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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-6, Chennai, dated 24.10.2016 and pertains to assessment year 2012-13. The assessee has also filed cross-objection against the very same order of the CIT(Appeals). Therefore, we heard both the appeal and cross-objection together and disposing of the same by this common order.
Shri M.S.V.M. Prasad, the Ld. Departmental Representative, submitted that the Assessing Officer disallowed proportionate expenditure against the retention money claimed as exempt.
According to the Ld. D.R., the assessee excluded a sum of `17,72,15,608/- as amount withheld while computing under normal provisions of the Income-tax Act, 1961 (in short 'the Act'). However, the corresponding expenditure was not excluded. According to the Ld. D.R., when the amount withheld by the assessee was excluded from computation, the corresponding expenditure on that withheld amount also should be excluded. However, according to the Ld. D.R., the assessee excluded the entire gross receipt while leaving the expenditure untouched, therefore, the Assessing Officer disallowed the expenditure relatable to the amount withheld.
However, on appeal by the assessee, the CIT(Appeals) by placing reliance in the assessee's own case for assessment year 2007-08, deleted the disallowance made by the Assessing Officer. According to the Ld. D.R., the order of this Tribunal in the assessee's own case for assessment year 2007-08 is not in respect of expenditure in relation to the amount withheld, but it is on withheld money itself.
Therefore, according to the Ld. D.R., the CIT(Appeals) is not justified in allowing the claim of the assessee. According to the Ld. D.R., in fact, the expenditure relatable to retention money is not the subject matter of discussion before this Tribunal, therefore, the order of this Tribunal in the assessee's own case for assessment year 2007-08 is not applicable at all.
On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee claimed an amount of `17,72,15,608/- as money withheld. The Assessing Officer found that the expenditure relatable to that amount also needs to be excluded. The Assessing Officer found that during the year under consideration the total expenditure incurred was `174.05 Crores as against the income of `192.19 Crores. The net profit was 9.43%.
According to the Ld. counsel, the Assessing Officer further found that the expenditure incurred in respect of withheld amount to the extent of `16,05,04,176/- needs to be disallowed. According to the Ld. counsel, the CIT(Appeals) found that the amount withheld cannot be disallowed. By placing his reliance on the order of this Tribunal in the assessee's own case for assessment year 2007-08, the CIT(Appeals) held that the money retained / withheld is not automatically payable as soon as the contract was executed, therefore, the Tribunal has rightly found that the same cannot be taken as income of the assessee. According to the Ld. counsel, the expenditure was in fact incurred even though the money was retained by the assessee. Therefore, according to the Ld. counsel, the CIT(Appeals) has rightly allowed the claim of the assessee.
We have considered the rival submissions on either side and perused the relevant material available on record. The assessee excluded `17,72,15,608/- from computation under the normal provisions of the Act. However, the corresponding expenditure was not excluded. Therefore, the Assessing Officer found that the corresponding expenditure when comparing to the net profit of 9.43% of the assessee comes to `16,05,04,176/-. The CIT(Appeals) found that the retention money cannot be treated as income of the assessee since it is not automatically payable as soon as the contract was executed, therefore, he deleted the addition made by the Assessing Officer. The CIT(Appeals) has not considered whether the expenditure relatable to retention / withheld money has to be allowed or not.
As rightly submitted by the Ld. D.R., the order of this Tribunal for the assessment year 2007-08 is only in respect of money withheld / retained for due performance of contract. The expenditure relatable to the money withheld was not the subject matter before this Tribunal for the assessment year 2007-08.
Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has to reconsider whether the expenditure relatable to money withheld is allowable deduction or not. Since that point was not considered, the issue needs to be reconsidered by the CIT(Appeals) at the first instance. Accordingly, the order of the CIT(Appeals) is set aside and the issue raised by the assessee is remitted back to the file of the CIT(Appeals). The CIT(Appeals) shall reconsider the issue and thereafter decide the same in accordance with law, after giving a reasonable opportunity to the assessee.
Now coming to the cross-objection filed by the assessee, the only issue arises for consideration is TDS credit of `7,30,058/-.
We have heard Sh. R. Vijayaraghavan, the Ld.counsel for the assessee and Shri M.S.V.M. Prasad, the Ld. Departmental Representative. The CIT(Appeals) confirmed the order of the Assessing Officer by placing reliance on the order of this Tribunal in East Coast Constructions & Industries Ltd. holding that when the retention money is not taxable, the corresponding TDS on that amount can be allowed in the year in which the retention money is offered to tax. The issue before this Tribunal is not in relation to retention money, but expenditure incurred in relation to retention money. Therefore, this issue also needs to be reconsidered by the CIT(Appeals). Accordingly, the order of the CIT(Appeals) is set aside and the issue of TDS credit is also remitted back to the file of the CIT(Appeals). The CIT(Appeals) shall reconsider the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, both the appeal of the Revenue and the cross- objection of the assessee are allowed for statistical purposes.
Order pronounced on 22nd June, 2017 at Chennai.