arise Income May Accrue To An Assessee W Ithout Actual Receipt Of The Same If The Assessee Acquires A Ri Ght To Receive The Income The Income Can Be Said To Have Accrued To H Im Though It May Be Received Later On Further It Is Not Only Neces Sary That The Assessee Must Have Contributed To Its Accruing Or Arising By Rendering Services Or Otherwise But Also He Must Have Acquired A Debt In His Favour A Debt Must Have In Existence And He Must Have Acquired A Right To Receive The Payment Unless And Until His Contribution Or Parenthood Is Effective In Bringing Into Existence A Debt Or A Ri Ght To Receive The Payment It Cannot Be Said That Any Income Had Accr Ued To Him 8 From The Terms And Condition Of The Plot Buyer Agreement It Is Clear That Income Has Accrued Arisen To The Assess Ee In Lieu Of The Sale Of Plots To The Customer The Customer Is Very Much Bound By The Payment Schedule And The Assessee Is Entitled To Re Ceive The Payments As Per The Agreement Once The Booking Amount Is Re Ceived By The Assessee The Said Plot Is Booked In The Name Of Cu Stomer And The Assessee Is Obliged To Receive The Payment As Per T He Payment Schedule And The Customer Also Is Obliged To Honour The Paym Ents In Instalments If Any So Both The Parties Are Bound By The Con Tract And The Income Is Said To Have Accrued To The Assessee And Hence C Hargeable To Tax 9 It Is Not Essential That Only When The Transacti On Is Complete In Terms Of Units Being Ready For Occupation And Posse Ssion Is Handed Over To The Customer That The Income Is Accrued To The Assessee In Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 10 Present Case Assessee Acquired The Right To Receiv E It As Per The Terms And Conditions Of The Agreement 10 It Is Immaterial As To How The Assessee Has Sho Wn A Particular Receipt In The Books Of Account Even If Assessee H As Shown The Receipt To Be In Form Of Advance That Does Not Bind The Ao To Examine The Actual Nature Of Receipt In Light Of Surrounding Ci Rcumstances And Referred To The Decision Of The Honble Supreme Cou Rt In Case Of Sutlej Cotton Mills 116 Itr 01 For The Proposition That Th E Way The Entries Are Made By The Assessee In The Books Of Accounts Is No T Determinative Of The Question Whether The Assessee Has Earned Any Pr Ofit Or Suffers Any Loss 11 The Word Advance Conveys The Idea Of Furnishi Ng Tending Or Offering Something Which May Be Returned In The Sam E Form The Forfeiture Clause Clause 6 A In The Terms And Co Nditions Of Plot Buyers Agreement Itself Suggest That The Product Unit Has Been Sold And If The Customer Fails To Make Full Payments Subsequently The Earnest Money Would Be Forfeited Along With Delayed Payment Inter Est Had The Receipt Been In The Form Of Advance By The Assessee It Woul D Have Been Returned To The Customer In The Same Form So The Above Receipts Do Not Partake The Character Of An Advance 12 It Was Held By The Ao That Substantial Advance Booking Amounts Have Been Received From Customers Over And Above Th E Title Already Devolved To The Customers As Seen From The Computa Tion Of Percentage Of Work Completed The Assessee Has Comp Leted Nearly 50 Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 11 Of The Project Hence No Significant Uncertainty I N Case Of Real Estate Sales Since Normally The Amount Of Consideration I S Specified In The Agreement No Significant Uncertainty Exists Regard Ing The Amount Of The Consideration That Will Be Derived From The Sal Es The Assessee And Other Constitutent Companies Have Acquired Land Whi Ch Is Being Sold As Such After Development Of Roads And Other Basis Am Enties Significant Risks And Rewards Devolve To The Customer Once He P Ays A Substantial Amount Against The Agreed Amount Consideration Of T He Plot 13 In View Of Above He Concluded That Assessee Ha S Not Declared Complete And Correct Profits And Has Not Followed A S 9 As 7 Which Tantamount To Not Following As 1 As Per Section 14 5 2 Therefore He Rejected The Books Of Accounts U S 145 3 And Appli Ed Percentage Completion Method And Computed The Income On Advanc E Received From Customers As Under Working Of Profit On Advance Received From Customers Amount Rs Advance Received From Customer As On 31 03 2012 4 44 28 514 Percentage Of Work Completed 45 73 D 2 03 17 159 Less Cost 44 27 E 89 95 131 Profit F D E 1 13 22 028 Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 12 Findings Of The Ld Cit A 14 Being Aggrieved The Assessee Carried The Matte R In Appeal Before The Ld Cit A The Ld Cit A Stated That It Is Cle Ar From The Guidance Note Issued By Icai That The Revenue Is To Be Recog Nised When The Seller Of The Goods Has Transferred To The Buyer Th E Legal Title In The Plots However If The Seller Is Obliged To Perform Any Substantial Acts After The Transfer Of All Significant Risks And Rew Ards Of Ownership Or Title Of Plots Revenue Is To Be Recognised By Appl Ying Percentage Completion Method As Explained In As 7 Constructio N Contracts In The Instant Case The Assessee Has Completed Only 45 73 Of Development Work Till 31 03 2012 And Even Though It Had Execute D Sale Deeds It Still Has To Execute The Devevlopemnt Work In Respect Of These Plots Also For Which Sale Deeds Have Been Executed Accordingly H E Held That Percentage Completion Method Is Also To Be Applied In Respect Of Plots For Which Sale Deeds Have Been Executed And Calcula Ted The Profit At Rs 1 17 80 367 As Under Particulars Amount In Rs Sales Deed Executed 5 44 46 105 Work Completed Revenue To Be Recognised 45 73 2 48 98 204 Revenue Already Recognised 37 59 918 Revenue For The Year 2 11 38 286 Percentage Completion Method Cost 44 27 93 57 919 Profit 1 17 80 367 Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 13 15 With Respect To The Advance Received From Custo Mers The Ld Cit A Stated That Assessee Has Not Recognized Any Revenue On Account Of Advances Received From Customers Whereas Ao Has Computed The Profit By Applying Percentage Completion Method In Respect Of Advance Received From Customers However As Per The Guidan Ce Note Revenue Is To Be Recognized With Reference To The Entire Am Ount Of Sales Consideration For Which Plot Buyers Agreement Were Executed As The Significant Risks And Rewards Of Ownership Has Been Transferred To The Buyer At The Time Of Executing The Agreement Accor Dingly The Ld Cit A Worked Out The Gross Value Of The Receipt In Respect Of Plots Where Advance Is Received And On Such Gross Receipt He Applied Percentage Completion Method To Work Out The Profit At Rs 1 73 71 778 Calculated In The Following Manne R A Share In The Gross Value Of The Advance From Custom Er Particulars Gross Value Received Total No Of Plots Advance From Customer For All The Three Companies 41 47 07 734 23 21 99 169 1402 Less Advances Where Receipt Is Less Than 10 6 03 22 432 12 14 340 185 Advance To Be Considered For Bifurcation In All The Three Companies 35 43 85 302 23 09 84 829 Share In Gross Value In The Ratio Of Advance Shown In The Financial Statements Shakuntlam Colonizers P Ltd 25 98 61 932 16 93 75 433 Vastukar Colonizers P Ltd 2 92 78 084 1 90 83 165 Vastukar Township P Ltd 6 81 63 838 4 44 28 514 Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 14 B The Income As Per Pcm On The Above Advance From Cus Tomer Works Out As Under Gross Advance From Customer 6 81 63 838 Percentage Of Work Completed 45 73 3 11 71 323 Less Cost 44 27 B 1 37 99 545 Profit A B 1 73 71 778 Profit Computed By The Ao 1 13 22 028 Difference 60 49 750 Accordingly The Ld Cit A Enhanced The Income By Rs 60 49 750 16 The Relevant Detailed Findings Of The Ld Cit A Are As Under Viii I Have Duly Considered The Submissions Of The Appellant Assessment Order And The Material Placed On Record It Is Noted That The Ao Has In Effect Applied Project Completion Method Where Sale Deeds Have Been Executed And Percentage Completion Method On Account Of Advances Received From The Customers Whereas The Ap Pellant Has Applied Percentage Completion Method In Respect Of Sale Deeds Executed By It However It Has Not Applied Percent Age Completion Method To The Amount Of Advances Received By It Fro M Customers I E No Revenue Was Recognized In Respect Of Advances Recei Ved From Customers Ix As Per The Guidance Note On Recognition Of Rev Enue By Real Estate Developers Revenue From Sales Or Service Tr Ansactions Should Be Recognized When The Seller Of Goods Has Transfer Red To The Buyer The Property In The Goods For A Price Or All Significan T Risks And Rewords Of Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 15 Ownership Hove Been Transferred To The Buyer And Th E Seller Retains No Effective Control Of The Goods Transferred To O Deg Ree Usually Associated With Ownership And No Significant Uncertainty Exists Regarding The Amo Unt Of The Consideration That Will Be Derived From The Sale Of The Goods X Further As Per The Guidance Note The Point O F Time Of Which All Significant Risks And Rewords Of Ownership Con Be C Onsidered As Transferred Is Required To Be Determined On The Ba Sis Of The Terms And Conditions Of The Agreement For Sale In Case Of Re Al Estate Sales The Events Such As Transfer Of Legal Title To The Buy Er Or Giving Possession Of Real Estate To The Buyer Under An Agreement For Sole Usually Provide An Evidence To The Effect That All Signific Ant Risks And Rewards Of Ownership Hove Been Transferred To The Buyer It Ma Y However Be Noted That In Cose Of Real Estate Soles The Seller Usually Enters Into On Agreement For Sale With The Buyer Of Initial Stages Of Construction This Agreement For Sale Is Also Considered To Have The E Ffect Of Transferring All Significant Risks And Rewords Of Ownership To T He Buyer Provided The Agreement Is Legally Enforceable And Subject To The Satisfaction Of All The Following Conditions Which Signify Transferring Of Significant Risks And Rewards Even Though The Legal Title Is Not Tran Sferred Or The Possession Of The Real Estate Is Not Given To The B Uyer A The Significant Risks Related To The Real Estate Ha Ve Been Transferred To The Buyer In Case Of Real Estate Sa Les Price Risk Is Generally Considered To Be One Of The Most Significant Risks Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 16 B The Buyer Has A Legal Right To Sell Or Transfer His Interest In The Property Without Any Condition Or Subject To O Nly Such Conditions Which Do Not Materially Affect His Right To Benefits In The Property Xi Once The Seller Has Transferred All The Signif Icant Risks And Rewards Of Ownership To