TMI Blog2020 (1) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... t year. We therefore affirm the CIT(A) s findings under challenge by adopting judicial consistency. The Revenue fails in its instant latter substantive grievance as well. - Decided in favour of assessee. - ITA No. 1173/Kol/2018 - - - Dated:- 17-1-2020 - Shri P.M. Jagtap, Vice-President and Shri S.S. Godara, Judicial Member For the Appellant : Shri Ram Bilash Meena, CIT-DR. For the Respondent : Shri Aplesh Gupta, ACA. ORDER PER S.S. Godara, Judicial Member:- This Revenue s appeal for assessment year 2013-14 arises against the Commissioner of Income Tax (Appeals)-I, Kolkata dated 13.03.2018, passed in case No.10199/CIT(A)-1/Circle-1(1)/2016-17, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act Heard both the parties. Case file perused. 2. The Revenue s former substantive ground pleads that the CIT(A) has erred in law and on facts in deleting the employees contribution to Provident Fund disallowance of ₹20,38,637/- despite the fact that the same had been deposited after the due date as per the specific provision in the corresponding statue. It fails to dispute that the assessee s impugned credit had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng mercantile system of accounts. It is legally and factually incorrect to say that the money retained by the debtor from such bills which becomes payable upon certain contingencies has not accrued to and forms part of the income of the assessee. Retention money which is forming part of sale is always an income accrued and arose in the hands of the assessee. Money is retained by the debtor to ensure that the performance guaranteed by the seller is obtained. In case the performance is achieved, the retained money is released. In case of non-performance, the debtor exercises his right and the seller loses the right to claim the retained money and the same is recognized as bad debt in the books of the seller. Once sale has happened, the seller is bound to recognize the entire amount of sale in the profit and loss account. As per Accounting Standard 9, non- recognition of sale happens only when at the time of sale itself, the seller is certain that the money will not come to him. This is not the case of the assessee as it has recognized the entire amount of sale in its profit and loss account. It is only in case the guaranteed performance is not achieved, will the deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase order itself. Sample copies of the contracts entered with the customers are enclosed as Annexure 2a. 2.3.2 The Appellant during the year under consideration claimed an amount of ₹ 10,12,20,489 as deduction on account of retention money since the income has not accrued to the Appellant and the same is not real income for the year under consideration. During the course of assessment proceedings, the Appellant submitted explanations in this regard before the Ld. AO vide submissions dated 4 February 2016 along with the party-wise details of the retention money (copy enclosed as Annexure 2) 2.3.3 The Ld. AO in the order under section 143(3) of the Act dated 30 March 2016 disallowed the claim of Appellant contending that - a. Retention money which is forming a part of the sale is always treated as income accrued and arisen in the hands of the Appellant. b. Further, once the sale has happened, the seller is bound to recognize the entire amount of sale in the profit and loss account. As per Accounting standard 9, nonrecognition of sale happens only when at the time of sale itself the seller is certain that the money will not come to him. c. In cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te parent company i.e. McNally Bharat Engineering Co. Ltd., Kolkata by the Hon'ble ITAT, Kolkata in ITA No.100/Kol/2011, where the Hon'ble Tribunal dismissed the department's appeal on the issue and held that retention money should not be included in computing Book Profit ujs.115JB as well as normal provisions (copy enclosed as Annexure 4). The relevant extracts have been reproduced below for your reference: 37. The Ld. Counsel for the assessee while reiterating the plea of the assessee as put forth before CIT(A) further placed reliance on the decisions of the Hon'ble ITAT, Kolkata Bench in the case of DCIT vs Binani Industries Ltd. in ITA No. 144/Kol/2012 for A.Y. 2009-10 order dated 02.03.2016 wherein the entire case laws on the issue has been discussed. The Tribunal finally concluded in the aforesaid decision that if the receipt is not in the nature of income then it cannot be considered as income for the purpose of book profit ujs.115JB of the Act. On the other hand if a receipt is considered as income but is exempt by virtue of any specific provision of the Act, then the same would be treated a part of the book profit ujs.115JB of the Act. Thus the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar issue has been decided in favor of assessee by the High Courts including Jurisdiction High Court 2.3.7 The Appellant also places reliance on decision of the Jurisdictional High Court in the case of CIT -vs- Simplex Concrete Piles (India) P. Ltd.