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2020 (1) TMI 250 - AT - Income TaxTaxation of retention money not accrued during the year - Accrual of income - as per AO addition has been rightly made during the course of assessment as well as in section 115JB MAT computation - HELD THAT:- It is not in dispute that the assessee had paid the impugned retention money as per the terms and conditions of the corresponding agreement with the other parties. Hon’ble apex court’s landmark decision in Chainrup Sampatram vs CIT [1953 (10) TMI 2 - SUPREME COURT] settled the law long back that although anticipated losses can be allowed to be deducted from commercial proceeds at the first sign of its reasonable probability, the converse is not true regarding anticipated profits to be treated as income unless the same are realized going by the principles of conservatism and commercial prudence. The Revenue fails to rebut the clinching fact that there is no surety about the impugned retention money to be finally refunded to the taxpayer. We therefore affirm the CIT(A)’s above extracted detailed reasoning. Coming to MAT computation, this tribunal’s coordinate bench’s decision in DCIT vs. M/s. Mcnally Bharat Engineering Ltd. [2020 (1) TMI 203 - ITAT KOLKATA] has already decided the issue against the department that such an amount does not partake the character of taxable income till the time mutual obligations are not fully satisfied. This first substantive ground is rejected therefore. Capital gains addition - Gain accrued in assessee’s heads on accrual of transfer of plant and machinery of “product” division - HELD THAT:- Assessee had received consideration by way of equity shares only. Hon’ble Bombay high court’s judgment in CIT vs. M/s. Bharat Bijlee Ltd. [2014 (5) TMI 512 - BOMBAY HIGH COURT] has relied upon in the CIT(A)’s order, holds that capital gains as “slump rate” do not arise in such an instance. CIT(A) has rightly deleted the impugned capital gains addition made by the assessing authority by invoking section 50B of the Act. The Revenue fails in its second substantive grievance as well. Provision for leave encashment disallowance - AO invoked section 43B(f) of the Act that such a provision is allowable only in case of actual payment - HELD THAT:- CIT(A) holds that hon’ble jurisdictional high court’s decision in Exide Industries Ltd. vs. Union of India [2007 (6) TMI 175 - CALCUTTA HIGH COURT] quashed the statutory provision itself as ultra vires. Hon'ble apex court has stayed operation thereof vide order dated 08.05.2009. He has therefore directed the Assessing Officer to follow their lordships’ final call on this issue. We notice in this backdrop of facts that there is no prejudice caused to the department in facts and circumstances of the case qua this last issue as well.
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