The Buyer And Other Conditi Ons For Recognition Of Revenue Specified In Paragraphs 10 And 11 Of As 9 Are Satisfied Any Further Acts On The Real Estate Performed By The Se Ller Are In Substance Performed On Behalf Of The Buyer In The Manner Simi Lar To A Contractor Accordingly In Case The Seller Is Obliged To Perfo Rm Any Substantial Acts After The Transfer Of All Significant Risks And Rew Ards Of Ownership Revenue Is Recognized By Applying The Percentage Of Completion Method In The Manner Explained In As 7 Construction Contr Acts Xii It May Be Mentioned That As Per Para 24 Of As 7 Construction Contract The Recognition Of Revenue And Expenses B Y Reference To The Stage Of Completion Of A Contract Is Often Referred To As The Percentage Completion Method Under This Method Contract Reve Nue Is Matched With The Contract Costs Incurred In Reaching The St Age Of Completion Resulting In The Reporting Of Revenue Expenses And Profit Which Can Be Attributed To The Proportion Of Work Completed Thi S Method Provides Useful Information On The Extent Of Contract Activi Ty And Performance During A Period Xiii It Is Noted From The Assessment Order That The Ao Has Taken Into Account The Entire Amount Of Sale Deeds Executed Ti Ll 31 03 2012 Rs 4 50 18 026 Minus The Sale Deeds Executed Till 3 1 03 201 I Rs 37 59 918 I E Rs 4 12 58 108 And After Deduct Ing Direct Cost At Rs Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 17 1 82 66 436 44 27 Of Rs 4 12 58 108 Comp Uted The Profit Of The Appellant Of Rs 2 29 91 6721 It Is Clear Fro M The Guidance Note That The Revenue Is To Be Recognized When The Selle R Of The Goods Has Transferred To The Buyer The Legal Title In The Plo Ts However If The Seller Is Obliged To Perform Any Substantial Acts After Th E Transfer Of All Significant Risks And Rewords Of Ownership Or Tile Of Plots Revenue Is To Be Recognized By Applying The Percentage Of Complet Ion Method In The Manner Explained In As 7 Construction Contracts I N The Instant Case Under Consideration The Appellant Has Completed On Ly 45 73 Of Development Work Till 31 03 2012 And Even Though It Had Executed Sale Deeds It Still Has To Execute The Development Work In Respect Of Those Plots Also For Which Sale Deeds Has Been Executed Therefore Percentage Of Completion Method Is Also To Be Appli Ed In Respect Of Plots For Which Sale Deeds Has Been Executed Thus In View Of The Above Discussion The Profit B Y Applying Percentage Completion Method On Account Of Sale Dee Ds Executed By The Appellant Is Determined At Rs 1 17 80 367 Ag Ainst Rs 2 29 91 672 Determined By The Ao And Rs 1 17 24 318 Declared By The Appellant 3 2 1 I It Is A Matter Of Fact That The Appella Nt Has Not Recognized Any Revenue For The Year Under Consideration On Acc Ount Of Advances Received From Customers Whereas The Ao Has Taken In To Account The Amount Received From Customers And Computed The Pro Fit Of The Appellant Company At Rs 1 13 22 028 By Applying Percentage Completion Method It May Be Mentioned Here That As Per The Guidance Note The Terms And Conditions Of The Agreement Ent Ered Into Between Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 18 The Seller And The Buyer Is An Important Piece Of E Vidence To The Effect That All Significant Risks And Rewards Of Ownership Have Been Transferred It Would Be Appropriate To Reproduce T He Relevant Terms And Conditions Of The Plot Buyers Agreement Exec Uted With The Buyers As Under 4 That At Present There Is No Subsisting Notifica Tion Or Order By The State Government Or Any Other Government Or Local Authority Regarding Acquisition Or Requisition Or O Therwise For Taking Over Of The Area In Which The Plot Is Locate D In Case Any Such Development Happens Or Takes Place Hereafter The Same Shall Be At The Cost And Risk Of The Buyer Who Will Be Bound To Carry Out And Implement All The Terms Of This Agree Ment Including Payment Of The Outstanding Instalments An D Will Also Thereafter Be Entitled To Receive The Compensation Paid By The Government Or Local Authority In Respect Of The Plo T The Promoter Shall Not Be Responsible Or Liable In Any Manner Whatsoever On Account Of Any Such Development 5 That The Buyer Agrees That If As A Result Of An Y Legislation Order Rule Or Regulation Made Or Issued By The Gov Ernment Or Any Other Competent Authority Or If Any Matter Iss Ue Relating To Such Approvals Permission Notices Notifications By The Competent Authority Ies Become Subject Matter Of Suit Writ Before A Competent Court Or Force Majeure Condition S The Promoter After Allotment Is Unable To Deliver The Plot To The Buyer For His Her Occupation And Use The Buyer Agr Ees That Decision Of Said Competent Authority Court Shall Be Applicable And Binding On All The Concerned Parties Thereto Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 19 8 That Transfer Of The Plot Will Be At Sole Discre Tion Of The Promoter And Will Need His Prior Written Approval Administrative Charges As Prescribed By The Promoter From Time To Time Will Be Paid By The Transfer At The Time Of Transfer Any C Hange In The Name Including Addition Deletion Registered As Pl Ot Buyer With The Promoter Will Be Deemed As Transfer For This Pu Rpose No Administrative Charges For The Transfer Of The Plot Amongst Family Members Husband Wife And Own Children Mother Fathe R And Real Brother Sister Will Be Charged Claims If Any Bet Ween Transferor And Transferee As A Result Of Subsequent Reduction Increase In The Area Or Its Location Will Be Settled Between Th Emselves I E Transferor And Transferee And The Promoter Will Not Be Party To This 13 That All Taxes Whether Levied Or Leviable Now O R In Future On The Said Plot As The Case May Be Shall Be Borne B Y The Buyer From The Date Of Booking Ii It Is Evident From The Above Referred Terms An D Conditions Of Plot Buyers Agreement That All The Significant Risk And Rewards Were Transferred To The Buyer At The Time Of Executing T He Plot Buyer Agreement As The Buyer Can Now Sell The Plot Booke D By Him And Is Also Responsible For The Taxes Levied Or Leviable I N Future And If The Land Is Acquired By Any Government Authority The Same S Hall Be At The Cost And Risk Of The Buyer Further In View Of The Guid Ance Note As Discussed Earlier In This Order The Appellant Was Required To Recognize Revenue On Account Of The Total Contract Amount In Respect Of The Plots For Which Plot Buyer Agreements Were Executed I E The Entire Amount Of Sale Consideration Thereof And Not Only The Amou Nt Received As Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 20 Advance Received From The Customers As The Signifi Cant Risks And Rewards Of Ownership Have Been Transferred And No S Ignificant Uncertainty Exists Regarding The Amount Of The Sale Consideration And Then The Percentage Completion Method Is To Be Appl Ied Iii The Appellant Has Not Recognized Any Revenue On Advances Received From Customers Which Is Not In Consonance With The Percentage Completion Method As Claimed To Be Foll Owed By It Therefore In View Of The Above Discussion It Is H Eld That The Ao Was Justified In Rejecting Books Of Accounts Of The App Ellant U S 145 3 Of The Act As The Appellant Did Not Apply Percentage C Ompletion Method In Respect Of All Cases Wherein The Significant Risks And Rewards Of Ownership Have Been Transferred And No Significant Uncertainty Exists Regarding The Amount Of The Sale Consideration On E Xecuting Of Plot Buyer Agreement And It Has Selectively Followed Pe Rcentage Completion Method Which Cannot Be Approved Iv It Is Pertinent To Mention Here That In The A Ssessment Order The Ao Has Taken Only The Amount Actually Received By T He Appellant As Advances From Customers Whereas The Total Amount Of Contract In Respect Of The Plots For Which Plot Buyer Agreeme Nts Were Executed Was To Be Taken Into Account For Computing Profit O F Th Appellant Thereof As The Significant Risks And Rewards Of Own Ership Have Been Transferred And No Significant Uncertainty Exists R Egarding The Amount Of The Sale Consideration And Then The Percentage C Ompletion Method Is To Be Applied Vi Thus In View Of The Above Discussion It Is H Eld That The Total Amount Or Gross Amount In Respect Of The Plots For Which Plot Buyer Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 21 Agreements Were Executed And Substantial Advances Have Been Received From The Customers By The Appellant Is To Be Taken Into Account For Computing Profit By Applying Percentage Completion Method Since The Project Or The Development Is Co Mplete To The Extent Of Only 45 73 Therefore The Profit On Account Of Advances From Customers Gross Amount Of Contract Is To Be Taken At Rs 1 73 71 778 As Computed By The Ar During Appel Late Proceedings Against Rs 1 13 22 028 Computed By The Ao I E T Here Is Increase Of Profit By A Sum Of Rs 60 49 750 17 Now Both The Parties Are In Appeal Against The Said Findings Of The Ld Cit A In Respect Of Sale For Which Registr Y Has Been Executed The Revenue Is Challenging Reduction In Profit From Rs 2 29 91 672 To Rs 1 17 80 367 From Sale Proceeds And The Assesse E Is Challenging The Determination Of The Gross Profit At Rs 1 17 80 367 As Against Gross Profit Of Rs 1 17 24 318 Declared By The Assessee And Thus Confirming The Addition Of Rs 56 049 By The Ld Cit A Secon Dly In Respect Of Advance Received From The Customers The Revenue Is Challenging The Action Of The Ld Cit A In Estimating Profit Of Rs 1 73 71 178 From Sale Proceeds In Absence Of Any Substantial Evidence To Prove The Claim Of Incomplete Work And The Assessee Is Challenging The Action Of The Ld Cit A In Confirming The Action Of The Ao In Holdin G That Revenue On Percentage Completion Basis Should Be Recognised In Respect Of Advance Received From Customers Where Such Advance Is More Than 10 Of The Consideration Even When The Conditions Of Revenue R Ecognition Are Not Satisfied And Thereby Determining The Income In Res Pect Of Such Advance At Rs 1 73 71 778 Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 22 Assessees Submission 18 The Ld Ar Submitted That The Dispute In The Pre Sent Appeal Is How The Percentage Completion Method Is To Be Applied The Icai Has Issued Guidance Note In Respect Of Accounting Of Re Al Estate Transactions The Relevant Para As Per This Guidanc E Note On The Basis Of Which Income Is Recognised By The Assessee Consi Stently Is As Under Application Of The Revenue Recognition Principles P Rescribed In As 9 To Real Estate Sales Para 2 For Recognition Of Revenue In Case