DEPUTY COMMISSIONER OF INCOME TAX vs. M/S. B.G. SHIRKE CONSTRUCTION TECHNOLOGY PVT.LTD, PUNE

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ITA 2771/PUN/2016Status: DisposedITAT Pune07 September 2018AY 2012-135 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the issue of retention money has been consistently decided in favour of the assessee in its own cases for earlier assessment years. Following the judicial discipline and previous pronouncements, the Tribunal upheld the CIT(A)'s deletion of the addition.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting the addition of retention money. The assessee, a construction contractor, followed the mercantile system but offered retention money to tax upon receipt. The Assessing Officer made an addition on the grounds that retention money should be taxed on accrual basis.

What were the issues?

Whether retention money, in the case of a contractor following the mercantile system, should be taxed on receipt basis or accrual basis. Whether the assessee's consistent practice of offering retention money to tax upon receipt is valid.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “B” BENCH, PUNE

Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM

For Respondent: Shri G.P. Chandrakar, Shri Nikhil Pathak
Hearing: 06.09.2018Pronounced: 07.09.2018

आदेश / ORDER

PER VIKAS AWASTHY, JM

This appeal by Revenue is directed against the order of Commissioner of Income Tax (Appeals)-1, Pune dated 14.09.2016 for the assessment year 2012-13.

2.

The Revenue has assailed the findings of Commissioner of Income Tax (Appeals) by raising following grounds:

2 ITA No.2771/PUN/2016 A.Y.2012-13

“1. The order of the Ld. Commissioner of Income-tax (Appeals) is contrary to the law and on facts and in the circumstances of the case.

2.

The Ld.CIT(A) erred in deciding that retention money has to be taxed in the year of receipt and not on accrual basis even though assessee is following mercantile system and assessee has debited all expenditure related to such contract receipt including retention money.

3.

The Ld. CIT(A) erred in confirming the view of assessee that retention money has to be excluded in computation of income, although the same has been shown as receipt during the year and credited in profit and loss account.

4.

The Ld. CIT(A) erred in confirming the view of assessee that retention money has to be excluded in computation of income in view of decision of the Bombay High Court in the case of Associated Cables (P.) Ltd. Vs. Dy.CIT [2006] reported in 286 ITR 596 (Bom.) although the facts of present case is distinguished. 5. For these and such other grounds as may be urged at the time of hearing, the order of Ld. Commissioner of Income Tax (Appeals) may be vacated and that of the Assessing Officer be restored.

6.

The appellant craves to add, amend, alter or delete any of the above ground of appeal during the course of appellate proceedings before the Hon'ble Tribunal.”

3.

Shri Nikhil Pathak appearing on behalf of the assessee submitted that

the assessee is engaged in the business of construction contractors, civil

and structural engineers, fabricators and manufacturing of post-harvest

equipment, exploration and development of oil and gas producing activities.

The ld. AR submitted that the assessee offers retention money to tax in the

year in which it is received. The assessee has been consistently following

this method of accounting qua retention money. During the course of

scrutiny assessment proceedings, the Assessing Officer made addition of

Rs.22,34,92,287/- on the ground that the retention money is to be brought

to tax in the year, it has become due. The ld.AR further submitted that

addition of retention money for similar reasons were made in earlier

assessment years starting from assessment year 2003-04. The matter

travelled upto the Tribunal. The Tribunal in ITA Nos.727 to 730/PN/2012,

vide order dated 31.10.2013 in assessee’s own case for assessment years

3 ITA No.2771/PUN/2016 A.Y.2012-13

2003-04, 2006-07, 2007-08 & 2008-09 concurred with the view of assessee

and deleted the addition. The Tribunal in ITA No.1146/PN/2014, for

assessment year 2010-11 decided on 15.01.2016 and in ITA

No.1330/PN/2015 for assessment year 2011-12 decided on 24.11.2017

following earlier orders of Tribunal decided the issue in favour of assessee.

The Commissioner of Income Tax (Appeals) following the judicial discipline

has deleted the addition by placing reliance on the order of Tribunal in ITA

Nos.727 to 730/PN/2012 (supra.).

4.

Shri G.P. Chandrakar representing the Department vehemently

defended the assessment order. However, ld. DR fairly admitted that the

issue raised by Revenue in the present appeal has already been decided by

the Tribunal in assessee’s own case in earlier assessment years.

5.

We have heard the submissions made by representatives of rival sides

and have perused the orders of Authorities below. The solitary issue raised

in present appeal by the Revenue is against deleting addition of retention

money. We find that this issue is recurring since assessment year 2003-04.

The Tribunal for the first time in bunch of appeals in assessee’s own case in

ITA Nos.727 to 730/PN/2012(supra.) after considering the assessee’s claim,

in principle directed for exclusion of retention money subject to verification

of quantum. Thereafter, the Tribunal in appeal of the assessee for

assessment year 2010-11 (ITA No.1146/PM/2014) & assessment year 2011-

12 (ITA No.1330/PUN/2015) has taken a consistent view in deleting the

addition subject to verification in similar terms. For the sake of

completeness, the relevant extract of the findings of the Tribunal in ITA

No.727 to 730/PN/2010(supra) are reproduced herein below:

4 ITA No.2771/PUN/2016 A.Y.2012-13

“25. In so far as the merits of the claim is concerned, no doubt in principle the same is covered by the ratio of the judgement of the Hon'ble Bombay High Court in the case of Associated Cables P. Ltd. (supra). The assessee has also furnished the year-wise working of the claim of excluding income on account of retention money for the assessment years in question. Such details are placed in the Paper Book filed before us and it has been asserted that the same was also available on the record of the authorities below. Ostensibly, the Assessing Officer as well the CIT(A) have not examined the merits of the claim because the same was rejected at the threshold itself. At the time of hearing, the appellant has preferred Additional Grounds of Appeal re-quantifying the claim for assessment years 2007-08 and 2008-09 in the event of similar claims not being found exigible for assessment years 2003-04 and 2006-07. In order to enable the Assessing Officer to verify the workings of the claim for assessment years 2007-08 and 2008-09, we restore the matter back to the file of the Assessing Officer. The Assessing Officer shall examine the working of the claim made by the assessee, including the revised workings consequent to non-admission of similar claim for assessment years 2003-04 and 2006-07, and thereafter allow the appropriate claim as per law. Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity of furnishing appropriate details in support of the claim and only thereafter the Assessing Officer shall adjudicate it as per law and re-compute the total income accordingly for the assessment years 2007-08 and 2008-09.”

The issue has been laid to rest by the Tribunal holding exclusion of

retention money and the Revenue has not brought on record any contrary

decision. Thus, in the light of the orders of Tribunal in assessee’s own case

for earlier assessment years, we uphold the findings of Commissioner of

Income Tax (Appeals) and dismiss the grounds raised by the Revenue.

In the result, appeal of the Revenue is dismissed. 6.

Order pronounced on Friday, the 07th day of September, 2018.

Sd/- Sd/- (अ�नल चतुव�द� /ANIL CHATURVEDI) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 07th September, 2018 SB

5 ITA No.2771/PUN/2016 A.Y.2012-13

आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-1, Pune. 4. The Pr. CIT-1, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

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