M/S.TOMCO ENGINEERING (P) LTD. vs. THE ASST. COMMISSIONER OF INCOME TAX,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 28TH DAY OF SEPTEMBER 2022 / 6TH ASWINA, 1944 ITA NO. 4 OF 2019 ITA 134/2017 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S.TOMCO ENGINEERING (P) LTD. 163, PALANNATTIL, KUNNACKAL.P.O., MUVATTUPUZHA, ERNAKULAM DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR, PAUL P.THOMAS. BY ADVS. HARISANKAR V. MENON SMT.MEERA V.MENON SMT.K.KRISHNA RESPONDENT/S: THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE WARD-2(1), KOCHI. BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX OTHER PRESENT: SR ADV. P.K.R. MENON THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 28.09.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA NO. 4 OF 2019 -2- S.V.BHATTI & BASANT BALAJI, JJ. - - - - - - - - - - - - - - -- - - -- - - - - - - - - - -- - - - - - - - - I.T.A NO.4 OF 2019 - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - JUDGMENT (Dated this the 28th day of September 2022) Basant Balaji J., A private limited company engaged in execution of contract works is the appellant. During the financial year 2011-12, the appellant had undertaken works awarded by the Kerala Water Authority for supplying, laying, jointing, testing and commissioning of pipes in the trenches having a depth of 1.5 mtr. as per Annex.A tender notification. During 2011-12, the Kerala Water Authority deducted Rs.73,86,402/- by virtue of clauses 8.12, 8.14 and 8.16. The appellant claimed the amount deducted by the Water Authority as expenditure eligible for deduction under the

ITA NO. 4 OF 2019 -3- Income Tax Act. 2. The assessing authority, by Annexure-B assessment order, disallowed the deduction as the assessee is debiting an expenditure which has not yet incurred. Relying on sections 36 and 37 of the Income Tax Act the assessing Authority held that recoveries made by the Kerala Water Authority are contingent in nature and have not been crystalised as expenditure during the year and therefore the amount was added back to the income of the assessee. Challenging the order of the assessment, the appellant filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner, by Annexure - C order, allowed the appeal in part and held that the dis-allowance of Rs.73,86,402/- made by the assessing officer is to directed to be deleted.

ITA NO. 4 OF 2019 -4- 3. The Revenue filed further appeal before the Income Tax Appellate Tribunal Cochin Bench as ITA No.134/COCH/17. The Tribunal on appreciation of the facts and circumstances of the case and Sections 36 and 37 of the Income Tax Act, allowed the appeal filed by the revenue for statistical purpose and remitted the issue back to the Assessing officer for fresh consideration afresh. The Tribunal has allowed the appeal based on the fact that the voucher produced by the assessee before the authority was not considered by the authority and does not reflect in the order. The Tribunal was of the view that the matter requires reconsideration since the question whether the retention amount can be allowed as an expenditure or not, is specifically considered by the Assessing authority. We are in full agreement with the impugned order in the

ITA NO. 4 OF 2019 -5- Income Tax Appeal and the matter is remitted to the Assessing Authority for consideration afresh. We clarify that the remand to the Assessing Officer is open and the assessing authority shall consider the merits of the case including the deduction of the retention amount retained by the Kerala Water Authority merits the claim of expenditure in the circumstances of the case and pass appropriate orders. Income Tax Appeal is disposed of with the above observations.

S.V.BHATTI,

JUDGE sd BASANT BALAJI,

JUDGE dl/

ITA NO. 4 OF 2019 -6- APPENDIX OF ITA 4/2019 PETITIONER ANNEXURES ANNEXURE A COPY OF TENDER NO.35/2012- 13/KWA/PHC/TVM, ISSUED BY SUPERINTENDING ENGINEER, KERALA WATER AUTHORITY, THIRUVANANTHAPURAM. ANNEXURE B COPY OF ASSESSMENT ORDER ISSUED BY THE INCOME TAX OFFICER, CORPORATE WARD 2(1), KOCHI FOR THE YEAR 2012-13 DATED 9.2.2015 ANNEXURE C COPY OF ORDER IN ITA NO.58/R-1/E/CIT(A)- II/2014-15 ISSUED BY THE COMMISSIONER OF INCOME TAX APPEALS, KOCHI-36 DATED 24.1.2017. ANNEXURE D COPY OF ORDER IN ITA NO.134/COCH/2017 FOR THE YEAR 2012-13 ISSUED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN DATED 11.6.2018.