Of Real Estate Sales It Is Necessary That All The Conditions Specified In Para Graphs 10 And 11 Of Accounting Standard As 9 Revenue Recognition As Reproduced Below Are Satisfied 10 Revenue From Sales Or Service Transactions Sho Uld Be Recognised When The Requirements As To Performance Set Out In Paragraphs 11 And 12 Are Satisfied Provided That A T The Time Of Performance It Is Not Unreasonable To Expect Ultima Te Collection If At The Time Of Raising Of Any Claim It Is Unreasona Ble To Expect Ultimate Collection Revenue Recognition Should Be Postponed 11 In A Transaction Involving The Sale Of Goods P Erformance Should Be Regarded As Being Achieved When The Following Co Nditions Have Been Fulfilled Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 23 I The Seller Of Goods Has Transferred To The Buye R The Property In The Goods For A Price Or All Significant Risks And Rewards Of Ownership Have Been Transferred To The Buyer And Th E Seller Retains No Effective Control Of The Goods Transferred To A Degree Usually Associated With Ownership And Ii No Significant Uncertainty Exists Regarding Th E Amount Of The Consideration That Will Be Derived From The Sale Of The Goods Para 3 The Real Estate Sales Take Place In A Varie Ty Of Ways And May Be Subject To Different Terms And Conditions As Specified In The Agreement For Sale Accordingly The Point Of Time At Which All Significant Risks And Rewards Of Ownership Can Be C Onsidered As Transferred Is Required To Be Determined On The Ba Sis Of The Terms And Conditions Of The Agreement For Sale In Case O F Real Estate Sales The Events Such As Transfer Of Legal Title To The Buyer Or Giving Possession Of Real Estate To The Buyer Under An Agreement For Sale Usually Provide An Evidence To The Effec T That All Significant Risks And Rewards Of Ownership Have Been Transferre D To The Buyer It May However Be Noted That In Case Of Re Al Estate Sales The Seller Usually Enters Into An Agreement For Sale With The Buyer At Initial Stages Of Construction This A Greement For Sale Is Also Considered To Have The Effect Of Trans Ferring All Significant Risks And Rewards Of Ownership To The B Uyer Provided The Agreement Is Legally Enforceable And Subject To The Satisfaction Of All The Following Conditions Which Signify Transferring Of Significant Risks And Rewards Even Though The Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 24 Legal Title Is Not Transferred Or The Possession Of The Real Estate Is Not Given To The Buyer A The Significant Risks Related To The Real Estate Ha Ve Been Transferred To The Buyer In Case Of Real Estate Sa Les Price Risk Is Generally Considered To Be One Of The Most Signi Ficant Risks B The Buyer Has A Legal Right To Sell Or Transfer His Interest In The Property Without Any Condition Or Subject To Only Such Conditions Which Do Not Materially Affect His Right To Benefits In The Property Para 4 Once The Seller Has Transferred All The Sig Nificant Risks And Rewards Of Ownership To The Buyer And Other Con Ditions For Recognition Of Revenue Specified In Paragraphs 10 A Nd 11 Of As 9 Are Satisfied Any Further Acts On The Real Estate Performed By The Seller Are In Substance Performed On Behalf O F The Buyer In The Manner Similar To A Contractor Accordingly In Case The Seller Is Obliged To Perform Any Substantial Acts After Th E Transfer Of All Significant Risks And Rewards Of Ownership Rev Enue Is Recognizedby Applying The Percentage Of Completion Method In The Manner Explained In As 7 Construction Contract S Relevant Para 24 Of As 7 Construction Contract Is As Under The Recognition Of Revenue And Expenses By Referenc E To The Stage Of Completion Of A Contract Is Often Referred To As The Percentage Completion Method Under This Method Co Ntract Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 25 Revenue Is Matched With The Contract Costs Incurred In Reaching The Stage Of Completion Resulting In The Reporting Of Revenue Expenses And Profit Which Can Be Attributed To The Proportion Of Work Completed This Method Provides Useful Informa Tion On The Extent Of Contract Activity And Performance During A Period Para 9 2 Of As 9 Provides As Follows Where The Ability To Assess The Ultimate Collection With Reasonable Certainty Is Lacking At The Time Of Rais Ing Any Claim E G For Escalation Of Price Export Incentives I Nterest Etc Revenue Recognition Is Postponed To The Extent Of U Ncertainty Involved In Such Cases It May Be Appropriate To R Ecognize Revenue Only When It Is Reasonably Certain That The Ultimate Collection Will Be Made Where There Is No Uncertai Nty As To Ultimate Collection Revenue Is Recognized At The T Ime Of Sale Or Rendering Of Service Even Though Payments Are Made By Installments Accordingly In Case It Is Unreasonable To Expect U Ltimate Collection The Revenue Recognition Is Postponed To The Extent Of Uncertainty Involved 19 It Was Submitted By The Ld Ar That The Assessee Has Accounted The Income Following The Guidance Note And Accounti Ng Policy But The Ao Where The Sale Deed Is Executed Has Not Applied Percentage Completion Method But Where Advance Is Received Fro M Customers Has Incorrectly Applied Percentage Completion Method T He Ld Cit A Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 26 Accepted The Contention Of Assessee For Determining The Profit Where Sale Deed Is Executed Of Course With Some Variatio N But Has Incorrectly Determined The Profit Where Advance Is Received From The Customers Each Of These Two Issues Is Explained Be Low 20 Booking Of Revenue Where Sale Deed Is Executed A The Sale Consideration Of Plots For Which Sale Deed Has Been Executed Is Rs 5 44 46 105 Till 31 03 2012 The E Ntire Sale Proceeds Cannot Be Considered Revenue As Assessee H As To Incur Expenditure Against Such Receipt As Explained Abov E Work Of Only 45 73 With Reference To The Actual Expenditur E To The Projected Expenditure Has Been Incurred Therefore Only 45 73 Of The Amount Received Where Sale Deed Has B Een Executed Can Be Recognized As Income Thus Till 31 03 2012 Only Rs 2 48 98 204 45 73 Of Rs 5 44 46 105 Can Be Recognized As Revenue And The Remaining Amount Is T O Be Carried Forward As Unearned Revenue In The Next Yea R As Revenue Of Rs 37 59 918 Is Already Recognized Til L 31 03 2011 As Per The Consistent Accounting Policy Followed By The Assessee Assessee Correctly Recognized Revenue For The Year At Rs 2 11 28 286 B As Against Above Ao Considered The Entire Amount W Here The Sale Deed Is Executed As Revenue In Doing So He F Ailed To Consider Para 4 Of The Guidance Note Which Provide That In Case The Seller Is Obliged To Perform Any Substantial Ac Ts After The Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 27 Transfer Of All Significant Risks And Rewards Of Ow Nership Revenue Is Recognized By Applying The Percentage Of Completion Method In The Manner Explained In As 7 Constructio N Contracts As Per Para 24 Of As 7 Where Percentage Of Completion Of Method Is To Be Applied Contract Rev Enue Is Required To Be Matched With The Contract Costs Incu Rred In Reaching The Stage Of Completion Resulting In The Reporting Of Revenue Expenses And Profit Which Can Be Attribute D To The Proportion Of Work Completed Therefore Sale Consi Deration As Per The Sale Deed Cant Be Recognized As Revenue Ra Ther The Proportionate Sale Consideration Attributable To Th E Cost Incurred Can Only Be Recognised As Revenue As Assessee Has Incurred Only 45 73 Of The Total Cost And It Is Obliged To Perform Substantial Act Even After The Transfer Of Signific Ant Risk And Reward Of The Ownership To The Buyer Revenue Is Co Rrectly Recognized At 45 73 Of The Sale Consideration Real Ised Where The Sale Deed Has Been Executed C The Ld Cit A Has Correctly Appreciated These Fact S And Therefore He Rightly Held That Revenue In Respect Of Completed Sales Can Be Recognized Only At 45 73 Of The Amoun T Received I E Rs 2 11 28 286 However In Respect Of The E Xpenditure To Be Allowed Against Such Revenue He Considered 44 2 7 Of Rs 2 11 38 286 I E Rs 93 57 919 As Against Rs 94 13 968 Worked Out By The Assessee Which Also Tallies With The Expenditure Recognized In P L A C Therefore Gross Income Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 28 Where Sale Deed Is Executed Would Work Out At Rs 1 17 24 318 As Against Rs 1 17 80 367 Worked Out By The Cit A 21 Booking Of Revenue In Respect Of Advance From C Ustomers A In Case Of Advance Received From Customers Revenue As Per Para 3 Of The Guidance Note Issued By Icai Can Be Recognised When All Significant Risk And Reward Of Ownership I S Transferred In Case Of Agreement For Sale All Significant Risk And Reward Of Ownership Is Considered To Be Transferred Where The Re Is No Price Risk And The Buyer Has A Legal Right To Sale Or Transfer His Interest In The Property Without Any Condition Or S Ubject To Only Such Condition Which Do Not Materially Affect His R Ight To The Benefits In The Property B In The Present Case On Advance Received From The C Ustomers The Conditions Of Revenue Recognition Are Not Satisfied As The Assessee Has Not Transferred To The Buyer Significa Nt Risks And Rewards Of Ownership This Is Evident From Para 7 1 0 Of The Plot Buyers Agreement Where It Is Categorically Provided That If The Buyer Default In Depositing The Instalment Amount M Aximum Two Times The Assessee Shall Have The Right To Cancel The Agreement And Forfeit The Earnest Money Interest On Delayed Payment Etc And The Amount Paid Over And Above The Earnest Mone Y Shall Be Refunded To The Buyer Only After Realising Such Amo Unt From Resale Of The Plot It Is Further Provided That Tra Nsfer Of Plot Shall Be At Sole Discretion Of The Assessee And Need His Written Prior Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 29 Approval And That The Actual Rightful And Meaningfu L Possession Shall Be Handed Over To The Buyer Only After Receiv Ing Entire Sales Consideration These Conditions Clearly Show That Buyer Has No Legal Right To Sale Or Transfer His Interest In The Property Till The Entire Sales Consideration Is Paid By Him Therefore The Condition Laid Down In The Guidance Note For Revenu E Recognition With Reference To Advance Received From Customer Is Not Satisfied C It Is Also Submitted That As Per The Consistent Acc Ounting Policy Followed By The Assessee Assessee Is Not Recognizi Ng The Revenue In Respect Of The Advance Received From Cus Tomers Advance Received Is Said To Accrue Only When Sale D Eed Is Registered And Not On The Basis Of