AMARSHIV CONSTRUCTION PVT LTD vs. ASST. COMMISSIONER OF INCOME TAX

Facts

The assessee, Amarshiv Construction Pvt Ltd, is engaged in civil construction. The appeals concern assessment years 2003-04 and 2007-08. The challenge is to a common order dated January 3, 2014, passed by the Income Tax Appellate Tribunal (Tribunal). For assessment year 2003-04, the Assessing Officer made an addition of Rs. 30,80,101/- representing retention money, disallowing the assessee's claim that it was not taxable income for the year. The assessee's appeals before the Commissioner of Income-Tax (Appeals) and the Tribunal were unsuccessful. The High Court notes that the controversy is concluded by a previous decision of the same court in a similar case.

Held

The High Court allowed both appeals, holding that the controversy is concluded by its prior decision in Amarshiv Construction Pvt. Ltd. v. The Deputy Commissioner of Income-Tax (Tax Appeal No.554/2003 and cognate matters), which was decided in favour of the assessee. The court answered the substantial question of law in favour of the appellant-assessee and against the revenue. The ratio decidendi is that retention money is not taxable in the year it is withheld, but only when it becomes payable to the assessee. The Assessing Officer is directed to tax the retention money in the assessment year relevant to the previous year in which it becomes payable, specifically after the defect liability period is over and certified by the Engineer-in-Charge.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Tribunal's finding and conclusion regarding the taxability of retention money for the assessment year under consideration is contrary to the settled position of law and documentary evidence on record? (Question of law) Assessee's Contention: The assessee contended that retention money is not taxable income for the year under consideration, based on the facts and documentary evidence. The assessee relied on the decision of this court in Amarshiv Construction Pvt. Ltd. v. The Deputy Commissioner of Income-Tax (Tax Appeal No.554/2003 and cognate matters). Revenue's Contention: The revenue's contentions are not explicitly recorded in the judgment, but it was the opposing party before the Tribunal and the High Court.