The Tax Publishers2020 TaxPub(DT) 2321 (Kol-Trib) : (2020) 183 ITD 0380

INCOME TAX ACT, 1961

Section 5

In terms of relevant clauses of contract, contractee had right to withhold certain percentage of the consideration till conclusion of project and only after certification of concluded projects, retained portion of the amounts would be disbursed finally which might be in the succeeding assessment years and was contingent upon terms and conditions of the contract. AO had not disputed the amount retained by contractees. In such a scenario, merely because assessee had booked the income in concerned year without actual receipt of it, could not be chargeable to tax as per the Act.

Income - Accrual - Money retained by contractee to be received only after conclusion of project -

Assessee-contractor was maintaining mercantile system of accounting and thus included retention money in its books of account and income-tax return. AO taxed the same for the concerned year. Assessee's case was that even if assessee had included retention money in the return, assessment had to be made on the income taxable as per law. Held: In terms of relevant clauses of contract, contractee had right to withhold certain percentage of the consideration till conclusion of project and only after certification of concluded projects, retained portion of the amounts would be disbursed finally which might be in the succeeding assessment years and was contingent upon terms and conditions of the contract. AO had not disputed the amount retained by contractees. In such a scenario, merely because assessee had booked the income in concerned year without actual receipt of it, could not be chargeable to tax as per the Act.

Followed :CIT v. Simplex Concrete Piles (India) (P) Ltd. 1989 TaxPub(DT) 0693 (Cal-HC), Anup Engineering Ltd. 2001 TaxPub(DT) 0487 (Guj-HC) : (2001) 247 ITR 457 (Guj), Associated Cables P. Ld. 2006 TaxPub(DT) 1785 (Bom-HC) : (2006) 286 ITR 596 (Bom-HC) and Ignifluid Boilers (I) Ltd. 2006 TaxPub(DT) 1176 (Mad-HC) : (2006) 283 ITR 295 (Mad)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 14A

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT