The Commissioner of Income Tax VI, V. Sri P.Mohan Reddy,

ITTA/222/2013

AI Insights

The case involves the Commissioner of Income Tax-VI, Hyderabad as the appellant and Sri P. Mohan Reddy as the respondent. The core issues pertained to the interpretation of income accrual and taxability of retained contract money and interest on FDR. The Appellate Tribunal had set aside the order of the CIT under section 263 of the Income Tax Act, which was challenged in this appeal. The Tribunal's decision was based on the fact that the retention money, which was not paid to the contractor until the defect liability period expired, should not be considered as accrued income for tax purposes until it was actually received by the contractor.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 744636 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 09-07-2013
• Assessment Year: misc
• Other Referred Cases: CIT vs. East Coast Constructions and Industries Limited
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment Order; Defect Liability Period; Erroneous; Income Tax; Interest on FDR; Prejudicial; Retention money; Tax deduction at source; Work-in-progress; Accrued
• Section: 263

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. No. 222 of 2013 DATE: 09.07.2013 Between: Commissioner of Income Tax-VI, Hyderabad. … Appellant And Sri P. Mohan Reddy, Hyderabad. … Respondent This Court made the following: THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A No.222 of 2013 JUDGMENT: (Per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be admitted on the following suggested questions of law: “(A) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in setting aside the order of CIT passed us 263 of the Income Tax Act, inspite of the revenue demonstratively proving that the assessment order is erroneous and prejudicial to the interest of revenue? (B) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the retention money retained by the employer (till expiry of defect liability period) cannot be said to have accrued to the contractor, inspite of admitted passing of the bill and issue of TDS certificate on the relevant amount? (C) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in deleting the addition made on account of interest on FDR on the purported premise of the same having been accounted for in the partnership and at any rate, the finding recorded by the appellate Tribunal in this behalf can be said to be based on material on record?” We have heard the learned counsel for the appellant and gone through the impugned judgment and order of the learned Tribunal. The learned Tribunal on fact has found that there has been disclosure of the withheld portion of 8% of the contract amount by the assessee and that there was no suppression of the contract receipts. The difference occurred in view of the withheld portion of the amount, which was shown as work-in- progress. In this case the fact is that the contractee did not make any payment of 8% of the contract price. However, the tax deduction at source was made as it was thought that the aforesaid income was not disclosed. This issue was considered by the Madras High Court in the case of CIT vs. East Coast Constructions and Industries Limited[1] and held that the assessee is not entitled to receive the withheld amount till the work is executed by the assessee and the contractee is satisfied about the completion of the work. Therefore, the withheld portion did not accrue to the assessee. It was also held by the Madras High Court that the withheld amount was taxable on receipt basis. The learned Tribunal decided the matter following the said judgment of the Madras High Court. We, therefore, do not find any reason to interfere with the impugned order. The other issue namely; interest is concerned, the learned Tribunal held that the amount disclosed and offered for taxation was reduced and the remaining portion of interest to the extent of Rs.5,49,257/- was offered for taxation by the assessee for the assessment year under consideration. Since a sum of Rs.1,81,875/- has already suffered taxation, it cannot be subjected to tax once again in the hands of the present assessee. In view of the above findings of the learned Tribunal, we do not want to interfere with the impugned judgment and order of the learned Tribunal. Moreover, we think that no question of law is involved in this matter. The appeal is accordingly dismissed. _____________________ K.J. SENGUPTA, CJ ______________ G. ROHINI, J Date: 09.07.2013 ES [1] (2006) 283 ITR 297 "