The Plot Buyers Agreement Reliance In This Connection Is Placed On The Follow Ing Cases S K Properties Vs Ito 2017 162 Itd 419 Bang Trib The Right Title Or Interest In The Immovable Prope Rty Can Be Transferred Only By Way Of Registering The Conveyan Ce Deed Executed In This Behalf Even The Accounting Standa Rd 9 Dealing With The Recognition Of Income Also Lays Down That The Income In Respect Of Transfer Of Immovable Property Can Be Re Cognized Only When The Risks Rewards And Ownership Of The P Roperty Is Transferred To The Buyer Therefore The Matter Req Uires Fresh Examination By Assessing Officer In Light Of The Ab Ove Position Of Law Therefore Court Remand This Matter Back To Th E File Of Assessing Officer With A Direction That The Income In Respect Of Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 30 Sale Of Plots Can Be Recognized Only In The Year In Which Conveyance Deed Executed Is Registered In Favour Of The Buyers And To Allow The Development Expenditure Incurred A S Expenditure Or The Expenditure Likely To Be Incurre D On The Plots Sold As Expenditure And This Direction Also Goes I N Line In Consonance With The Provisions Of Accounting Standa Rd 9 Which Clearly Lays Down That Matching Is Required To Be D One On Accrual Basis In Respect Of The Income Offered To T Ax And Upheld By Honble Supreme Court In The Case Of Cit Vs Tap Aria Tools Ltd Acit Vs Happy Home Corporation 2017 50 Cch 0076 Ahd Trib Ao Did Not Dispute With Regard To Stand Of Assessee That Amounts Which Had Been Accounted In Regular Books O F Accounts Would Be Taxed When Sale Deed Would Be Executed Or Possession Will Be Delivered To Prospective Buyers Different Yardstick Was Adopted For On Money Received By Asse Ssee Over And Above Amounts Stated In Regular Books Of Accoun Ts Analysis Of Ao Was That Against This Amount Asses See Would Not Be Required To Incur Expenditureit Was Net Rea Lization Which Had Only Profit Componentright To Retain Thi S Amount Would Accrue To It When Sale Deed Would Be Executed Or Possession Of Flats Would Be Given To Prospective B Uyers On Completion Of Projectfor Example If On Account Of Any Reason Project Could Not Be Completed Then Assessee Would Be Required To Refund Money And In That Situation On Money Would Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 31 Also Be Refundedthus Right To Receive Or Retain T His Component Was Subject To Execution Of Sale Deed Or Handing Over Of Possessiontitle In Property Would Be Trans Ferred Not In Year In Which Assessee Received Part Consideration As Earnest Money But It Was To Be Construed In Year When Sales Was Registered Or Possession Was Handed Over To Prospec Tive Buyersgujarat High Court In Case Of Cit Vs Shival Ik Buildwell Held That Assessee Being Developer Of Project Prof It In His Case Arose On Transfer Of Title Of Property And Receipt Of Any Advances Or Booking Amount Could Not Be Treated As Trading Receipt Of Year Under Considerationtribunal Further Noted Tha T Such Method Of Accounting Followed By Assessee Had Been Accepted By Revenue In Earlier Yearstribunal Was Therefore Of The Opinion That Aos Decision To Reject Book Results D Uring Year Under Consideration Was Not Justifiedcit A Delete D Addition On Ground That Same Amount Could Not Be Taxed Twice Because This Very Amount Had Been Offered For Taxation In D Ifferent Years And Same Rate Of Tax Was Applicable Upon Assesseer Evenues Appeal Dismissed Cit Vs Ashaland Corporation 1982 133 Itr 55 Guj Hc Income Accrues On Sale Of Land And Arises In The Ye Ar In Which The Title In The Property Is Transferred And Not In The Year In Which Assessee Received Part Of Consideration And E Arnest Money The Transaction Of Sale Of Immovable Propert Y Becomes Complete Only On Possession Of Title Which Takes Pl Ace Only When Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 32 Registered Deed Is Executed Some Receipt Of Earnes T Money And Advance Receipt Of Money Towards Transaction Would Not By Itself Partake The Character Of Taxable Income As T He Registered Sale Deed Was Executed Only In The Subsequent Year In This Regard Head Notes From The Judgment Are Referred A S Under The Land Purchased By The Assessee Which Forms Par T Of Its Stock In Trade Would Continue To Be So Until And U Nless It Sells It The Business Deal In Respect Of The Land Would Be Complete Only When The Assessee Executed A Sale Deed Since It Was Only On Completion Of The Sale Transaction That The Asse Ssee Could Be Said To Have Earned Profit Or Suffered Loss The Ea Rnest Money And Part Payment Of Price Would Not Constitute Trad Ing Receipts For The Assessment Year In Which They Were Received Unless The Title Of The Assessee Is Extinguished The Title To The Purchaser Cannot Arise Both Cannot Be The Exclusive Owners O F The Same Property At The Same Time It Was Axiomatic That An Agreement To Sell Does Not Create Any Interest In Favour Of T He Purchaser It Is On Completion Of The Transaction Of Purchase And Sale Culminating In The Extinguishment Of The Title Of T He Vendor And Simultaneous Creation Of The Title In The Vendee Th At The Assessee Earns Profit Or Suffers Loss A Transactio N Which May Or May Not Ultimately Result In A Completed Sale By Ex Ecuting A Registered Conveyance Is No Transaction At All For The Purpose Of Working Out Profit Receipt Of Sum Amount Would Ass Ume The Character Of Income Or Profit Only When The Sale Tr Ansaction Is Completed In Accordance With Law The Land Does Not Cease To Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 33 Be The Stock In Trade Of The Assessee Unless And Un Til The Sale Is Completed Therefore The Amount Received By The As Sessee By Way Of Earnest Money And Part Payment Of The Purcha Se Price Cannot Be Treated As Its Trading Receipt Paras Buildtech India Private Limited Anr Vs Ci T 2016 382 Itr 0630 Del Hc Advance Amounttreatment Of Advance Amount Received By Assessee As Incomeapplication Of Percentage Comple Tion Methodassessee Engaged In Business Of Real Estate As A Developerassessee Either Purchased Land In Its Own Name Or Got Power Of Attorney From Land Owner In Case Prope Rty Was Owned By Another Party So As To Carry Out Activitie S Of Development On Land In Terms Of A Collaboration Agr Eement Assessee Entered Into Agreements To Develop And Sel L Overall Projects In Terms Of Sharing With Ownerassessee En Tered Into Contracts With Various Buyers And Received Sums By Way Advance For Booking Or Reserving Flats Shops Areas On Completion Of Project Assessee Handed Over Possess Ion Of Flats Booked To Respective Customers Buyers Along With Ex Ecution Of Sale Conveyance Deed Assessee Regularly Followed A Ccounting Standard As 9 Issued By Institute Of Chartered Ac Countants Of India Icai In This Method Revenue Was Recognize D As And When Significant Risk And Reward Of Ownership Title Was Transferred All Sums Received For Construction Pro Ject Till Such Time Were Treated As Advances And Shown As Liabilit Y All Expenses Incurred In Construction Were Accounted Fo R In Stock In Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 34 Trade And Or Block Of Buildings And Reflected As Su Ch In Balance Sheet Of Assesseeao Rejected Submission Of Assesse E And Held That As 7 Was Applicable To Assessee Ao Held That Assessee Was Acting As A Contractor And Held That Significa Nt Risks And Rewards Of Ownership Had Been Transferred By Assess Ee To Buyers When Agreements To Sell Were Entered Into Wi Th Them Books Of Account Of Assessee Were Rejected U S 145 And Its Profits Were Computed By Applying Asao Added A Sum Of Rs 1 56 88 100 To Assessees Declared Income By App Lying Percentage Completion Method Cit A Also Noted Tha T Entire Exercise Was Revenue Neutral As Ao Had Only Advance D Accrual Of Income From Ay 2006 07 To Ays 2004 05 And 2005 0 6 Cit A Held That Percentage Completion Method Would Not Apply In Assessee Case Itat Reversed Order Of Cit A And Accepted Plea Of Revenue That Percentage Completion Method W Ould Apply Since Assessee Had Transferred Risks And Rewards To Buyers Even Prior To Commencement Of Construction Activitieshe Ld Action 145 1 Of The Act States That Income Chargeable Un Der Heads Profits And Gains Of Business Or Profession Shall Be Computed In Accordance With Either Cash Or Mercantile System Of Accounting Regularly Employed By Assessee It Was Only With Effect From 1st April 2015 That Change Had Been Brought About I N Section 145 2 Which Permitted Central Government To Notif Y In Official Gazette From Time To Time Income Computation And Di Sclosure Standards To Be Followed By Any Class Of Assesses O R In Respect Of Any Class Of Income That Change Was Prospectiv E And In Any Event Did Not Apply To Case On Handit Is Settled L Egal Position Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 35 That It Is Not Open To An Ao To Reject Accounts Of Assessee Unless He Comes To Determination That Notified Accounting Standards Have Not Been Regularly Followed By Assessee As Po Inted Out By Cit A In Order Dated 2nd July 2010 As Of Icai Did Not Have Any Statutory Recognition Under The Act Although It Was Binding Under The Companies Act 1956 Method Of Accounting Followed By Assessee In Present Case I E Project Completion Method Was Certainly One Of Recognized Methods And Had Been Co Nsistently Followed By It No Good Reason For Itat To Have Rev Ersed Finding Of Cit A Only Reason Given In Impugned Ord Er Of Itat Was That Risks And Rewards Of Ownership Were Tran Sferred To Buyers Who Had Paid Booking Advance Amounts And In Some Cases These Rights Were Transferred To Third Partie Showever This Did Not In Any Manner Affect Treatment Of Said Amounts In Books Of Assesseeas Noted Hereinbefore Expenses O F Construction Were Not Debited To P L Account Of Ass Essee It Was Shown As Cost Of Construction Or Block Of Build Ings Explanation Added By Way Of Notes To Accounts Was N Ot Taken Note Of By Itat When It Came To Conclusion That Per Centage Completion Method Should Apply To Assessee In Cit Iv V Shivalik Buildwell P Ltd 2013 40 Taxmmann Com 219 Gujarat It Was Held That Assessee Who Was A Deve Loper Was Entitled To Book Amount Received As Booking Advance As Income On Transfer Of Propertytill Then Advance Booking A Mounts Could Not Be Treated As His Trading Receipthigh Co Urt Recognized That Assessee In That Case Was Entitled To Apply Project Completion Method In Terms Of Applicable As High Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 36 Court Answered Question A As Far As Ay 2005 06 In Negative I E Favour Of Assessee And Against Revenueassesse Es Appeal Allowed D It May Be Noted That Assessee Has Accounted For Inc Ome In Respect Of These Advances In Subsequent Years When Registry Of These Plots Took Place The Position Of The Total R Egistry And Advance From Customer Up To 31 03 2015 Is As Under Amount Of Registry Done Up To 31 03 2015 Rs 6 88 31 758 Advance From Customers Up To 31 03 2015 Rs 3 37 47 056 From The Above It Can Be Noted That In Respect Of P Art Of The Advance Received From The Customer Till 31 03 2012 Registry Has Been Done In The Subsequent Years And Offered For T Ax As Per The Method Of Accounting Consistently Followed By The A Ssessee In Subsequent Years Income So Offered Has Been Accept Ed And Therefore Taxing The Income As Per The Method Adop Ted By The Lower Authorities Would Tantamount To Double Taxati On Hence The Addition Made By Ao And Enhanced By The Ld Cit A With Reference To The Advance Received From Customer Is Unjust 23 In View Of Above It Was Submitted That The Add Ition Of Rs 1 13 22 628 Made By The Ao And Enhanced By The Ld Cit A To Rs 1 73 71 778 In Respect Of Advanced Received Fr Om The Customer Is Uncalled For Be Directed To Be Deleted Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 37 24 On The Other Hand Ld D R Vehemently Argued Th E Matter He Took Us Through The Findings Of The Ao And The Ld C It A Which We Have Noted Above Further Ld Dr Submitted That Even Th Ough Assessee Claims That It Follows Percentage Completion Method Of Recognition Of Revenues In Reality Revenues In Terms Of Advance Received From The Plot Buyers Have Not Been Recognized At All And In Respect Of Duly Executed Sale Deeds Again The Revenues Have Been R Ecognized To That Extent Of Work Completed Thus The Assessee Has Fol Lowed A Mix Approach Which Cannot Be Accepted He Drawn Our Re Ference To The Decision Of The Honble Supreme Court In Case Of Ci T Vs Bilahari Investment 168 Taxman 95 And Cit Vs Shri Goverdha N 69 Itr 675 He Also Referred To The Decision Of The Coordinate Bench In Case Of Paras Build Call P Ltd 57 Taxmann Com 12 And Ou R Reference Was Drawn To Para 10 And Para 12 1 12 2 Of The Said D Ecision Which Reads As Under 10 Turning To The Taxation Principle Relevant For Our Purpose We Find That Section 5 Contains The Scope Of Total Income It Provides Inter Alia That All Income From Whatever Source Derived Which Accrues Or Arises Or Is Deemed To Accrue Or Arise Is Included In The Sc Ope Of Total Income Under The Mercantile System Of Accounting Which Th E Extant Assessee Is Following An Income Becomes Taxable When Right To Receive An Income Is Finally Acquired Ordinarily When Some G Oods Products Are Sold By A Businessman Income Does Not Arise Before The Transfer Of Title In Such Goods To The Buyer It Is Because Tha T Till That Time The Buyer Does Not Acquire Any Risks And Rewards Attach Ed To The Product Which Pass Only With The Sale But If The Product U Nder Sale Is Of A Unique Nature Such As A Commercially Constructed Unit For Which The Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 38 Developer Has Entered Into Agreement For Sale At Th E Initial Stage Of Construction By Transferring All Significant Risks And Rewards Of The Ownership To The Buyer The Income Accrues On Year To Year Basis By Considering The Percentage Of Completion Of The Pro Perty Under Transfer It Is So For The Reason That After Signin G Agreement To Sell The Developer Acquires An Infallible Right Over The Pay Ments Received Towards Sale Consideration Which Coincide With The Progress In Construction The Buyer Simultaneously Acquires Own Ership Of The Right In The Property Much Before The Transfer Of Legal T Itle In His Favour Such A Right In The Hands Of Buyer Is A Valuable Right C Apable Of Transfer To Any Third Person At Any Stage Of Construction As S Uch It Is Wrong To Say That No Profit Accrues To The Developer Builder Till The Execution Of Registered Sale Deed The Position May Be Different When The Developer Undertakes The Construction Work Without Entering I Nto Any Agreement For Sale To The Buyers At The Initial Stage When T He Developer First Completes The Construction Work At His Own And Then Sells The Commercial Units To The Buyers No Income Can Be Sa Id To Have Accrued To The Developer Till The Construction Is Completed And Sale Is Made To The Buyers By Transfer Of Legal Title The Reason B Eing That Till The Transfer Of Title To The Buyers It Is Only The Dev Eloper Who Holds All The Risks And Rewards Of Ownership Income Becomes Taxa Ble Only When It Accrues And It Accrues When Right To Receive It Is Finally Acquired A Right To Receive Income In The Case Of Sale Of Commercial Unit Is Acquired When Risks And Rewards Attached To Its Ownership Ar E Transferred To The Buyers And Not Before Or After That It Is But Natu Ral That No Developer Will Transfer Risks And Rewards Of Ownership To The Buyers Until He Has Secured The Receipt Of Sale Consideration This App Ears To Be The Reason Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 39 Which Propelled The Institute To Come Out With Guid Ance Note In 2006 Requiring The Adoption Of The Percentage Completion Method Alone For The Recording Of Accounting Transactions By Develop Ers So That The Accounts Give A True And Fair View Of Its Profits Similar View Has Been Reiterated In The Guidance Note Issued In 2012 So The Litmus Test Of Accrual Of Income Of A Developer Under The Mercanti Le System Of Accounting Is The Passing Of Risks And Rewards Of O Wnership To The Buyers 12 1 Before Applying Them It Is Sine Qua Non To No Te Their Salient Features Under The Percentage Of Completion Method Income Accrues Matching With The Stage Of Completion Reached Up To The End Of The Year Caveat Is That The Risks And Rewards In The C Onstruction Must Have Been Transferred To The Buyer In The Absence Of Su Ch A Transfer There Can Be No Question Of Accrual Of Income Simply On T He Basis Of The Owner Constructing His Property Meant For Sale On C Ompletion At A Later Stage Income Is Computed Under This Method By Dedu Cting The Costs Incurred In Reaching The Stage Of Completion From T He Proportionate Sale Price Attributable To The Work Completed In Contra St To That Under The Project Completion Method Or As We Also Commonly C All The Completed Contract Method Income Accrues Only When The Contr Act Is Completed Or Substantially Completed Substantially Completed Means That When Only Minor Construction Work Is Left To Be Done Un Der This Method The Costs Incurred On Year To Year Basis Up To The Stag E Of Completion Or Substantial Completion Of Construction Are Treated As Work In Progress Similarly The Payments Received Are Also Accumulate D During The Course Of The Contract And Shown As Liability In The Balan Ce Sheet Income Accrues Only Upon The Completion Or Substantial Com Pletion Of The Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 40 Construction Activity Here Again The Same Caveat Applies That The Developer Should Have Transferred The Risks And Rew Ards Of Ownership To The Buyers At Initial Stage If There Is A Prior Agreement But There Is No Transfer Of Risks And Rewards Of Ownership To Th E Buyer Then No Income Would Accrue Till The Passing Of Risks And R Ewards To The Buyer At The Time Of Completion Or Substantial Completion Of The Construction Activity On The Other Hand If There Is No Prior A Greement For Sale Then Income Accrues Only When Sale Is Actually Made Whi Ch Event May Happen After The Completion Or Substantial Completi On Of Construction 12 2 It Can Be Noticed From The Decisions Available On The Point That The Assessee Has A Choice Of Consistently Following Eit Her The Project Completion Method Or The Percentage Completion Meth Od When It Has Entered Into An Agreement For Sale And Transferred Risks And Rewards Of Ownership To The Buyer At The Initial Stage Obviou Sly The Choice To The Assessee Is Restricted To Either Of The Two Methods And It Cannot Breach Both Of Them When A Developer Having Transferred Risks And Rewards Of Ownership To The Buyer At The Initial Stage Fol Lows The Percentage Completion Method On A Consistent Basis The Income Accrues On Year To Year Basis In Line With The Progress Of The Constru Ction On The Other Hand When Such A Developer Follows The Project Com Pletion Method Income Accrues On The Completion Or Substantial Com Pletion Of The Project The Essence Of The Project Completion Meth Od Is The Completion Or The Substantial Completion Of Constru Ction But When Such A Developer Having Initially Transferred All The R Isks And Rewards Of Ownership To The Buyers Offers Income At The Time Of The Registration Of Sale Deed Then This Manner Of Offering Income Fail S To Accord With The Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 41 Project Completion Method Such A Course Of Action Obviously Results Into Shifting Of Income From The Year Of Completion Or Substantial Completion Of Construction Contract To Later Year S Which Is Impermissible Our Findings 25 We Have Heard The Rival Contentions And Perused The Material Available On Record The Issue In Dispute Relates T O Recognition Of Revenue By The Assessee Which Has Been Categorized Into Two Broad Categories Revenues Where The Assessee Has Entere D 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 Accountin G 26 The Assessee Is Engaged In Development Of Resid Ential Township Project South City Located In Village Jaisinghpur A Rampura Bujurg Near Chaksu Tonk Road Jaipur In Collaboration Wit H 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 Pl Ot Of Specified Size And Location And The Agreed Price Covers Developmen T Of Internal Services Such As Roads Electricity Water And Drai Nage System Within The Peripheral Limits Of Township The Nature Of Transa Ction Under Consideration Is Therefore Sale Of Plots Of Land Wi Th Development Of Internal Common Facilities Within The Township 27 The Assessee Has Contended That By Following C Onsistent Accounting Policy Where The Revenues Are Recognized On Percentage Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 42 Completion Method During The Year Under Considerat Ion Revenues For The Year Are Recognised At Rs 2 11 38 286 As Per Registered Sale Deeds And No Revenues Are Recognised Against The Ad Vance Booking Amount Of Rs 4 44 28 514 Received From Customers The Said Accounting Policy Has Been Duly Reflected In Schedu Le 11 Of Its Audited Financial Statement And The Same Is In Accordance W Ith 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 T He 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 Recogniz Ed As Revenues And Secondly The Advance Received From The Customers S Hould Be Recognized To The Extent Of Percentage Of Work Comp Leted In The Township Project 28 It Would Therefore Be Relevant To Refer To The Recommendations As Contained In The Said Guidance Note Issued By Th E Icai And The Same Are Reproduced As Under 6 Revenue In Case Of Real Estate Sales Should Be Recognized When All The Following Conditions Are Satisfied I The Seller Has Transferred To The Buyer All Sig Nificant Risks And Rewards Of Ownership And The Seller Retains No Effective Control Of The Real Estate To A Degree Usually Asso Ciated With Ownership Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 43 Ii No Significant Uncertainty Exists Regarding Th E Amount Of The Consideration That Will Be Derived From The Rea L Estate Sales And Iii It Is Not Unreasonable To Expect Ultimate Col Lection 7 The Determination Of Point Of Time When All Sign Ificant Risks And Rewards Of Ownership Are Transferred Depends On The Facts And Circumstances Of Each Case Considering The Terms An D Conditions Of The Agreement In Case Of Real Estate Sales All Signif Icant Risks And Rewards Of Ownership Are Normally Considered To Be Transfer Red When Legal Title Passes To The Buyer E G At The Time Of The Regis Tration With The Relevant Authorities Of The Real Estate In The Nam E Of The Buyer Or When The Seller Enters Into An Agreement For Sale A Nd Gives Possession Of The Real Estate To The Buyer Under The Agreement All Significant Risks And Rewards Of Ownership Are Also Considered To Be Transferred If The Seller Has Entered Into A Legally Enforceable Agree Ment For Sale With The Buyer And All The Following Conditions Are Satisfie D Even Though The Legal Title Is Not Passed Or The Possession Of The Real Estate Is Not Given To The Buyer A The Significant Risks Related To Real Estate Ha Ve Been Transferred To The Buyer In Case Of Real Estate P Rice Risk Is Generally Considered To Be One Of The Most Signific Ant Risks B The Buyer Has A Legal Right To Sell Or Transfer His Interest In The Property Without Any Condition Or Subject To O Nly Such Conditions Which Do Not Materially Affect His Right To Benefits In The Property Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 44 8 When The Seller Has Transferred To The Buyer All Significant Risks And Rewards Of Ownership It Would Be Appropriate T O Recognize Revenue At That Stage Subject To Fulfillment Of Other Condi Tions Specified In Paragraph 6 Above Provided The Seller Has No Furth Er Substantial Acts To Complete Under The Contract However In Case Th E Seller Is Obliged To Perform Any Substantial Acts After The Transfer Of All Significant Risks And Rewards Of Ownership Revenue Should Be Recognized On Proportionate Basis As The Acts Are Performed I E By Applying T He Percentage Of Completion Method In The Manner Explained In Accoun Ting Standard As 7 Construction Contracts An Example Is A Bui Lding Or Other Facility On Which Construction Has Not Been Completed Though All Significant Risks And Rewards Of Ownership Have Been Transferre D Pursuant To The Fulfilment Of Conditions Stated In Paragraph 7 Abov E Another Example Is Of A Land Which Is Yet To Be Developed Though The S Eller Has Transferred All Significant Risks And Rewards Of Ownership Of T He Land To The Buyer Through An Agreement For Sale As Per Paragraph 7 Ab Ove 9 Whether The Seller Retains No Effective Control Of The Real Estate Transferred To A Degree Usually Associated With Own Ership Also Depends On The Facts And Circumstances Of Each Case Conside Ring The Terms And Conditions Of The Agreement The Nature And Extent Of Continuing Involvement Of The Seller Should Be Assessed To Det Ermine Whether The Seller Retains Effective Control In Some Cases Re Al Estate May Be Sold With A Degree Of Continuing Involvement By The Sell Er Such That The Risks And Rewards Of Ownership Are Not Transferred Examp Les Are Sale And Repurchase Agreements Which Include Put And Call Op Tions And Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 45 Agreements Whereby The Seller Guarantees Occupancy Of The Property For A Specified Period 10 In Case Of Real Estate Sales Since Normally Th E Amount Of Consideration Is Specified In The Agreement No Sig Nificant Uncertainty Exists Regarding The Amount Of The Consideration Th At Will Be Derived From The Sales 11 For Determining Whether It Is Not Unreasonable To Expect Ultimate Collection A Seller Should Consider The Evidence O F The Buyers Commitment To Make The Complete Payment Where The Ability To Assess The Ultimate Collection With Reasonable Cert Ainty Is Lacking At The Time All Significant Risks And Rewards Of Ownership Are Transferred To The Buyer Revenue Recognition Is Postponed To The Exte Nt Of Uncertainty Involved For Example When The Aggregate Of The Pa Yments Received Including The Buyers Initial Down Payment Or Con Tinuing Payments By The Buyer Provide Insufficient Evidence Of The Buy Ers Commitment To Make The Complete Payment Revenue Is Recognized On Ly To The Extent Of Realisation Of The Consideration Provided Other Conditions For Recognition Of Revenue Are Satisfied 12 An Enterprise Should Disclose The Accounting Po Licy Regarding Recognition Of Revenue Arising From The Real Estate Sales Including The Timing Of Transfer Of Significant Risks And Rewards Of Real Estate Which Is The Subject Matter Of Sale Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 46 Further It Is Noted That As Per As 7 The Recognit Ion Of Revenue And Expenses By Reference To The Stage Of Completion Of A Contract Is Often Referred To As The Percentage Completion Method Un Der This Method Contract Revenue Is Matched With The Contract Costs Incurred In Reaching The Stage Of Completion Resulting In The Reporting Of Revenue Expenses And Profit Which Can Be Attributed To The Proportio N Of Work Completed 29 In The Instant Case In Respect Of Transaction S Where Sale Deeds For Plots Of Land Have Been Duly Executed And Regis Tered With The Relevant Authorities There Is No Dispute That The Assessee Has Transferred To The Buyer All Significant Risk And R Ewards Of Ownership And The Assessee Retains No Effective Control Of Th E Real Estate To A Degree Usually Associated With Ownership And No Si Gnificant Uncertainty Exists Regarding The Amount Of The Consideration An D Its Collection As The Same Has Been Fully Recovered Prior To Signing Of The Sale Deed 30 At The Same Time What Is Equally Relevant To Consider Is The Economic Substance Of The Transaction As We Have Noted Above In Terms Of Plot Buyers Agreement The Buyer Agrees To Purchase A Plot Of Specified Size And Location And The Agreed Price Co Vers Development Of Internal Services Such As Roads Electricity Water And Drainage System Within The Peripheral Limits Of Township The Econo Mic Substance Of Transaction Under Consideration Is Therefore Sale O F Plots Of Land Alongwith Development Of Internal Common Facilities Within The Township The Buyer Of Plot Of Land Is Not Paying Merely For Piece Of Land Cut Into Specified Size At A Given Location Bu T Also For Development Of Various Common Facilities There Is No Separate Identifiable Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 47 Consideration For Development Activities Which Is A Vailable On Record And Therefore One Can Only Speculate And Debate Ab Out Whether These Activities Are Substantial Or Not The Fact Remains That Unless Such Facilities Are Made Available And Functional These Plots Of Land Cannot Be Put To Intended Use The Development Activities Are Therefore Closely Linked To The Sale Of Plot Of Land And The Economic Substance Of The Transaction Is Therefore Sale And Purchase Of Devel Oped Plots Of Lands The Assessee Is Therefore Obliged To Perform The Sp Ecified Development Activities Even After The Sale Deeds Have Been Duly Executed In Favour Of Buyers The Revenues In Such Cases Should There Fore Be Recognized On Proportionate Basis As The Acts Are Performed I E By Applying The Percentage Of Completion Method In The Manner Expla Ined In Accounting Standard As 7 Construction Contracts Which Provides That Contract Revenue Are Required To Be Matched With Th E Contract Costs Incurred In Reaching The Stage Of Completion Resul Ting In The Reporting Of Revenue Expenses And Profit Which Can Be Attributed To The Proportion Of Work Completed We Find That The Ao Has Not Disputed The Fact That The Assessee Is Required To Carry Out The Specified Development Activities And Also The Application Of Percentage Of Completion Method Of Recognition Of Revenues But Ha S Missed This Finer Nuisance Of Interconnection Between The Economic Su Bstance Of The Transaction And Application Of Percentage Completio N Method Of Recognition Of Revenues While Analyzing The Guidanc E Note Issued By The Icai And Which Has Been Rightly Appreciated By The Ld Cit A The Stage Of Development Of The Township Project Has Be En Determined By The Assessee At 45 73 With Reference To Entire Lan D And Development Cost For The Whole Project And Is Not In Dispute Be Fore Us The Total Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 48 Revenues In Respect Of Executed Sale Deeds Till 31 03 2012 Comes To Rs 5 44 46 105 And 45 73 Thereof Comes To Rs 2 48 98 204 And After Allowing Credit For Revenues Already Recognized In The Previous Year Amounting To Rs 37 59 918 The Revenues For The Yea R Have Been Rightly Determined By The Ld Cit A At Rs 2 11 38 286 And W E Hereby Affirm His Findings In This Regard 31 Now We Refer To The Second Category Of Revenue S Which Are Advances And Booking Amounts Received From The Cust Omers In Terms Of Plot Buyers Agreement As Against Revenues In Respe Ct Of Executed Sale Deeds Which We Have Discussed Above The Ao Has Ap Plied Percentage Of Completion Method And To The Extent Of Developme Nt Of The Township Project Determined By The Assessee At 45 73 Has B Rought To Tax Revenues Amounting To Rs 2 03 17 159 Out Of Total A Dvances To The Tune Of Rs 4 44 28 514 Received As On 31 03 2012 The L D Cit A Has However Considered The Whole Of Sale Consideration Amounting To Rs 6 81 63 838 In Respect Of Which The Plot Buyers Agr Eement Have Been Executed And Such Advances Have Been Received And Brought To Tax Revenues Amounting To Rs 3 11 71 323 To The Extent Of Work Completed I E 45 73 Applying The Percentage Completion