CIT, CHD. vs. M/S SAB INDUSTRIES LTD. CHD.

ITA/149/2007HC Punjab & HaryanaPHHC01072823200706 May 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI2 pages
AI SummaryDismissed

What were the facts?

The Revenue has appealed an order of the Income Tax Appellate Tribunal (ITAT) dated June 30, 2006, for assessment year 2002-03. The assessee, M/s SAB Industries Limited, is engaged in construction work and had declared a net loss of Rs. 1,27,33,410/-. The Assessing Officer (AO) made additions, including disallowing retention money held by the client pending successful completion of work. The Commissioner of Income Tax (Appeals) set aside the AO's disallowance, and the ITAT affirmed this decision. The dispute centers on whether the Rs. 17,00,009/- retained by the client should be treated as the assessee's income for the year, given the assessee's accrual basis of accounting.

What did the High Court hold?

The High Court held that the Tribunal was correct in its decision. The Court agreed with the consistent view of various High Courts, as cited by the assessee, which held that the right to receive retention money accrues only upon the fulfillment of contractual obligations. Therefore, such retained amounts do not constitute the assessee's income in the year of retention. The Court found no substantial question of law arising from the ITAT's order. The appeal was dismissed, upholding the ITAT's decision to set aside the disallowance of retention money as income.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 17,00,009/- retained by the authorities could not be treated as assessee's income for the year in spite of the fact that income was being assessed on accrual basis? (Question of law) Assessee's Contentions: The assessee relied on several High Court judgments, including Commissioner of Income Tax vs. Chanchani Brothers (Contractors) Pvt. Ltd, Commissioner of Income Tax, Simplex Concrete Piles (India) Pvt. Ltd., Commissioner of Income Tax vs. East Coast Constructions and Ind. Ltd, Commissioner of Income Tax vs. Associated Cables P. Ltd, and Commissioner of Income Tax vs. P & C Constructions (P) Ltd. These cases held that the right to receive retention money accrues only after fulfilling contractual obligations, and thus, it does not constitute income in the year it is retained. Revenue's Contentions: The Revenue argued that the retention money should be treated as the assessee's income for the year, despite the accrual basis of accounting, implying that the accrual should be considered in the year of retention.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 06.05.2013 ITA No. 149 of 2007

Commissioner of Income Tax Chandigarh-II ......Appellant vs. M/s SAB Industries Limited, Sector 26, Chandigarh .....Respondent CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI

Present: - Ms. Urvashi Dhugga, Advocate for the appellant. M/s Akshay Bhan and Alok Mittal, Advocates for respondent. Hemant Gupta, J ....... Present appeal under Section 260-A of the Income Tax Act, 1961 (for short the 'Act') arises out of an order passed by Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh on 30.6.2006 for the assessment year 2002-03. The revenue has claimed following substantial question of law: - “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 17,00,009/- retained by the authorities, could not be treated as assessee's income for the year in spite of fact that income was being assessed on accrual basis”? Respondent-company is engaged in construction work. For the relevant accounting year, the assessee filed its return of income declaring net los

The order continues below.

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