The ADIT.,(Intl.Taxn.), V. Ballast Nedam International, Baroda

ITA 209/AHD/2010

• Counselvise Citation: 20920514 RSA 2010
• Duration Of Justice: 2 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-07-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 21-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 THE ADIT (INTL. TAXN.), AHMEDABAD APPELLANT VS. BALLAST NEDAM INTERNATIONAL C/O CC CHOKSHI & CO. CHARTERED ACCOUNTANTS, NUTAN BHARAT SOCIETY, ALKAPURI, BARODA PAN-AAACB5966C RESPONDENT DEPARTMENT BY : SHRI S.K. GUPTA, CIT- D.R. ASSESSEE BY : SHRI SANJAY R. SHAH, A.R. DATE OF HEARING : 05.07.2012 DATE OF PRONOUNCEMENT 20.07.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THESE ARE REVENUES APPEAL AGAINST SEPARATE ORDERS OF LD. CIT(A), GANDHINAGAR, AHMEDABAD DATED 15.10.2009 AND 03.11.2 009. SINCE BOTH THE APPEALS BELONG TO THE SAME ASSESSEE AND REVENUE HAS TAKEN COMMON GROUNDS IN BOTH THE APPEALS AND BOTH THE APPEALS WERE HEARD TO GETHER, FOR THE SAKE OF I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 2 CONVENIENCE THESE ARE BEING DISPOSED OF BY PASSING A CONSOLIDATED ORDER BY TAKING THE FACTS FOR ASSESSMENT YEAR 2002-03. 2. THE COMMON GROUNDS TAKEN BY THE REVENUE READS A S UNDER:- THE LD. CIT(A)-GANDHINAGAR HAS ERRED IN LAW AND FA CTS BY HOLDING THAT RETENTION MONEY CANNOT BE INCLUDED IN TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS BY DECID ING THAT RETENTION MONEY DOES NOT ACCRUE OR ARISE TO THE ASS ESSEE WHEN THE BILLS ARE RAISED, BUT, ONLY ON FINAL RECEIPT OF RETENTION MONEY ON SATISFACTORY COMPLETION OF WORK. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS INVOLVED IN THE CONTRACT FOR CONSTRUCTION OF JETTY AND BREAKWATER F ACILITY AT DAHEJ, GUJARAT FOR PETRONET LNG LTD (PLL). THE ASSESSEE HAD CLAIMED R ETENTION MONEY RELATED TO CONTRACTEE AMOUNTING TO RS.6,24,54,307/- AS ALLOWA BLE EXPENDITURE. IT ALSO EARNED THE RETENTION MONEY RELATED TO SUB-CONTRACTOR OF RS .1,18,24,129/- AS DISALLOWABLE, THEREFORE, AS A RESULT, A NET FIGURE OF RS.5,06,30, 188/- WAS CLAIMED AS DEDUCTION. THIS WAS IN CONTRAST TO THE FACT THAT IN ITS BOOKS OF ACCOUNT THE ASSESSEE HAD SHOWN THE RESPECTIVE AMOUNTS AS A CONTRACT REVENUE AND TH E CONTRACT COST RESPECTIVELY, ALTHOUGH THE MATTER HAD BEEN CLARIFIED VIA NOTES 1, 2 & 5 TO THE COMPUTATION OF INCOME. DURING THE ASSESSMENT PROCEEDINGS THE A.O. ASKED THE ASSESSEE AS TO WHY THESE AMOUNTS SHOULD NOT BE TREATED AS REVENUE AND THE COST IN COMPUTING THE INCOME. THE ASSESSEES STAND WAS THAT THE RETENTIO N MONEY WITH M/S PLL HAS NOT ACCRUED TO THE ASSESSEE AS THE SAME SHALL BE REALIZ ED ONLY ON SATISFACTORY COMPLETION OF THE CONTRACT. SIMILAR TREATMENT ON T HE REVERSE HAS TO BE GIVEN TO THE MONIES