Meth Od 32 In This Regard We Refer To The Plot Buyers Ag Reement And See Whether The Parameters Specified In The Guidance No Te Issued By Icai For Recognition Of Revenues As We Have Noted In Pa Ra 28 Above Are Satisfied In The Instant Case Or Not The Sample P Lot Buyers Agreement Placed On Record At Apb Page 22 36 Has Been Entered Into Between One Of The Collaborator Of The Assessee M S Shakuntlam Colonizers Private Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 49 Limited And Shri Mukesh Kumar Saini Dated 7 Th Oct 2009 The Said Agreement Provides That The Promoter Along With Its Associates Have Undertaken Development Promotion Of A Residential Colony Known As South City In The Village Jaisinghpura Rampura B Ujurg Near Chaksu Tonk Road Jaipur And The Surrounding Area Of Said Villages And The Buyer Who Has Earlier Applied And Granted Provisio Nal Registration Of Residential Plot Of 200 Sq Yrds At A Basic Price O F Rs 1700 Per Sq Yard Under The Installment Payment Plan And Thereaf Ter A Registration No Sc 252 Dated 25 04 2007 And Now This Agreement Shall Supersede The Terms And Conditions As Set Out In Registration Form Which Has Been Signed Delivered By The Buyer When He Booked The Said Plot In Clause 1 Of The Agreement It Has Been Provided Tha T The Promoter Agrees To Sell And The Buyer Agrees To Purchase Plo T No 29 In Block G Admeasuring Size Of 200 Sq Yards Allotted On The B Asis Of Lottery Drawn On 21 05 2008 In The Presence Of Registration Holde Rs Rs 1700 Per Sq Yard In South City Jaipur It Has Been Further Provided That The Said Agreed Price Of The Plot Of Land Covers Development Of Internal Services Such As Roads Electricity Water And Drainage Syst Em Within The Peripheral Of The Colony And The Payment Is To Be M Ade In Installments As Prescribed In Schedule 1 Annexed To This Agreeme Nt It Has Been Further Provided That The Preferential Location Cha Rges 10 Of The Basic Price Will Be Charged Extra In Addition To Th E Aforesaid Rate Determined It Has Been Further Provided That It Wi Ll Be Responsibility Of The Buyer To Strictly Adhere To The Payment Schedul E As Mentioned In Schedule 1 And The Buyer Also Agrees To Deposit The Post Dated Cheques For Balance Installments Of The Said Plot As The Pe R The Payment Plan Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 50 33 On Perusal Of The Schedule 1 To The Agreement It Provides For The Total Cost Of The Plot At Rs 34 000 00 The Plot Size The Rate Location And The Installments Which Are Payable On Monthly Basis It Provides For A Registration Amount Of Rs 5 000 Booking Advance Of 20 Amounting To Rs 68 000 And The Remaining Amo Unt In 24 Installments Which Varies From 2 To 5 Of Total Pri Ce And The Final Installment Of 21 52 Payable At The Time Of Handin G Over Of The Possession To The Buyer In Clause 2 Of The Agreeme Nt It Has Been Provided That Any External Or Peripheral Services P Rovided By Any Government Or Local Authority And Any Service Charg Es Levied Thereof Shall Also Be Payable In Addition To The Aforesaid Price Of The Plot In Clause 7 C It Has Been Provided That 20 Of The Tot Al Deposited Amount Either At The Time Of Registration Plot Buyer Agree Ment Or Thereafter Shall Constitute The Earnest Money For The Purpose Of This Agreement 34 On Cumulative Reading Of All These Clauses In T He Agreement Which Have Been Mutually Agreed And Consented To By The Assessee And The Plot Buyer It Is Crystal Clear That The Pr Ice Risk Which Is One Of The Significant Risk In Relation To Real Estate Has Been Fully Transferred By The Assessee To The Buyer Further It Is Noted Tha T Regarding Any External Regulatory Risk By Way Of Any Direction Or Action Of The State Government Or Any Local Authority The Entire Cost And Risk Has Again Been Passed On By The Assessee To The Buyer And At The Same Time The Assessee Has Safeguarded Its Own Interest And Risk As It Clear From Clauses 4 And 5 Of The Agreement Which Are Reproduc Ed As Under 4 That At Present There Is No Subsisting Notifica Tion Or Order By The State Government Or Any Other Government Or Local Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 51 Authority Regarding Acquisition Or Requisition Or O Therwise For Taking Over Of The Area In Which The Plot Is Locate D In Case Any Such Development Happens Or Takes Place Hereafter The Same Shall Be At The Cost And Risk Of The Buyer Who Will Be Bound To Carry Out And Implement Al The Terms Of The Agreeme Nt Including Payment Of The Outstanding Instalments And Will Als O Thereafter Be Entitled To Receive The Compensation Paid By The Government Or Local Authority In Respect Of The Plot The Prom Oter Shall Not Be Responsible Or Liable In Any Manner Whatsoever O N Account Of Any Such Development 5 That The Buyer Agrees That If As A Result Of An Y Legislation Order Rule Or Regulation Made Or Issued By The Gov Ernment Or Any Other Competent Authority Or If Any Matter Iss Ue Relating To Such Approvals Permission Notices Notifications By The Competent Authority Ies Become Subject Matter Of Any Suit Writ Before A Competent Court Or Force Majeure Condition S The Promoter After Allotment Is Unable To Deliver The Plot To The Buyer For His Her Occupation And Use The Buyer Agr Ees That Decision Of Said Competent Authority Court Shall Be Applicable And Binding On All The Concerned Parties Thereto 35 In Light Of Above It Is Clear That The Signifi Cant Risk Relating To The Real Estate Namely Price Risk As Well As Any Extern Al Regulatory Risk Relating To Acquisition Requisition Or Taking Over Area In Which Plot Is Located By The State Government Or Any Other Local Authority Has Been Transferred By The Assessee To The Buyer Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 52 36 Regarding The 2 Nd Condition As To Whether The Buyer Has A Legal Right To Sell Or Transfer His Interest In The Prope Rty We Refer To Clauses 7 8 And 9 Of The Plot Buyers Agreement Which Read S As Under 7 That It Shall Be Incumbent On The Buyer To Comp Ly With All The Terms And Conditions Of This Agreement And Or Non D Eposit Of Instalment And Or Default In Depositing The Instalm Ent Amount Maximum Two Times Not More Than Three Consecutives Instalments Simultaneously In Such Circumstances The Promoter Shall Have Right To Cancel And Or Terminate This Agreement After Giving A Registered Notice To The Buyer And Shall Be Entitled To Forfeit The E Ntire Amount Of Earnest Money Interest On Delayed Payment Etc And The Buy Er Shall Be Left With No Lien Right Interest Or Any Claim Of What Soever Nature In The Plot The Promoter Shall Thereafter Be Free To Rese Ll And Or Deal With The Said Plot In Any Manner Whatsoever Claim Of Whatsoe Ver Nature In The Plot At Its Sole Discretion The Amount If Any Paid Over And Above The Earnest Money Processing Fees Interest On Delayed Payment Etc Would Be Refunded To The Buyer By The Promoter Only After Realizing Such Amount To Be Refunded On Resale But Without An Y Interest Or Compensation Of Whatsoever Nature The Promoter Sha Ll Have The First Lien And Charge On The Said Plot For All Its Dues P Ayable By The Buyer To The Promoter Without Prejudice To The Companys Aforesaid Rights The Company At Its Sole Discretion Waive The Breach In Not Making Paym Ents As Per The Payment Plan But On The Condition That The Buyer S Hall Pay Interest To The Company Which Shall Be Charged 24 Per Annum For The Period Of Default On The Defaulted Amount Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 53 B That In Addition To The Other Specific Clauses Relating To Cancellation The Promoter Shall Be Free To Exercis E Its Right Of Cancellation Of Allotment In The Case Of I Provisional Allotment Obtained Through Misrepresentation Suppression Of Material Facts Ill Egal Practice By A Natural Person Or Judicial Person For Med In Any Constitutional Law Of India For The Time Being In Force Ii Violation Of Any Law Rule Or Regulation Framed By The Central Government Or State Government For The Time Being In Force In The Event Of Cancellation The Entire Deposits T Ill The Date Of Cancellation Shall Be Forfeited And The Promoter Wi Ll Resume Possession Of The Plot With Structure Thereon If Any And The Buyer Will Have No Right To Claim Any Compensation Thereof The Buyer Shall Indemnified To The Company For Such Loss Of Reputation Caused By The Action Deed Of Buyer And Shall Be Res Ponsible For All The Consequence Resulting There From And The Company Do Es Not Accept Any Responsibility In This Regard C That The Promoter And The Buyer Hereby Agree Th At 20 Of The Total Deposited Amount Either At The Time Of Regist Ration Plot Buyer Agreement Or Thereafter Paid To The Former By The L Atter Shall Constitute The Earnest Money For The Purpose Of Thi S Agreement D That No Separate Notice Shall Be Given In This Regard Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 54 8 That Transfer Of The Plot Will Be At The Sole Di Scretion Of The Promoter And Will Need His Prior Written Approval Administrative Charges As Prescribed By The Promoter From Time To Time Will Be Paid By The Transfer At The Time Of Transfer Any Change In The Name Including Addition Deletion Registered As Plot Buyer With Th E Promoter Will Be Deemed As Transfer For This Purpose No Administrat Ive Charges For The Transfer Of The Plot Amongst Family Member Husband Wife And Own Children Mother Father And Real Brother Sister Wil L Be Charged Claims If Any Between Transferor And Transferee As A Result Of Subsequent Reduction Increase In The Area Or Its Location Will Be Settled Between Themselves I E Transferor And Transferee And The P Romoter Will Not Be Party To This 9 That The Buyer Shall Pay As And When Demanded B Y The Promoter The Final Sale Consideration Of The Plot At The Time Of Possession Buyer Undertakes To Take The Possession Within 30 Thirty Days From The Date When The Promoter Intimate In Wr Iting Of The Offer Of Possession Failing Which The Buyer Authorities The Promoter To Cancel The Allotment And Forfeit The Earnest Money Delaye D Payment Interest Etc And Refund The Balance Price Paid By The Buyer Without Any Interest Upon Realization Of Money From Resale Re Allotment To Any Other Party Without Prejudice To The Companys Aforesaid Rights The Company At Its Sole Discretion Waive The Breach In Not Making Paym Ents As Per The Payment Plan But On The Condition That The Buyer S Hall Pay Interest And Panel Interest To The Company Which Shall Be Charge D 24 Per Annum For The Period Of Default On The Defaulted