9911796707
TMI Blog2019 (3) TMI 1645X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 23/02/2017, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the 'Act'), relating to Assessment Years 2007-08, 2008-09 & 2009-10. 2. As the issues arising in all these appeals are common, for the sake of convenience they are heard together and disposed off by way of this common order. 3. We have heard Shri Pankaj Parekh, FCA, the ld. Counsel for the assessee and Shri A.K. Nayak, CIT D/R on behalf of the revenue. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- Sr. No. Party's Name Sales (Rs.) Retention Amount (Rs.) Percentage of Retention 1. Jindal Steel & Power Ltd. 1,36,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was entitled to get 90 per cent of payment in first instance when work was done and remaining 10 or 5 per cent, as case may be, was to be paid later on after submitting certificates from architects/engineers, removal of defects, payment of damages, etc. - Assessee was crediting 100 per cent of job value in past years but from assessment year 1965-66, it had started practice of crediting only 90 per cent value for work done after deducting retention money -Whether it could be said that on date of submission of bills assessee had no right to receive entire amount on completion of work and retention money did not accrue to it on such date but on later date in accordance with terms of contracts and ITO would be unjustified in making any addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(3) of the Act, in pursuance of an order u/s 263 of the Act passed by the ld. Pr. CIT on 29/03/2012. The ld. CIT(A) partly allowed the appeal of the assessee. Further aggrieved the assessee is in appeal before us. 7.1. After hearing rival contentions, we find that the ld. CIT(A) has considered the submissions of the assessee that retention of money cannot be considered as income of the assessee. At para 1.2. & 1.3. of his order the ld. CIT(A) held as follows:- "1.2. I have gone through the A.O.'s contention and the appellant's submission on the point. As per the judicial decisions relied upon it does appear that the appellant has a case when he claims that retention money has not fallen due in the year when the bill was ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even worse than the project completion method which was superseded by the percentage completion method. In the project completion method the profit of the contracts or projects get aggregated in the last year in which the project is completed. Even this financial result was found unreasonable and distorted and, therefore, the percentage completion method was brought in to distribute the profit equitably over the years. The judicial decisions relied upon by the appellant is thus making the situation worse where the profit almost may be equal to the retention money as in most of the cases the net profit on the contract varies in the region 5 to 10%. Thus reduction of the retention money from the profit amounts to postponing the whole of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated contracts the profit computed as arising by excluding all the retention money results in loss of about 5% [9.96% - 4.88% = 5.08%] on the Sales of the relevant contracts. This distortion needs to be corrected. By applying matching principle to the retention money claimed to be due only in later year the profit contained in the corresponding money so retained is about Rs. 16,43, 104/ - computed at the rate of net profit of 4.88%. Thus it is held that the profit of Rs. 16,43,104/- out of the money retained be taken to later year(s), when the said money becomes due and thus the profit therein arises. The sum of Rs. 3,20,27,063/- being balance out of the retention money is treated as the profit or revenue realizable in the current year. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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