RETAINED BY THE ASSESSEE FOR SUB-CONTRACTOR. HOWEVER, THE A.O. DID NOT AGREE WITH THE STAND OF THE ASSESSEE COMPANY. HE W AS OF THE VIEW THAT SINCE BILLS I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 3 WERE RAISED AND THE BILLS HAVE BEEN PASSED, THE ENT IRE AMOUNT HAD ACCRUED TO THE ASSESSEE. THE A.O. SPECIFICALLY STRESSED THE POINT THAT THE FACT THAT THE REVENUE HAS BEEN RECOGNIZED IN ASSESSEES BOOKS OF ACCOUNT AND THE TAX HAS BEEN DEDUCTED ON THE FULL AMOUNT WITHOUT DEDUCTION OF THE RETENTION MONEY WOULD SHOW THAT THE FULL AMOUNT HAS ACCRUED TO THE ASSESSEE. HE ALSO REFERR ED TO THE FACT THAT ASSESSEE FURNISHED BANK GUARANTEE AS A MEASURE AND AS OBLIGA TION FOR ITS DUE PERFORMANCE. THE ASSESSEE RELIED ON VARIOUS CASE LAWS BEFORE THE A.O. HOWEVER, THE A.O., PLACING RELIANCE ON THE DECISION OF HONBLE ITAT, AHMEDABAD IN THE CASE OF DCIT VS. AMARSHIV CONSTRUCTION (P) LTD. 88 ITD 381 DISALLOWE D A SUM OF RS.5,06,30,188/- IN RESPECT OF RETENTION MONEY. BEFORE LD. CIT(A) THE ASSESSEE FILED WRITTEN SUBMISSIONS WHICH HAVE BEEN REPRODUCED BY LD. CIT(A ) AT PARA 2.2 AND 2.2.1 OF HIS ORDER. AFTER TAKING INTO CONSIDERATION THESE SUBMI SSIONS OF THE ASSESSEE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER:- THE ISSUE HAS BEEN GIVEN DUE CONSIDERATION. THE J UDICIAL DECISIONS RELIED UPON BY THE APPELLANT ARE VERY CLE AR ON THE ISSUE. TO THE EXTENT THE AMOUNTS RETAINED (10% OF OR 15% A S THE CASE BE) ARE SUBJECT TO FULFILLMENT OF SOME CONDITIONS E .G. SUBJECT TO INSPECTION OF SATISFACTORY COMPLETION, THE SAME SHA LL NOT HAVE ACCRUED TO THE ASSESSEE AND HENCE IS NOT INCLUDABLE IN THE APPELLANTS INCOME. THE VARIOUS CLAUSES OF THE CON TRACT THROUGH WHICH THE AUTHORISED REPRESENTATIVE HAS LED DO POIN T OUT TO THE FACT THAT THE MONTHLY BILLS BEING SUBMITTED BY THE APPELLANT ARE FOR ALL PRACTICAL PURPOSES PROVISIONAL BILLS AND THEREF ORE WHAT HAS NOT BEEN BILLED IN THE INVOICES CANNOT BE STATED TO BE APPELLANTS CLAIM. AS PER THE SAMPLE COPIES OF INVOICES SUBMIT TED, THE INVOICE AMOUNT IS NET OF RETENTION. ON THE OTHER HAND, THE ASSESSING OFFICERS RELIANCE ON THE DECISION OF ITAT, AHMEDAB AD IN THE CASE OF DCIT VS. AMARSHIV CONSTRUCTION (P) LTD. (SUPRA) DOES NOT NEGATE APPELLANTS CLAIM. THE READING OF THE SAID DECISION OF THE ITAT SHOWS THAT IT HAS CONSIDERED THE ISSUE IN THE LIGHT OF THE RATIO LAID DOWN BY THE CALCUTTA HIGH COURT IN THE CASE OF SIMPLEX CONCRETE PILES PVT., LTD. (SUPRA) BUT CAME TO THE C ONCLUSION THAT THE FACTS OF THE CASE ARE DIFFERENT, NAMELY IT INVO LVED SECURITY DEPOSIT ON THE PART OF THE APPELLANT AND THE RETENT ION MONIES. IN I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 4 THIS CASE AS WELL AS IN SOME OF THE OTHER CASE, THE