Am Ount Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 55 37 In Light Of Above We Are Of The View That Purs Uant To The Plot Buyer Agreement The Buyer Has Been Allotted A Spec Ified Plot Of Land Even Though The Possession Has Not Been Handed Over At That Stage And The Sale Deed Shall Be Executed In Future The Buyer Clearly Has A Right To Sell Or Transfer His Interest In The Prope Rty After Taking Prior Written Approval As Well As Payment Of Specified Ad Ministrative Charges The Approval Of The Assessee Cannot Be Read To Mean In Any Way Restricting The Assessees Right To Deal With The P Lot Of Land Rather Such An Approval Is More Of A Regulatory Mechanism Put I N Place By The Assessee Which The Buyer Should Adhere To There I S No Restriction Which Has Been Provided In The Agreement Which Spec Ifically Restrict Such Right Of The Buyer In Terms Of Handling Or Tra Nsferring His Interest In The Property To A Third Person Till The Entire S Ale Consideration Has Been Paid 38 Regarding The Third Condition Since The Amoun T Of The Consideration For The Sale Of Plot Has Been Clearly Specified In The Plot Buyers Agreement We Do Not See Any Uncertainty Whi Ch Exists Regarding The Amount Of The Consideration That Will Be Derived From The Said Sale Of Plot Of Land 39 Regarding The Last Condition As To Whether It I S Not Unreasonable To Expect Ultimate Collection As We Noted Above T He Buyer Has Agreed To Deposit The Booking Advance Of 20 And Has Also Agreed To Deposit The Post Dated Cheques For The Balance Installments As Per The Payment Plan Specified In Schedule 1 However It Is For Th E Assessee To Assess The Ultimate Collection With Reasonable Certainty I N Each Of The Individual Cases Vis A Vis The Acts And Commitments As Well As Taking Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 56 Into Account Any Default If So Committed By The Res Pective Buyers And Where The Seller Comes To A View That The Ultimate Collection Is Lacking In Certain Cases Revenue Recognition Can Be Postpo Ned To The Extent Of Uncertainty Involved At The Same Time It Has Been Provided In The Guidance Note Issued By Icai That Where The Aggrega Te Of Payments Or Continuing Payments By The Buyer Provide Insufficie Nt Evidence Of The Buyers Commitment To Make Complete Payment Revenu E To The Extent Of Actual Realisation Of The Consideration Should B E Recognized Provided Other Conditions For Recognition Of Revenue Are Sat Isfied Therefore In The Instant Case In Absence Of A Specific Finding B Y The Assessing Officer To The Contrary And The Fact That Assessee Has Not Realized The Full Sale Consideration At The Time Of Signing Of The Buyers Agreement A Reasonable Presumption Can Be Drawn That The Ultima Te Collection Of The Full Amount Of The Sale Consideration With Reasonab Le Certainty Is Lacking Given That The Revenue Recognition Is T O Be Postponed To The Extent Of Uncertainty Involved In Terms Of Realisat Ion Of Subsequent Installments And The Amount Which Has Actually Been Realized Received During The Year In Respect Of The Advance Received From Customers Should Only Be Recognized In The Financial Statemen T As Revenues Accruing For The Period To The Extent Of Percentag E Of Work Completed Following The Percentage Of Completion Method In The Instant Case For Example Where The Booking Advance Received Is Rs 6 8 000 And The Work Has Been Completed To An Extent Of 45 73 Rev Enues To The Extent Of Rs 31 096 Shall Be Recognized In The Fina Ncial Statements And The Balance Shall Be Carried Forward To Subsequent Financial Year 40 Now Coming To Another Contention Of The Ld Ar That As Per The Consistent Accounting Policy Followed By The Assess Ee It Is Not Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 57 Recognizing The Revenue In Respect Of The Advance R Eceived From Customers It Was Contended That Advance Received I S Said To Accrue Only When Sale Deed Is Registered And Not On The Ba Sis Of The Plot Buyers Agreement And Reliance Was Placed On Variou S Coordinate Bench And High Court Decisions Referred Supra In This Regard It Is An Admitted Position Of The Assessee That It Is Follow Ing Percentage Completion Method Of Accounting Of Recognition Of R Evenues Further The Litmus Test Of Accrual Of Income Under The Merc Antile System Of Accounting Is The Passing Of Risks And Rewards Of O Wnership To The Buyers Under The Percentage Completion Method Of Recognition Of Revenues The Income Is Computed By Deducting The C Ost Incurred In Reaching The Stage Of Completion From The Proportio Nate Sale Attributable To The Work Completed Therefore Whe Re Under The Plot Buyers Agreement Where Significant Risk And Rewar Ds Have Been Transferred To The Buyers The Consideration So Rec Eived To The Extent Of Stage Of Completion Of The Project Has Accrued And Will Be Subject To Tax By Not Offering The Consideration In Form Of Advance So Received From The Customers The Assessee Cannot Be Said To Be Following The Percentage Completion Method Rather It Would Be Fo Llowing Project Completion Method The Honble Delhi High Court In Case Of Paras Builtech Supra Wherein Decision Of Honble Gujara T High Court In Case Of Shivalik Buildwell Reported In 40 Taxmann Com 21 9 Was Also Relied Upon Held That Where The Advances Have Been Receiv Ed During The Year And Not Offered To Tax Following The Project Comple Tion Method The Same Was Certainly One Of The Recognized Method Of Accounting Besides Percentage Completion Method And Where The Same Is Consistently Followed By The Assessee It Should No T Be Disturbed Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 58 However In The Present Case Where The Assessee Ha S Admittedly Chosen To Follow The Percentage Completion Method It Cannot Be Allowed To Breach The Very Same Method By Not Offer Ing The Advances So Received During The Year To Tax And Following A Project Completion Method The Above Said Decisions Therefore Dont Su Pport The Case Of The Assessee Further The Decision Of Honble Guj Arat High Court In Case Of Ashaland Corporation Supra Was Rendered I N The Context Of A Dealer Of Land Which Had Entered Into An Agreement With A Housing Society To Sell Certain Plots Of Land And Is Thus D Istinguishable As In The Instant Case The Assessee Is Not Merely Selling Pl Ots Of Land But Has Also Undertaken Carry Out The Development Activitie S And Is A Developer Similarly Other Decisions Of The Coordinate Bench Have Been Rendered In Their Peculiar Facts And Circumstances Of The Ca Se And Are Distinguishable 41 Further It Is Noted That In Respect Of Revenue S From Executed Sale Deeds The Revenues Have Been Recognized To The Ext Ent Of Work Completed And The Said Principle Will Apply In Resp Ect Of Advances So Received From The Buyers The Assessee Has Therefo Re To Maintain The Consistency In Its Method Of Accounting Where It Is Following Percentage Completion Of Method And Within The Said Method It Cannot Be Allowed To Make Variation On The Basis Of Plot Buyers Agree Ment And Executed Sale Deeds So Long As The Basic Parameters For Reco Gnition Of Revenues As We Have Discussed Above Have Been Fulfilled 42 In Light Of Above Discussions In Respect Of To Tal Advances Actually Received From The Customers As On 31 03 2012 Amount Ing To Rs Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 59 4 44 28 514 Arising Out And In Respect Of Which Plo T Buyers Agreement Has Been Executed Revenues To The Extent Of Percen Tage Of Work Completed 45 73 Which Comes To Rs 2 03 17 159 F Ollowing The Percentage Completion Method Has Been Rightly Broug Ht To Tax By The Assessing Officer And The Order Of The Ld Cit A Is Set Aside To This Extent 43 In The Entirety Of Facts And Circumstances Of The Case Following The Percentage Completion Method Revenues As Per Executed Sale Deeds Amounting To Rs 2 11 38 286 And In Respect Of Advances Received From The Customers Amounting To Rs 2 03 17 159 Aris Ing Out And In Respect Of Which Plot Buyers Agreement Has Been Exe Cuted Shall Be Recognized For The Year Under Consideration There Is No Dispute Regarding The Cost Incurred And Expected To Be Incu Rred In Future And Which Has Been Determined As A Percentage Of Sale 44 27 At Rs 1 83 52 325 And After Setting Off The Said Cost Th E Profit Chargeable To Tax Shall Be Rs 2 31 03 120 As Against Rs 3 43 13 7 00 Determined By The Ao 44 The Respective Grounds Of Appeal Filed By The A Ssessee And Revenue Are Disposed Off Accordingly Ita No 172 Jp 2017 45 In Case Of M S Shakuntalam Colonisers Pvt Ltd For Ay 2011 12 In Ground No 1 The Assessee Has Challenged The Ac Tion Of Ld Cit A Wherein The Revenue On Percentage Completion Basis Has Been Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 60 Recognized In Respect Of Advances Received From The Customers Both The Parties Submitted That The Facts And Circumstan Ces Of The Case Are Pari Materia To The Case Of Vastukar Colonizer Pvt Ltd In Ita No 105 119 Jp 2017 Hence Our Findings And Directions Cont Ained In Ita No 105 Jp 2017 And 1119 Jp 2017 Shall Apply Mutatis Mutandis To This Appeal As Well The Ground No 1 1 Was Not Pressed Hence The Same Has Been Dismissed As Not Pressed Ita No 106 Jp 2017 120 Jp 2017 46 In Case Of M S Vastukar Colonizers Pvt Ltd F Or Ay 2012 13 The Similar Grounds Of Appeal Have Been Taken By The As Sessee And The Revenue In Respect Of Recognition Of Revenue For Wh Ich Registry Has Been Executed And Where Advances Have Been Received From The Customers The Facts And Circumstances Of This Case Are Pari Materia To The Facts And Circumstances Of The Case In Vastukar Township Pvt Ltd In Ita No 105 119 Jp 2017 Hence Our Findings And Direction S Contained In Ita No 105 Jp 2017 And 1119 Jp 2017 Shall Apply Mutatis Mutandis To This Appeal As Well In The Result Respective Appeals Of The Assessee A Nd Revenue Are Disposed Off With Above Directions Order Pronounced In The Open Court On 22 12 2017 Sd Sd Kul Bharat Vikram Singh Yadav U Kf D Lnl Judicial Member Ys Kk Lnl Accountant Member Ita No 105 119 172 106 120 Jp 2017 M S Vastukar Township Pvt Ltd Jaipur Vs Dcit Jaipur 61 Tk Iqj Jaipur Fnukad Dated 22 12 2017 Ganesh Kr Vknsk Dh Izfrfyfi Vxzsfkr Copy Of The Order Forwarded To 1 Vihykfkhz The Appellant M S Vastukar Township Pvt Ltd Jai Pur 2 Izr Fkhz The Respondent Dcit Circle 2 Jaipur 3 Vk Dj Vk Qdr Cit 4 Vk Dj Vk Qdr Cit A 5 Fohkkxh Izfrfuf K Vk Dj Vihyh Vf Kdj K T Iqj Dr Itat Jaipur 6 Xkmz Qkbzy Guard File Ita No 105 119 172 106 120 Jp 2017 Vknskkuqlkj By Order Lgk D Iathdkj Asst Registrar