TMI Blog2000 (12) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.51,72,000 retained by the authorities from the contract payment receivable by the assessee on accrual basis this year could not be treated as the assessee's income for the year inspite of the fact that income was being assessed on accrual basis?" The facts of the case are that the respondent-assessee is engaged in the construction of tunnels, dams, etc. For the assessment year 1988-89, it filed a return on July 28, 1988, declaring a loss of Rs.47,48,047. By an order dated March 14, 1988, the Assessing Officer finalised the assessment under section 143(3) disallowing the assessee's claim for deduction of Rs.51,72,000 which was debited in its profit and loss account in the security for successful execution of the contracts. The appeal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sought by the Revenue is a pure question of law and as there is no direct decision of this court on the issue the Tribunal may be directed to make reference thereof to this court. Shri M. L. Sarin, senior advocate, appearing for the respondent-assessee, argued that the question sought by the Revenue has already been answered in favour of the assessee by different courts and, therefore, this petition should be dismissed. He submitted that the amount of Rs.51,72,000 retained by the authorities by way of security for successful completion of the contract cannot be treated as an income of the assessee for the assessment year 1986-87 and, therefore, the Commissioner of Income-tax (Appeals) and the Tribunal have rightly deleted the same from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem of accounting. Under the mercantile system, credit entries are made in respect of the amounts due immediately they become legally due though they may be received at a later point of time. As against this, under the cash system, it is only the actual cash receipts and actual cash payments that are recorded as credits and debits. Therefore, the amount which became legally due to the assessee on successful completion of work will prima facie be deemed as its income liable to be assessed during the relevant assessment year. That is an issue on which we do not want to express final opinion at this stage, but, we are convinced that the question sought by the Revenue is a question of law requiring determination by this court. Hence, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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