[1989] 179 ITR 8 [Cal] wherein it has been held that the retention money in respect of jobs not completed during the relevant assessment year should not be taken into account in computing the profits for the assessment year in question since the assessee has no right to claim any part of the retention money till the verification of the satisfactory execution of the contract. It was also held that only after the assessee fulfilled the obligations under the contract, the retention money would be released and the assessee would acquire the right to receive such retention money. 2.3.8 The above ruling has been upheld by Gujarat High Court in case of Amarshiv Construction (P) Ltd. [2014] where the assessee was awarded a construction contract and in terms of contract certain amount was withheld by employer of contract towards retention money for satisfactory execution of contract by assessee, retention money was to be taxed in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey retained by the customers as per the agreement between the Appellant and the customers on the ground that the same shall be taxable in the year of receipt and also offered retention money of ₹ 2,40,09,589/- to tax representing the amount which was claimed as deduction in earlier years and received during AY 2013-14. The Appellant submitted that no right to claim any part of the retention money gets vested till the verification of satisfactory execution of the contract is concluded and accordingly, the said retention money cannot be said to be accrued until the claim is accepted by customers satisfactory performance of the contract. Hence, the said retention money shall be taxable only in the year of receipt (after the satisfactory performance of the contract). The appellant's AIR has submitted that retention money could not be regarded as income of the assessee. It was also contended that the Appellant has not got any right to enforce the claim on account of retention money in AY 2013-14 and hence the same could not be said to be accrued in FY 2012-13 (relevant to AY 2013-14), and that the. AO has erred in completely disregarding the submissions made by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of income then it cannot be considered as income for the purpose of book profit u/s.115JB of the Act. On the other hand if a receipt is considered as income but is exempt by virtue of any specific provision of the Act, then the same would be treated a part of the book profit u/s.115B of the Act. Thus the Ld. Counsel for the assessee submitted that since the retention money in question was not in the nature of income at all it should not be included as part of the book profit u/s.115JB of the Act. 38. We have given a very careful consideration to the rival submissions. As far as the question with regard to excluding the retention money while computing the total income under the normal provisions of the Act is concerned, it is not disputed by the revenue that the sum in question is in the nature of retention money. In such circumstances we are of the view that the retention money cannot be regarded as income of the assessee. The issue is no longer res integra and has been concluded by the Hon'ble Calcutta High Court in case of CIT Vs. Simplex Concrete (Piles) India Pvt. Ltd. [179 ITR 8]. In the aforesaid decision the Hon'ble Calcutta High Court on identical fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pvt. Ltd. (supra) on identical issue, I am of the view that the AO was not justified in addition of the impugned amount of net retention money of ₹ 7,72,10,900/-,which is not sustainable. Accordingly, the AO is directed to delete the addition of ₹ 7,72,10,900/-.This ground is allowed. 4. We have given our thoughtful consideration to rival pleadings. Learned departmental representative s sole argument is that the Assessing Officer had rightly added the impugned retention money as assessee s income going by its accounting method regularly followed. We find no merit in Revenue s instant grievance. It has come on record that this latter issue; although a recurring one, is no more res integra between the parties since the tribunal s order(s) in assessment years 2008-09 and 2009-10 (supra) have already decided the same in assessee s favour. We wish to reiterate with the Revenue s pleadings have nowhere sought to draw any exception on facts or law in it impugned assessment year. We therefore affirm the CIT(A) s findings under challenge by adopting judicial consistency. The Revenue fails in its instant latter substantive grievance as well. 5. This Revenue s appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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