HISTORY OF ACCOUNTING STANDARDS APPLICABLE TO REAL ESTATE DEVELOPER
ANALYSIS OF GUIDANCE NOTE ON ACCOUNTING FOR REAL ESTATE TRANSACTIONS (REVISED 2012) 4.1 88 i -
REVENUE RECOGNITION FOR REAL ESTATE DEVELOPER UNDER IFRS
IMPACT OF INCOME COMPUTATION AND DISCLOSURE STANDARD
ANALYSIS OF PROVISION OF SECTION 45(2) REGARDING CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE
ANALYSIS
ANALYSIS OF THE PROVISIONS OF SECTION 50C, SECTION 43CA, SECTION 56(2)(x)(b) & SECTION 23(5)
2.1 METHOD OF ACCOUNTING FOR REVENUE RECOGNITION FOR REAL ESTATE DEVELOPER
(i) Completed Contract Method (CCM)
(a) Features of Completed Contract Method (CCM)
(b) Tax Implications of Completed Contract Method (CCM)
(ii) Percentage of Completion Method (PCM) i.e.
(a) Features of Percentage of Completion Method
(b) Tax Implications of Percentage of Completion Method
2.2 APPROPRIATE METHOD FOR TAXABILITY OF REAL ESTATE DEVELOPERS
business or profession
‘Guidance note on Accounting for Real Estate Transactions (Revised 2012)’
.
2.3 JUDICIAL CONTROVERSY REGARDING ADOPTION OF COMPLETED CONTRACT METHOD (CCM) OR PERCENTAGE OF COMPLETION METHOD (PCM) BY THE REAL ESTATE DEVELOPER
Para 2.3
(i) Cases relating to year in dispute prior to 1st April, 2003 i.e. when old AS-7 was applicable -
(a) Option of the assessee to Choose CCM or PCM
(1) CIT, Meerut Hyundai Heavy Industries Co. Ltd.
Lastly, there is a concept in accounts which is called as the concept of Contract Accounts. Under that concept, two methods exist for ascertaining profit for contracts, namely, ‘Completed Contract Method’ and ‘Percentage of Completion Method’. To know the results of his operations, the contractor prepares what is called as Contract Account which is debited with various costs and which is credited with the revenue associated with a particular contract. However, the rules of recognition of cost and the revenue depend on the method of accounting. Two methods are prescribed in Accounting Standard-7 (AS-7). They are - ‘Completed Contract Method’ and ‘Percentage of Completion Method’.”
(2) CIT Bilahari Investment (P.) Ltd.
“Recognition/identification of income under the 1961 Act is attainable by several methods of accounting. It may be noted that the same result could be attained by any one of the accounting methods. The completed contract method is one such method. Similarly, the percentage of completion method is another such method.”
Para 2.3
-
(b) Adoption of Completed Contract Method (CCM) approved by the Courts i.e.
(11) D. K. Enterprises ITO
(12) CIT Moghul Builders & Planners
profits and gains arising out of construction and sale of flats by the assessee-builder had to be computed on the basis of handing over the possession of flats to the respective buyers. Tribunal has not committed any error, factual or legal, in applying the ratio of the judgment in Madgul Udyog CIT —No referable question of law arises—Madgul Udyog CIT applied
CIT Unique Builders & Developers
(c) Adoption of Completion Contract Method (CCM) not Approved by the Courts and direction given to follow Percentage Completion Method (PCM)
TAXATION OF REAL ESTATE DEVELOPERS & JOINT DEVELOPMENT ARRANGEMENTS WITH ACCOUNTING ASPECTS
AUTHOR : RAJ K. AGARWAL, RAKESH GUPTA
PUBLISHER : TAXMANN
DATE OF PUBLICATION : SEPTEMBER 2024
EDITION : 7TH EDITION
ISBN NO : 9789364552066
NO. OF PAGES : 584
BINDING TYPE : Paperback
Rs. 1,395
DESCRIPTION
This book is an authoritative guide that addresses the multifaceted tax and accounting challenges specific to joint development arrangements in the real estate sector. It is helpful for tax professionals, real estate developers, accountants, and legal advisors to understand the complex domain.
The Present Publication is the 7th Edition and has been amended by the Finance (No. 2) Act, 2024. This book is authored by Dr Raj K. Agarwal & Dr Rakesh Gupta with the following noteworthy features:
• [Comprehensive Tax Analysis] Covers critical issues like determining the year of transfer, valuing sale consideration, and key tax provisions, including Section (s) 2(47), 45(2), 50D, and 45(5A)
• [Legal and Accounting Analysis] Provides detailed explanations of relevant provisions, such as the chargeability of capital gains under Section 45(5A) and deductions for affordable housing under Section 80-IBA, alongside practical insights into revenue recognition and accounting standards under IFRS and ICDS
• [Judicial Analysis] Reviews recent judicial decisions and interpretations, guiding handling of complex legal issues in joint development contexts
• [Sector-specific Tax Challenges] Addresses specific issues like the taxability of retention money, demolition costs, and rental income, with practical examples and case studies
• [Practical Tools and Examples] Includes real-world scenarios, practical guidance, and case studies to help professionals understand the complexities of tax compliance and best practices in joint development arrangements