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2015 (1) TMI 702 - HC - Income TaxAccrual of Income - Inclusion of particular income in the assessment year - what is the system of accountancy adopted by the assessee? - year in which the amount representing 2.5% had accrued to the respondent - Held that:- In the instant case, the clause in the contract provided for deduction of 7.5% from each bill. Out of this, 5% would be payable on successful completion of the work and balance 2.5% after the expiry of the defect free period. For instance, if the value of the contract is ₹ 1.00 crore and the amounts are paid under four bills of ₹ 25.00 lakhs each. From each of the first 3 bills, sums representing 7.5% are deducted. On successful completion of the work, the amounts representing 5% deducted from the first three bills, would become payable along with the final bill. However, even from the final bill, 2.5% would be deducted. This amount of 2.5%, which stood deducted from all the four bills, becomes payable, only on expiry of the defect free period. If such period is one year, the amount becomes payable only when no defects whatever are found or noticed, during that period. It is, no doubt, true that in all the bills, reference was made to these amounts and corresponding entries were made in the books of account. However, the right to receive that amount was contingent upon there not being any defects in the work, during the stipulated period. It is then, and only then, that the amount can be said to have accrued to the respondent. It is represented by the learned counsel for the respondent that the amount was received by his client in the subsequent assessment year on expiry of the defect free period and that the amount has been brought under the tax. - Decided against revenue.
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