The Tax Publishers2020 TaxPub(DT) 0242 (Kol-Trib)

INCOME TAX ACT, 1961

Section 4

Although anticipated losses can be allowed to be deducted from commercial proceeds at first sign of its reasonable probability, the converse is not true regarding anticipated profits to be treated as income unless same are realized going by the principles of conservatism and commercial prudence. Revenue failed to rebut clinching fact that there was no surety about impugned retention money to be finally refunded to assessee, therefore, taxation of retention money not accrued during the year was not justified.

Income - Year of taxability - Retention money in case of contractor -

Assessee-contractor paid retention money as per terms and conditions of corresponding agreement with other parties. AO held that retention money was forming part of sale which had to be included in return of income.Held: Although anticipated losses can be allowed to be deducted from commercial proceeds at first sign of its reasonable probability, the converse is not true regarding anticipated profits to be treated as income unless same are realized going by the principles of conservatism and commercial prudence. Revenue failed to rebut clinching fact that there was no surety about impugned retention money to be finally refunded to assessee, therefore, taxation of retention money not accrued during the year was not justified.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

INCOME TAX ACT, 1961

Section 50B

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