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

ITA/148/2007HC Punjab & HaryanaPHHC01072822200706 May 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI2 pages
AI SummaryDismissed

What were the facts?

The appeal is filed by the Commissioner of Income Tax (CIT) against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, dated June 30, 2006, for the assessment year 2001-02. The assessee, M/s SAB Industries Limited, is engaged in construction work. The assessee had declared a net loss of Rs. 63,54,053/-. The Assessing Officer (AO) made additions, including disallowing retention money held by the client pending successful completion of work. The CIT(Appeals) set aside the AO's disallowance, and this order was affirmed by the ITAT. The amount in dispute is Rs. 3,99,406/-.

What did the High Court hold?

The High Court held that the Tribunal was correct in its decision. The court noted the consistent view of various High Courts, which it respectfully agreed with, 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 they are retained. The court found no substantial question of law arising for consideration. Consequently, the appeal filed by the revenue was dismissed. No issue was expressly left undecided.

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. 3,99,406/- 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? Assessee's contentions: The assessee relied on several High Court judgments, including Commissioner of Income Tax vs. Chanchani Brothers (Contractors) Pvt. Ltd (161 ITR 418 Patna), Commissioner of Income Tax, Simplex Concrete Piles (India) Pvt. Ltd. (179 ITR 8 Calcutta), Commissioner of Income Tax vs. East Coast Constructions and Ind. Ltd (2006) 283 ITR 297 (Mad), Commissioner of Income Tax vs. Associated Cables P. Ltd (2006) 286 ITR 596 (Bom), and Commissioner of Income Tax vs. P & C Constructions (P) Ltd. (2009) 318 ITR 113 (Mad). These judgments held that the right to receive retention money accrues only after the contractual obligations are fulfilled, and therefore, it does not constitute income in the year of retention. Revenue's contentions: The revenue argued that the retention money should be treated as the assessee's income for the year, given that income is assessed on an accrual basis.

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. 148 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 2001-02. 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. 3,99,406/- 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 loss

The order continues below.

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