DLF LTD. Vs. ADDITIONAL COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The petitioner is a real estate developer engaged in creation, execution and sale of residential and commercial projects. It also earns income from Special Economic Zone (SEZ) on which it had claimed deduction under Section 80-IAB of the Income Tax Act, 1961 (Act, for short).

(2.) For the previous year relevant to the Assessment Year 2010-11, the petitioner filed its return of income on 15th October, 2010 declaring income of Rs.474,34,24,620/- (as per the impugned order dated 25th March, 2013 the return declared income of Rs.6,52,95,98,420/-, but this aspect need not be examined and is not relevant for the purpose of the present decision).

(3.) As per the petitioner, for computing the said income, they had followed Percentage of Completion Method (POCM, for short), 'Percentage of Completion Method' is an accounting method in which the revenues and expenses of long-term contracts are recognized yearly as a percentage of the work completed during that year. This is the opposite of the completed contract method, which allows taxpayers to defer the reporting of any income and expenses until a long-term project is completed. The percentage of completion method of accounting is commonly used in construction projects. as distinct from completed contract method. The petitioner had also claimed deduction of Rs.178.63 crores under Section 80-IAB in respect of profits derived from projects in SEZ areas. The petitioner had granted loans and advances to its subsidiaries and shown interest income @ 6.5% per annum in respect of said loans and advances as received from its subsidiaries.