DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 1(1),, PUNE vs. M/S. ADWITIYA PROJECTS (INDIA) PVT.LTD,, PUNE

At the very outset, the Ld. DR for the Revenue submitted that this is a matter on recall by virtue of the order of Miscellaneous Application No.22/PUN/2021 dated 05.03.2021 by the Revenue.

The only issue for adjudication in this appeal is whether retention money of Rs.4,90,24,344/- was not taxable in view of decision of the Hon’ble Bombay High Court while computing the assessed total income.

The brief facts in this case are that during assessment proceedings, it was submitted by the assessee vide letter dated 28.11.2016 at Para B that retention money which is kept by customers does not amount an income in the year in which such amount is retained by the customers. The assessee relied on the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Associated Cables (P). Ltd. (2006) 286 ITR 596 and the decision of the Pune Bench of the Tribunal in the case of Akruti Projects, order dated 10th January, 2014. However, the Assessing Officer while passing assessment order has neither considered the submissions of the assessee nor judicial pronouncements and held the retention money as taxable and added to the total income of the assessee.

That before the Ld. CIT(Appeal), it was submitted by the assessee that in assessment year 2013-14, the Ld. CIT(Appeal) had directed the Assessing Officer to consider the claim for exclusion from total income for such retention money and also that the Assessing Officer shall be entitled to verify the quantum of amount before allowing such relief. Thereafter, the assessee had submitted a statement showing details of retention money kept by customers on the invoices generated in the current year along with ledger extracts to show that customers had retained certain sums as retention money. This retention money withheld by contractees pending satisfactory completion of the project does not amount to an income in the year in such amount is retained by customers in-principle. That once again, the assessee relied on the aforesaid judicial pronouncements (supra.) which are on record. On this issue, the Ld. CIT(Appeal) has held as follows:

Before parting, we may observe that the additional Ground is being admitted only with respect to a claim of Rs.25,02,710/- and no more. In other words, even if the amount excludible from income on account of it being in the nature of retention money following the parity of reasoning the Hon'ble High Court in the case of Associated Cables (P) Ltd. (supra) is in excess of Rs.25,02,710/-, the claim of the assessee shall be limited to Rs.25,02,710/- and if it is below the said amount, then only the appropriate relief shall be allowable.

Thereafter, relying on the decision of the Pune Bench of the Tribunal in the case of Akruti Projects (supra.), the Ld. CIT(Appeal) directed the Assessing Officer to consider the claim of Rs.4,90,24,344/- of the assessee for exclusion from total income subject to verification of the quantum of amount before allowing such relief.

These facts were conceded by the Ld. DR for the Revenue. He submitted that from assessment year 2016-17, this retention money is taxable. However, we find that the case before us pertains to assessment year 2014-15 and during this time, retention money was not taxable. We find, in the facts and circumstances, judicial pronouncements relied on by the assesse are on the point. The Ld.CIT(Appeal) has also relied on such judicial pronouncements and directed the Assessing Officer to exclude the retention money as claimed by the assessee subject to verification of the total quantum.

In the result, appeal of the Revenue is dismissed.