Provisional Liability for Profit

This query is : Resolved

Tajoddin (Querist)
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17 September 2008 Dear Experts

one of our cliet is engaged in in-house developemnt of residential layout. They are following Percentage Completion Method for recognising revenue. presently the sale proceeds received towards sale of sites is treated as liability in balance sheet and the entire developed land (Including Land Purchase and development) is shown as Closing W.I.P. in B/Sheet. Estimated cost is shown only for development aspect and actual admin cost charged to taxable income. for the balance development cost to be inccured the same is treated as provisional Liability and deducted from Sale Proceeds kept as from customers as well as closing W.I.P.

our doubt is whether the provisional liability shown for feture expenses which is deducted from advance as well as closing W.I.P. is correct? are they suppose to recover TDS on Provisional Liability provided?
Kindly Clarify

Ex: the project is 4 years or more
Area to be Sold - 1000 sft
Estimated Cost - 2000/- for development
Land Cost - 1000/- Actual
in Books actual Development Cost
suppose 1 Yr 250/-
2 Yr 400/-

Sale Proceeds
suppose 1 Yr 500/- 100 sft
2 Yr 750/- 150 sft

how to recognise the revenue and estimated cost liability will create for sold area

Tajoddin

Tajoddin (Querist)
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17 September 2008 Pls urgent

Tajoddin

Tajoddin (Querist)
Follow

17 September 2008 Pls Urgent