CONCEPT OF RETENTION MONEY AND SECURITY DEPOSIT HAS BEEN CLEAR LY DISTINGUISHED. HENCE, CONSIDERING THE LEGAL POSITION AND FACTS OF THE CASE, IT IS HELD THAT THE MONIES RETAINED BY THE PRINCIPAL A S PER PROVISIONS OF CONTRACTS AS RETENTION MONEY CAN NOT BE INCLUD ED IN THE TOTAL INCOME. AGGRIEVED BY THIS ORDER OF LD. CIT(A) NOW THE REV ENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, LD. D.R. RELIED ON THE ORDER OF THE A.O. AND FURTHER SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED BY HOLDING THAT RETENTION MONEY DID NOT ACCRUE OR ARISE TO THE ASSESSEE WHEN THE BI LLS WERE RAISED BUT ONLY ON FINAL RECEIPT OF RETENTION MONEY ON SATISFACTORY COMPLETI ON OF THE WORK. IT WAS ALSO SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN NOT FOLLOWING THE DECISION OF HONBLE ITAT OF AHMEDABAD BENCH IN THE CASE OF DCIT VS. AMA RSHIV CONSTRUCTION (P) LTD. (SUPRA). CONCLUDING HIS ARGUMENT LD. D.R., THEREFO RE, SUBMITTED THAT THE ORDER PASSED BY LD. CIT(A) MAY KINDLY BE SET ASIDE AND TH AT OF THE A.O. BE RESTORED. 5. LD. COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, REITERATING THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES FURTH ER SUBMITTED THAT THE ORDER PASSED BY LD. CIT(A) IS IN CONFORMITY WITH THE VARI OUS CASE LAWS ON THE ISSUE OF TAXABILITY OF RETENTION MONEY. RELIANCE WAS ALSO P LACED ON THE DECISION OF HONBLE ITAT, MUMBAI BENCH IN THE CASE OF ADIT VS. BALLAST NADAM DREDGING WHEREIN ON IDENTICAL FACTS IT WAS HELD THAT RETENTION MONEY WI THHELD BY THE CONTRACTEE PENDING COMPLETION OF CONTRACT DID NOT ACCRUE TO THE ASSESS EE IN THE YEAR IN WHICH THE AMOUNT WAS RETAINED. HE, THEREFORE, PRAYED THAT TH E ORDER PASSED BY LD. CIT(A) BE UPHELD. I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 5 6. HEARD BOTH THE PARTIES AND PERUSED THE VARIOUS CASE LAWS CITED BY THE ASSESSEE AND THE REVENUE AND FIND THAT THE ORDER PA SSED BY LD. CIT(A) IS IN CONFORMITY WITH THE DECISION OF HONBLE ITAT, MUMBA I BENCH IN THE CASE OF ADIT VS. BALLAST NADAM DREDGING WHEREIN ON IDENTICAL FACTS T HE HONBLE ITAT, WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HAS OBSERVED AS UNDER:- WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUT HORITIES BELOW AND SUBMISSIONS OF THE LEARNED REPRESENTATIVE S OF BOTH THE PARTIES. W E HAVE GONE THROUGH THE CASES (SUPRA) CITED BY LEAR NED REPRESENTATIVES OF BOTH PARTIES. WE OBSERVE THAT T HE SIMILAR ISSUE HAS BEEN CONSIDERED BY ITAT (TM) IN THE CASE OF AS SOCIATED CABLES PVT. LTD. (SUPRA) AS UNDER: 90 PERCENT OF VALUE OF ASSESSEES GOODS WERE BILLE D ON DISPATCH, AND 10 PERCENT WAS PAYABLE UPON COMPLE TION OF WARRANTY PERIOD. THIS AMOUNT RETAINED WAS CONDITIO NAL ON FULFILLMENT OF CERTAIN REPRESENTATIONS