Jt. CIT, Range-10, Pune V. Spirex Marshall Pvt. Ltd., Pune

ITA 1057/PUN/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7377 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT LEUVA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B : PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JM AND SHRI D. KARUNAKARA RAO. AM I.T.A. NO. 1057/PN/2009 : A.Y. 2006-07 JT. CIT RANGE 10, PUNE APPELLANT VS. SPIREX MARSHALL PVT. LTD., OPP. 106 TH MILE STONE, MUMBAI PUNE ROAD, KASARWADI PUNE-411 034 PAN AACCS 7603 J RESPONDENT APPLICANT BY : SHRI HEMANT LEUVA RESPONDENT BY: SHRI KISHORE PHADKE ORDER PER SHAILENDRA KUMAR YADAV THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)III PUNE DATED 29-6-2009 FOR A.Y . 2006-07 ON THE FOLLOWING GROUND: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THA T THE RETENTION MONEY I.E. THE AMOUNT RETAINED BY THE CUSTOMERS FROM THE CONTRACT PAYMENT RECEIVABLE BY T HE ASSESSEE (ON ACCRUAL BASS) THIS YEAR, COULD NOT BE TREATED AS THE ASSESSEES INCOME FOR THE YEAR INSPITE OF TH E FACT THAT INCOME WAS BEING ASSESSED ON ACCRUAL BASIS? 2. THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF STEAM RELATED ENERGY SAVING DEVICES AND GADGETS LIK E STEAM TRAPS, PRESSURE REDUCING VALVES, STEAM OPERATED PUM PS ETC. ITA NO.1057/PN/09 SPIREX MARSHALL A.Y. 2006-07 - 2 - THE ASSESSEE FILED A RETURN OF INCOME ON 27-11-2006 DECLARING TOTAL INCOME AT RS. 21,93,85,489/- WHICH WAS PROCE SSED U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME AT R S. 22,00,17,450/- AFTER MAKING AN ADDITION OF RETENTIO N MONEY. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSE SSEE. SAME HAS BEEN OPPOSED BEFORE US BY THE REVENUE. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD WE FIND THAT THE ISSUE RAISED IN THIS APP EAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF A CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OW N CASE IN ITQ NO. 481/PN/199 FOR A.Y. 1995-96 WHEREIN VIDE PA RA 8.4 AND 8.5 OF ITS ORDER THE TRIBUNAL HELD AS UNDER: WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE '' BEFORE US. THE JUDGMENT PROCEED S ON THE BASIS THAT THE ASSESSEE NEITHER RECEIVED ANY PART OF RETENTION MONEY IN THIS YEAR NOR ANY BANK GUARAN TEE WAS FURNISHED. IN SUCH A SCENARIO, OUR DECISION IN ITA NO. 1465/PN/96(SUPRA) AS CLEARLY APPLICABLE, NAMELY , THAT - I) RETENTION MONEY DOES NOT ACCRUE AS INCOME TO THE ASSESSEE IN THIS YEAR, AND' II) SUCH MONEY .ACC RUES AS INCOME WHEN THE PERIOD OF WARRANTY LAPSES ON ACCRUA L BASIS. IT MAY NOT BE OUT OF PLACE TO MENTION HERE T HAT SIMILAR ISSUE HAD BEEN DECIDED BY WAY OF A WRITTEN ORDER BY THE HON'BLE ITAT, PUNE BENCH B, PUNE IN ITA NO S. 265/PN/95, 1045/PN/95, AND 1344/PN/96, DATED 29.06.2005, OF WHICH THE AM WAS THE AUTHOR. IN THAT ORDER, A LARGE NUMBER OF CASES WERE CONSIDERED AND FOLLOWING PROPOSITIONS OF LAW WERE SUMMARIZED IN PARAGRAPH 6:- ITA NO.1057/PN/09 SPIREX MARSHALL A.Y. 2006-07 - 3 - I) THE ACCRUAL OF INCOME TAKES PLACE WHEN RIGHT TO RECEIVE INCOME ARISES (171 ITR 41, 161 ITR 524, 61 ITRE 395) II) IN A CONTRACT, UNDER MERCANTILE METHOD OF ACCOUNTING, THE UNCONDITIONAL LEGAL RIGHT TO RECEIV E MONEY UNDER THE AGREEMENT (192 ITR 15, 179 ITR 8, 48 ITD 141, 247 ITR 457) III) THE PRINCIPLE OF MATCHING OF INCOME AND CORRESPONDING EXPENDITURE MAY BE AN ACCOUNTANTS VIEW, BUT UNDER THE LAW THE EXPENDITURE AND INCOME CAN BE TREATED DIFFERENTLY, DEPENDING UPON WHETHER ONE OR BOTH HAD ACCRUED OR NOT ON THE BASIS OF METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND; IV) RECEIPT OF RETENTION MONEY BY FURNISHING UNCONDITIONAL BANK GUARANTEE MAYOR MAY NOT AMOUNT THE ACCRUAL OF INCOME WHICH WILL HAVE TO BE CONSIDERED ON THE BASIS OF TERMS AND CONDITIONS OF THE CONTRACT. HOWEVER, FURNISHING OF UNCONDITIONAL BANK GUARANTEE IS ATTENDANT WITH SIGNIFICANT RISKS, AND WHERE THE AGREEMENT PROVIDES FOR ACCEPTANCE TEST FOR SATISFACTORY PERFORMANCE IN LIEU OF WHICH CERTAIN MONEY WAS RETAINED BY THE CONTRACTEE, THAT AMOUNT WILL ACCRUE AS INCOME ONLY ON SATISFACTORY PERFORMANCE OF THE TEST AND ACCEPTANCE BY THE CONTRACTEE. ' OUR AFORESAID FINDINGS ARE IN LINE WITH THE PRINCIP LES RECORDED IN THAT ORDER. 8.5 THE RESULT OF THE AFORESAID DISCUSSIONS IS THAT GROUND NO. 1 OF THE APPEAL IS ALLOWED. FACTS BEING SIMILAR, FOLLOWING THE AFORESAID DECISI ON OF THE ITAT IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INF IRMITY IN THE ORDER OF THE CT(A) AND THE SAME IS UPHELD. ITA NO.1057/PN/09 SPIREX MARSHALL A.Y. 2006-07 - 4 - 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH 2011. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 31 ST MARCH 2011 ANKAM COPY OF ORDER FORWARDED TO : 1. ASSESSEES 2. DEPARTMENT 3. CIT - IV PUNE 4. CIT(A) III PUNE 5. ITAT, D.R. B BENCH, PUNE. TRUE COPY BY ORDER ASSTT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE.