C.I.T UDAIPUR vs. BHEEM SINGH

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ITA/34/2015HC RajasthanRJHC01021260201522 April 20164 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal affirmed the findings of the CIT(A) and held that the amount of Rs. 1,38,60,000/- deposited by the assessee included an advance payment of Rs. 18,08,219/-. This advance payment, being a deposit towards the contract and not income earned in the relevant assessment year, could not be treated as the assessee's income. The Court found that the CIT(A)'s and ITAT's findings were based on facts and were not capricious or perverse. Therefore, no substantial question of law arose for consideration. The appeal was dismissed in limine. The ratio decidendi is that advance payments made by a contractor towards a contract, even if deposited with a government entity and subject to TCS, do not constitute income for the assessment year in which the advance is paid, provided it is not earned income.

What were the facts?

The assessee, engaged in toll tax collection, filed a return for AY 2005-06. The Assessing Officer (AO) reopened the assessment and added Rs. 18,08,219/- to the assessee's income. This addition represented the difference between the toll tax collected (Rs. 1,20,51,781/-) and payments made by the assessee (Rs. 1,38,60,000/-) for the Mangalwad Toll Naka contract, as per a TCS certificate. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the addition. The CIT(A) found that the contract amount was Rs. 2,52,00,000/-, with a security deposit of 10% and an initial deposit of 17.5% (Rs. 44,10,000/-). The balance was payable in installments. The CIT(A) held that the advance payment of Rs. 18,08,219/- could not be treated as income. The Income Tax Appellate Tribunal (ITAT) affirmed the CIT(A)'s order, leading to the present appeal by the Revenue.

What were the issues?

1. Whether the amount of Rs. 18,08,219/-, representing an advance payment towards the toll tax collection contract, can be treated as the assessee's income for the assessment year 2005-06, thereby justifying the addition made by the Assessing Officer? (Question of law) Assessee's contentions: The assessee argued, and the lower appellate authorities found, that the amount in dispute was an advance payment towards the contract and not income earned during the relevant assessment year. The CIT(A) noted that the assessee was required to deposit 17.5% of the bid value as an initial deposit, and the amount in question was part of this advance payment. The assessee claimed credit for TCS deducted on this amount. Revenue's contentions: The Revenue contended that since Rs. 1,38,60,000/- was deposited by the assessee and TCS was collected on the entire amount, it could not be accepted that this amount included an advance payment of Rs. 18,08,219/-. The Revenue argued that the entire deposited amount should be considered as income, or at least the difference should be added.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 148,Section 206C(5A)

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME TAX, UDAIPUR VS. BHIM SINGH CHUNDAWAT Dated:- 22.4. 16. HON'BLE MR.JUSTICE SANGEET LODHA HON'BLE MR.JUSTICE KAILASH CHANDRA SHARMA Mr.K.K.Bissa, for the Revenue.

1.

This appeal is directed against order dated 25.7.14 passed by the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur, affirming the order dated 29.10.13, passed by the Commissioner of Income Tax (Appeals) ['CIT(A)'], Jodhpur, deleting the addition of Rs.18,08,219/- to the income of the assessee made by the Assessing Officer (A.O.) vide re- assessment order dated 20.12.11, for the assessment year 2005-06. 2. The relevant facts are that the assessee, who is engaged in the business of collection of toll tax, sales tax and royalty on contract basis entered into with the Government Department, filed Return of income for the assessment year 2005-06 declaring total income of Rs.36,21,496/-. The total income of the assessee was computed by the A.O. under Section 143(3) of the Income Tax Act, 1961 (for short “the Act”) at Rs.3,78,32,562/-. assessment year 2005-06, as filed under Section 148 of the Act. The A.O. found that the assessee has made payments of Rs.1,38,60,000/- in respect of advance installments and monthly installment in respect of Mangalwad Toll Naka as per TCS certificate under Section 206 C (5A) of the Act, issued by the Resident Engineer, RSRDC Limited, Udaipur. Accordingly, the difference amount of toll tax collected by the assessee estimated at Rs.1,38,60,000/- as against Rs.1,20,51,781/- disclosed by the assessee in P&L account of Mangalwad Toll Naka, quantified at Rs.18,08,219/- was added to the total income of the assessee.

3.

Aggrieved by the re-assessment order dated 29.10.13 passed by the A.O. as aforesaid, the assessee preferred an appeal before the CIT (A). After due consideration of the rival submissions, CIT (A) arrived at the finding that the assessee was awarded contract for collection of toll tax for Rs.2,52,00,000/-, which was payable in 12 equal installments and further, as per para 1 of the agreement, in addition to the amount of security deposit which was 10% of approved bid amount, the assessee was also required to deposit 17.5% of the bid value Rs.44,10,000/- (Rs.2,52,00,000 x 17.5%) and the balance amount was required to be paid in equal installment of COMMISSIONER OF INCOME TAX, UDAIPUR VS.

Rs.18,90,000/-. The CIT (A) also observed that as per the agreement, the assessee was also required to deposit income tax (TCS) with RSRDC Ltd. and the same is deposited by the RSRDC and the assessee claimed credit of such tax deducted on the strength of certificate to this effect issued in Form 27D. The CIT (A) arrived at the finding that the advancement payment of Rs.18,08,219/- deposited with RSRDC, cannot be termed as receipt/income of the assessee and accordingly, the addition made by the A.O. was deleted.

4.

The order passed by the CIT (A) has been affirmed by the ITAT. Hence, this appeal.

5.

Learned counsel appearing for the Revenue submitted that an amount of Rs.1,38,60,000/- has been deposited by the assessee and TCS @ 2.244% has been collected on the entire amount and the assessee has claimed credit for the same and therefore, it cannot be accepted that amount of Rs.1,38,60,000/- includes the advance payment of Rs.18,08,219/-.

6.

We have considered the submissions of the learned counsel and perused the material on record.

7.

It is a matter of record that amount of Rs.1,38,60,000/- deposited by the assessee includes advance payment of installment @ 17.5% of the contract money i.e.

COMMISSIONER OF INCOME TAX, UDAIPUR VS.

Rs.2,52,00,000/-, quantified at Rs.44,10,000/-. In this view of the matter, since the amount of Rs.1,38,60,000/- deposited by the assessee includes the advance payment of Rs.18,08,219/-, which in no manner can be treated to be income of the assessee during the relevant assessment year. In the considered opinion of this court, the finding arrived at by the CIT (A), affirmed by the ITAT, as aforesaid, remains a finding of fact, which cannot be said to be capricious or perverse.

8.

In view of the discussion above, no substantial question of law arises for consideration of this court in this appeal.

9.

Accordingly, the appeal is dismissed in limine. (KAILASH CHANDRA SHARMA),J. (SANGEET LODHA),J. Aditya/

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