MADE BY ASSE SSEE TO CUSTOMERS. AS PER THE AGREEMENT ENTERED INTO WITH THE CUSTOMERS, AMOUNT RETAINED WAS RELEASED AGAINST FUR NISHING BANK GUARANTEE BY A SCHEDULED BANK. THE THIRD MEMBER HELD OF THE TRIBUNAL HAD HELD AS F OLLOWS: . AS THE PERFORMANCE GUARANTEE REMAINS AND IS ENFORCEABLE WITHOUT NOTICE TO THE ASSESSEE, THE INC OME FROM THE RETENTION MONEY CANNOT BE RECOGNIZED. CONSEQUE NTLY, I HAVE TO AGREE WITH THE LEARNED ACCOUNTANT MEMBER TH AT THE RETENTION MONEY OF 10% HAS TO BE EXCLUDED IN COMPUT ING THE TOTAL INCOME UNTIL THE PERIOD OF GUARANTEE IS O VER. WE OBSERVE THAT THE HONBLE JURISDICTIONAL HIGH COU RT IN THE SUBSEQUENT ASSESSMENT YEAR OF SAME ASSESSEE CONSIDE RED THE ABOVE DECISION OF ITAT AND AFFIRMED THE SAID DECISI ON. IT WAS HELD THAT RETENTION MONEY WITHHELD BY THE CONTRACTEE PEN DING COMPLETION OF CONTRACT WORK DOES NOT ACCRUE TO THE ASSESSEE/CONTRACTOR IN THE YEAR IN WHICH THE AMOUNT IS RETAINED. WE ALSO OBSERVE THAT SIMILAR ISSUE WAS ALSO CONSIDE RED BY ITAT IN THE CASE OF SPIRAX ARSHALL LTD. (SUPRA) WHEREIN IT WAS HELD THAT RECEIPT OF RETENTION MONEY AGAINST FURNISHING BANK GUARANTEE CANNOT PARTAKE CHARACTER OF INCOME SINCE IT CANNOT BE APPORTIONED UNTIL GUARANTEE PERIOD WAS OVER. THE RETENTION MON EY MAY BE RECEIVED BY THE ASSESSEE; IT CANNOT BE APPORTIONED UNTIL EXPIRY OF WARRANTY PERIOD. WE OBSERVE THAT THE HONBLE ALLAB AHAD HIGH COURT IN THE CASE OF CIT VS. YATINDRA AND CO. (SUPR A) HELD THAT AN AMOUNT RECEIVED BY ASSESSEE AGAINST BANK GUARANTEE WAS NOT I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 6 ACCRUED TO THE ASSESSEE DURING THE YEAR AS NO ABSOL UTE RIGHT TO RECEIVE THE AMOUNT AT THAT STAGE VESTED. FURTHER WE OBSERVED THAT THE ASSESSEE RECEIVED A PA RT OF RETENTION MONEY AGAINST BANK GUARANTEE IN THE PRECE DING ASSESSMENT YEARS, THE DETAILS OF WHICH ARE GIVEN BY ASSESSING OFFICER AT PAGE 2 AND ALSO MENTIONED HEREIN ABOVE I N PARA 3 AT PAGE 3 OF THIS ORDER. DURING THE COURSE OF HEARING THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESS EE IS FOLLOWING CONSISTENTLY TO OFFER FOR TAXATION THE PA RT RELEASED OF RETENTION MONEY AGAINST BANK GUARANTEE IN THE ASSES SMENT YEAR IN WHICH RIGHT TO RECEIVE THE SAID RELEASE OF RETEN TION MONEY ACCRUED TO THE ASSESSEE UNCONDITIONALLY. THE LEARN ED DEPARTMENTAL REPRESENTATIVE ALSO DID NOT DISPUTE TH E ABOVE CONTENTION OF LEARNED AUTHORIZED REPRESENTATIVE AT THE TIME OF HEARING. IN VIEW OF ABOVE FACTS AND DECISIONS, AND PARTICULA RLY THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY THE HONBLE MU MBAI HIGH COURT IN THE CASE OF ASSOCIATED CABLES PVT. LTD. (S UPRA) WHICH HAS BEEN FOLLOWED BY THE LEARNED CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). HENCE, WE