Tax Department issues notice to DLF for assessment year 2007-08
The Hindu Business Line, October 27, 2009, Page 2
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“We are sure of the fact and figures which will be considered in the appeal”, said Mr Rajiv Talwar.
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Our Bureau, New Delhi
The Income-Tax Department has issued a notice to real estate major DLF Ltd for a special audit for the assessment year 2007-08.
Earlier this year, in relation to a tax matter pertaining to financial year 2005-06, the Tax Department had passed an order, adding close to Rs 1,200 crore as DLF’s taxable income for FY06.
The company had challenged the order with the appellate authorities and the matter is currently under appeal.
When contacted, the DLF group Executive Director, Mr Rajiv Talwar, confirmed that the company had received the notice.
“We are sure of the fact and figures which will be considered in the appeal,” he said.
Company sources said that the latest notice was in line with the previous tax case. “If a view is taken for a particular year, it may be incumbent on the assessing officer to take that view for the next year,” sources said.
In May the company, in a disclosure to the BSE, had referred to the tax case for fiscal 2005-06 and stated that it had got an expert opinion on the enhanced taxable income and was confident that the addition would not be sustained by the appellate authorities.
“In an unlikely event, if the said order is not reversed by the appellate authorities then it can result in a contingent liability of about Rs 300-400 crore,” the company had said, at that time.
The addition to income was the fallout of a special audit report of the Income-Tax Department. The Report of the Special Auditor recommended that the Tax Department re-assess about Rs 1,200 crore as additional income. On May 6, the Assessing Officer, following audit and assessment proceedings, issued an order adding most of the amount suggested in the Special Audit Report.
The year 2005-06 was the first year in which revised accounting norms prescribed by the ICAI (Institute of Chartered Accountants of India) became applicable for construction and real-estate development companies.
These norms allowed real-estate companies to use the ‘percentage of completion method’ (PoCM) to recognise revenues and profits.
DLF started using the PoCM from FY 2005-06, prior to which all accounts were prepared in accordance with the conveyancing method. DLF went public in mid-2007.
Under the PoCM method, revenues are recognised based on the actual proportion of completion of a project, while earlier the builders would recognise income and profits only after a project was completed.
The Hindu Business Line, October 27, 2009, Page 2
--------------------------------------------------------------------------------
“We are sure of the fact and figures which will be considered in the appeal”, said Mr Rajiv Talwar.
--------------------------------------------------------------------------------
Our Bureau, New Delhi
The Income-Tax Department has issued a notice to real estate major DLF Ltd for a special audit for the assessment year 2007-08.
Earlier this year, in relation to a tax matter pertaining to financial year 2005-06, the Tax Department had passed an order, adding close to Rs 1,200 crore as DLF’s taxable income for FY06.
The company had challenged the order with the appellate authorities and the matter is currently under appeal.
When contacted, the DLF group Executive Director, Mr Rajiv Talwar, confirmed that the company had received the notice.
“We are sure of the fact and figures which will be considered in the appeal,” he said.
Company sources said that the latest notice was in line with the previous tax case. “If a view is taken for a particular year, it may be incumbent on the assessing officer to take that view for the next year,” sources said.
In May the company, in a disclosure to the BSE, had referred to the tax case for fiscal 2005-06 and stated that it had got an expert opinion on the enhanced taxable income and was confident that the addition would not be sustained by the appellate authorities.
“In an unlikely event, if the said order is not reversed by the appellate authorities then it can result in a contingent liability of about Rs 300-400 crore,” the company had said, at that time.
The addition to income was the fallout of a special audit report of the Income-Tax Department. The Report of the Special Auditor recommended that the Tax Department re-assess about Rs 1,200 crore as additional income. On May 6, the Assessing Officer, following audit and assessment proceedings, issued an order adding most of the amount suggested in the Special Audit Report.
The year 2005-06 was the first year in which revised accounting norms prescribed by the ICAI (Institute of Chartered Accountants of India) became applicable for construction and real-estate development companies.
These norms allowed real-estate companies to use the ‘percentage of completion method’ (PoCM) to recognise revenues and profits.
DLF started using the PoCM from FY 2005-06, prior to which all accounts were prepared in accordance with the conveyancing method. DLF went public in mid-2007.
Under the PoCM method, revenues are recognised based on the actual proportion of completion of a project, while earlier the builders would recognise income and profits only after a project was completed.
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