COMMISSIONER OF INCOME TAX vs. M/S S.A. BUILDERS LTD

ITA/61/2004HC Punjab & HaryanaPHHC01051582200406 May 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI2 pages
AI SummaryDismissed

What were the facts?

The Revenue, Commissioner of Income Tax (Central), Ludhiana, has appealed an order dated 04.04.2003 passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, for the assessment year 1992-93. The assessee, M/s S.A. Builders Limited, a construction company, had declared a net loss of Rs. 1,17,39,640/-. The Assessing Officer (AO) made additions, including disallowing Rs. 14,45,700/- retained by the client as retention money, pending successful completion of the work. The Commissioner of Income Tax (Appeals) set aside the AO's disallowance, and the ITAT affirmed this decision. The Revenue is challenging the ITAT's order.

What did the High Court hold?

The High Court held that there was no substantial question of law arising for consideration. The Court agreed with the consistent view of various High Courts, which held that the right to receive retention money accrues only upon the fulfillment of contractual obligations. Therefore, such retained amounts do not constitute income in the year of retention. The High Court found no reason to interfere with the ITAT's decision. The appeal was dismissed. No specific issue was 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. 14,45,700/- 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 Contention: The assessee argued that the right to receive retention money accrues only after the obligations under the contract are fulfilled. Therefore, it does not constitute income in the year it is retained. The assessee relied on the decisions in 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. Revenue's Contention: The revenue contended 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. 61 of 2004

Commissioner of Income Tax (Central), Ludhiana ......Appellant vs. M/s S.A. Builders 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 4.4.2003 for the assessment year 1992-93. 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. 14,45,700/- 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 of

The order continues below.

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