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TMI Blog2024 (11) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... and thus deduction u/s 80-IA should not be allowed while considering the same for the purpose of computing taxable profits. 2.3. The Ld. CIT(A) was not justified and failed to appreciate the fact that the Appellant follows the Income Computation and disclosure Standard('ICDS') III dealing with construction contract which specifically provides that retention money shall form part of the contract revenue and erred in not considering the fact that the ruling of Hon'ble Kolkata Tribunal in the case of DCIT vs. M/s. McNally Bharat Engineering Co. Ltd. (I.T.A No.100/Kol/2011) pertains to the period prior to the introduction of ICDS provisions and will not apply to the facts of the Appellant. 2.4. The Ld. CIT(A) erred in stating that the facts of AY 2017-18 were not identical to AY 2018-19 and in not appreciating the fact that in AY 2017-18 the CIT(A) in its order while allowing deduction u/s 80-IA on retention money had specifically stated that the reasons given by Ld. Assessing Officer for denial of revised deduction u/s 80IA (which included retention money) are not justifiable.. 2.5. Without prejudice to above, the Ld. CIT(A) was not justified and gr in facts and in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26AS statement. The appellant explained the difference to the extent of Rs. 5,09,331/- but the difference of Rs. 1,00,252/- was not explained. Therefore, AO made addition of Rs. 1,00,252/- on account of undisclosed interest income. Further, AO had disallowed the corresponding TDS credit of Rs. 60,958/- on Rs. 6,09,583/- since interest of Rs. 5,09,331/- was offered for taxation in AY 2019-20. Thus, Assessing Officer completed the assessment u/s 143(3) r.w.s. 143(3A) and 143(3B) and passed assessment order on 15.03.2021 by holding as under : "4 ADDITION OF RETENTION MONEY During the assessment proceeding, vide notice u/s. 142(1) dtd. 17/12/2020 the assessee was asked to furnish the details of retention money received ruling the year under consideration and its applicability on computation of deduction claimed u/s. 80IA. In response to this notice vide letter dt. 31/12/2020 the assessee has furnished its reply on perusal of the assessee reply the assessee has stated that the JV has accounted for retention money amounting to Rs. 31,86,76,819/- during the FY 2017¬18 In this regard, the meaning of retention money, the purpose of recognizing and its implication on business is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,76,819/-) and disallowing the balance claim of Rs. 31,86,76,819/-. Penalty proceedings u/s. 270A is separately initiated for under reporting of income." 4. Feeling aggrieved by the order passed by the assessing officer, assessee filed appeal before the Ld. CIT(A), who dismissed the appeal of assessee by holding as under : "6.2. I have perused the assessment order, grounds of appeal and submission filed by the appellant and arguments made during VC. I find from the assessment order that the appellant had claimed deduction u/s 80IA of Rs. 104,34,52,820/- at the rate of 100% of profit and gain derived from business. However, it was noted by the AO that the profit and gain from the business also included retention money of Rs. 31,86,76,819/- which has an element of uncertainty hence was not allowable while computing the deduction u/s 80IA. Therefore, by relying on the decision of Hon'ble Supreme Court of India in the case of Cambay Electrical Supply co. Ltd ( 113 ITR 684 ), the AO reduced the claim of deduction u/s 80IA to Rs. 72,47,76,001/- as against deduction of Rs. 104,34,52,820/- claimed in the return of income. During appellant proceedings the appellant claimed that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'ble Calcutta High Court on identical facts held that having regard to the terms and conditions of the contract, it could not be held that either 10 per cent. Or 5 per cent., as the case may be, being retention money, became legally due to the assessee on the completion of the work. 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. Therefore, on the date when the bills were submitted, having regard to the nature of the contract, no enforceable liability accrued or arose and, accordingly, it could not be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of bills. The assessee had no right to claim any par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be allowed, and alternatively, it was submitted that if the retention money offered to tax is not allowable, and in that scenario, the corresponding amount should be reduced from the income of the JV while computing of the taxable income under the head income from profits and gains from the business and profession. 7. The ld.DR relied upon the orders passed by the lower authorities, as mentioned herein above. Furthermore, he relied upon the decision of the Hon'ble High Court of Calcutta in the case of PCIT Vs. EMC Ltd. reported in (2022) 142 taxmann.com 48. The ld.CIT(A) has submitted that computation of income from the construction and service contracts are required to be prepared and taxed in accordance with Section 43CB of the Act. Our attention was drawn to Section 43CB of the Act, which reads as under : Section 43CB in The Income Tax Act, 1961 43CB. [Computation of income from construction and service contracts. [Inserted by Finance Act, 2018 (Act No. 13 of 2018), dated 29.3.2018.] (1) The profits and gains arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42.376/- and tax liability under the normal provisions or the Act. Subsequently the appellant had filed revised return of income on 19/03/2018 1.e. within the permitted time limit and had added the retention money of Rs. 11,36,37,740/- and also deduction /s 8OIA on the same. The AO did not allow the deduction u/s 801A of Rs. 11.36.37. 740/- on the ground that the appellant has included portion of retention money in the business income whose receipts are not certain and subject to satisfaction of the contractor i.e. Jaipur Development Authority. Further the AO noted that the reasons for enhancement of deduction u/s 80IA are not mentioned in the audit report. The appellant has claimed that it has disclosed the retention money as income ICDS II and by relying various judicial pronouncement claimed that the deduction should be allowed as per the revised Form No. 10CCB. Alternatively the appellant claimed that if the deduction u/s 80IA is not allowed, then the retention money income offered for taxation should be reduced from the total income. I have considered the assessment order and the submission filed by the appellant. I find that the revised return of income was filed within t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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