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7.1 The Coordinate Bench of this Tribunal in the case of Aaryan Buildspace LLP (cited supra) held as follows:

"8. We have carefully considered the arguments of both parties and perused the material on record. The core issue in this appeal is whether the assessee, a real estate developer, was required to follow the Percentage Completion Method under Section 43CB of the Act or could recognize revenue based on AS-9 and the ICAI Guidance Note.

8.1. The AO's reliance on Section 43CB of the Act is misplaced because this provision is applicable only to construction contracts and contracts for providing services, whereas the assessee is a real estate developer engaged in constructing and selling residential units on its own land. The legislative intent behind Section 43CB of the Act and its placement within the framework of the Act clarify that it governs income recognition for contractors undertaking construction projects for clients, not for developers executing real estate projects on their own account. Section 43CB of the Act was introduced through the Finance Act, 2018, with retrospective application from 01.04.2017, to regulate the computation of income from construction contracts and contracts for providing services. The section explicitly mandates that profits and gains from a "construction contract" or "contract for services" must be determined on the basis of the PCM in accordance with the Income Computation and Disclosure Standards (ICDS). The phrase "construction contract" is critical to understanding the section's applicability, as it indicates that the provision applies only to contractors executing projects on behalf of a third party, where a contractual obligation exists. A construction contract, in accounting and legal parlance, refers to an agreement where a contractor undertakes to execute construction work for a specified price A.Y. 2018-19.

8.2. Since the assessee does not provide construction services to any third party under a contract, it does not fall within the ambit of Section 43CB of the Act, which is specifically designed to regulate the revenue recognition of contractors executing construction projects for clients rather than developers selling self-constructed properties.

8.3. The Accounting Standard (AS) applicable to a business further reinforces the distinction. AS-7 (Construction Contracts) applies only to construction contracts where revenue is recognized based on project milestones and the Percentage Completion Method (PCM). Since Section 43CB of the Act adopts the PCM as the prescribed method, it is clear that this section was meant to align with AS-7, which governs the accounting treatment for construction contracts. AS-9 (Revenue Recognition), on the other hand, applies to real estate developers and mandates that revenue should be recognized when the transfer of significant risks and rewards of ownership takes place. The assessee follows AS-9, as it recognizes revenue only when conveyance deeds are executed, and possession is handed over to buyers. The Institute of Chartered Accountants of India (ICAI) has also clarified in its Guidance Note on Accounting for Real Estate Transactions (2012, Revised) that real estate developers should follow AS-9, not AS-7 Thus, the AO's attempt to apply Section 43CB of the Act, which mirrors AS-7, is fundamentally flawed.

8.4. The assessee's method of revenue recognition is consistent with ICAI's AS-9 and the Guidance Note, both of which allow revenue recognition only upon sale deed execution and possession transfer.

8.5. The DR's contention that the assessee is a contractor is misplaced, as it fails to recognize the fundamental distinction between a contractor executing a construction project for a client and a real estate developer constructing and selling units on its own land. The assessee is not providing a service to a third party under a contractual obligation but is developing a project at its own risk and selling completed units to buyers. In contrast, a contractor undertakes construction for another party based on predetermined specifications. The DR's assertion that Section 43CB of the Act does not differentiate between a real estate developer and a contractor is incorrect. A careful reading of Section 43CB of the Act makes it evident that it applies exclusively to "construction contracts" and "contracts for providing services"--terms that inherently require the existence of a contractual obligation between the service provider (contractor) and the recipient (client). The assessee's business model does not involve entering into construction contracts but rather the sale of completed units. The fact that the agreement specifies stage-wise payments does not convert the nature of the transaction into a construction contract. Advances received from customers are not "contract revenue" but part of the consideration for the A.Y. 2018-19.

ultimate sale of property. The DR's contention that the judicial precedents relied upon by the CIT(A) relate to periods before the introduction of Section 43CB of the Act and are therefore not applicable is flawed. The principle that real estate developers must recognize revenue upon the transfer of ownership and not on a percentage completion basis has been established through long-standing jurisprudence, which remains applicable even after the introduction of Section 43CB of the Act.