UPHOLD HIS ORDER AND REJECT THE GROUND OF APPEAL TAKEN BY THE DEPART MENT. 7. WE FURTHER FIND THAT THAT THE FACTS OF THE CASE RELIED BY THE REVENUE IN THE CASE OF DCIT VS. AMARSHIV CONSTRUCTION (P) LTD. (SUPRA) ARE DIFFERENT THAN THAT OF THE PRESENT CASE. THE ISSUE IN THE CASE OF DCI T VS. AMARSHIV CONSTRUCTION (P) LTD. (SUPRA) DECISION WAS REGARDING THE YEAR IN WHI CH THE INCOME HAS ACCRUED WHEREAS THE ISSUE IN THE CASE OF THE ASSESSEE IS TH E ACCRUAL OF THE INCOME. THIS WOULD BE CLEAR FROM READING OF PARA 21 OF DCIT VS. AMARSHIV CONSTRUCTION (P) LTD. (SUPRA) DECISION WHICH READS AS UNDER:- IN ALL THESE THREE CASES, THE SUPREME COURT HELD T HAT THERE WAS NO REAL INCOME AND, THEREFORE, NOT EXIGIB LE TO INCOME-TAX; WHEREAS IN THE PRESENT CASE, IT IS NOBO DYS CASE THAT NO INCOME HAS RESULTED AT ALL. THE QUESTION I S ONLY AS TO IN WHICH YEAR IT ACCRUED TO THE ASSESSEE. ACCOR DING TO THE REVENUE, IT WAS IN THE YEAR WHEN THE BILLS WERE PRESENTED AND PASSED FOR PAYMENT AND THE ASSESSEE RECEIVED THE MONEY BY FURNISHING BANK GUARANTEE AND AS I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 7 PER THE ASSESSEE IT WAS THE YEAR AFTER THE PERFORMA NCE LIABILITY CLAUSE WAS OVER AND THE BANK GUARANTEE WE RE RELEASED AND CEASED TO BE OPERATIVE. 8. WE FURTHER FIND THAT DCIT VS. AMARSHIV CONSTRUC TION (P) LTD. (SUPRA) DECISION DEALT WITH THE ISSUE WHETHER THE ASSESSEE HAD IN FACT RECEIVED THE AMOUNT OF SECURITY DEPOSIT BY FURNISHING BANK GUARANTEE WH ICH IS CLEAR FROM PARA 15 OF THAT DECISION WHICH READS AS UNDER:- IN OUR OPINION, IT ACCRUED TO THE ASSESSEE AN D THEREAFTER RETAINED BY WAY OF ADDITIONAL SECURITY A ND IN FACT RECEIVED BY THE ASSESSEE BY FURNISHING A BANK GUARA NTEE. 9. IN THE INSTANT CASE THERE IS NO DISPUTE ABOUT T HE FACT THAT ASSESSEE HAS NOT RECEIVED ANY MONEY OUT OF THE AMOUNT RETAINED A S RETENTION MONEY BY THE CONTRACTEE. THESE ARE SOME OF THE DISTINGUISHING F EATURES BETWEEN THE CASE OF ASSESSEE AND DCIT VS. AMARSHIV CONSTRUCTION (P) LTD . (SUPRA) CASE. THEREFORE, WE HAVE NO HESITATION IN HOLDING THAT RELIANCE PLACED BY THE A.O. ON THE DECISION IN THE CASE OF DCIT VS. AMARSHIV CONSTRUCTION (P) LTD. (SU PRA) WAS MISPLACED. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE FEEL NO N EED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) AND THE SAME IS HEREBY U PHELD. 11. IN THE RESULT, BOTH THE APPEALS, FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20.07.2012 SD/- SD/- (T.R. MEENA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER I.T.A. NO.209/AHD/2010 A. Y. 2002-03 WITH I.T.A. NO.363/AHD/2010 A. Y. 2003-04 8 N.K. CHAUDHARY, SR. P.S. COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE BY ORDER AR,ITAT,AHMEDABAD