ACIT Corp. Circle 1(3), CHENNAI V. Consolidated Interiors Limited, CHENNAI

ITA 2208/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6433 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 23-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Additional depreciation; Bonafide belief; Revenue expenditure
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.2208, 2209 & 2210/CHNY/2018 / ASSESSMENT YEARS: 2008-09, 2009-10 & 2010-11) THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), CHENNAI. VS M/S. CONSOLIDATED INTERIORS LIMITED, NO.14, BAWA ROAD, ABHIRAMAPURAM, CHENNAI 600 018. PAN: AACCC8135D ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.2211/CHNY/2018 / ASSESSMENT YEAR: 2013-14) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI. VS M/S. CONSOLIDATED INTERIORS LIMITED, NO.14, BAWA ROAD, ABHIRAMAPURAM, CHENNAI 600 018. PAN: AACCC8135D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SMT. S. VIJAYAPRABHA, JCIT / RESPONDENT BY : SHRI. S. SRIDHAR, ADVOCATE /DATE OF HEARING : 03.01.2019 /DATE OF PRONOUNCEMENT : 18.01.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4, CHENNAI, DATED 14.05.2018 IN ITA NOS.03 & 02/2011- 2 ITA NOS.2208 TO 2211/CHNY/2018 12/A.YS.2008-09 & 2009-10 AND ITA NOS.352 & 315/2016-17/A.YS. 2010-11 & 2013-14/CIT(A)-4, PASSED U/S.250(6) R.W.S. 143(3) &147OF THE ACT FOR THE ASSESSMENT YEAR 2008-09 AND U/S. 250(6) R.W.S. 143(3) OF THE ACT FOR THE ASSESSMENT YEARS 2009-10, 2010-11 & 2013-14. 2. THE REVENUE HAS RAISED SEVERAL IDENTICAL GROUNDS IN ITS APPEALS HOWEVER THE CRUXES OF THE ISSUES ARE THAT:- (I) THE LD.CIT(A) HAS ERRED IN GRANTING DEDUCTION U/S.35D(1)(II) OF THE ACT BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.592/MDS/2014 DATED 06.01.2016 FOR THE ASSESSMENT YEAR 2007-08, WHILE AS THE FACT REMAINS THAT THE TRIBUNAL IN THE EARLIER INSTANCE HAD DISMISSED THE APPEAL OF THE ASSESSEE SINCE THE GROUND WAS NOT PRESSED AT THE TIME OF HEARING. (II) THE LD.CIT(A) HAS ERRED BY HOLDING THAT THE RETENTION MONEY RETAINED BY THE CLIENTS OF THE ASSESSEE COMPANY TOWARDS COMPLETED WORKS CONTRACT WHICH IS DOUBTFUL TO BE RECOVERED SHALL NOT BE INCLUDED AS THE REVENUE OF THE ASSESSEE COMPANY FOR THE RELEVANT ASSESSMENT YEARS. 3 ITA NOS.2208 TO 2211/CHNY/2018 (III) THE LD.CIT(A) HAS FURTHER ERRED BY HOLDING CONVERSELY THAT THE RETENTION MONEY RETAINED BY THE ASSESSEE COMPANY AGAINST THE DUES PAYABLE TO THE SUB-CONTRACTORS TOWARDS COMPLETED WORKS CONTRACT SHALL BE TREATED AS REVENUE EXPENDITURE FOR THE RELEVANT ASSESSMENT YEARS WHEN THE ACTUAL PAYMENT WAS NOT MADE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF INTERIOR DECORATIONS AS CONTRACTORS AND IN THE PROCESS ALSO ASSIGN SUB-CONTRACTS. THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR ALL THE RELEVANT ASSESSMENT YEARS AND THEREAFTER ASSESSMENT WAS COMPLETED U/S.143(3) / U/S.147 & 148 OF THE ACT WHEREIN THE LD.AO MADE SEVERAL ADDITIONS AMONGST WHICH THE LD.CIT(A) ALLOWED CERTAIN GROUNDS IN FAVOUR OF THE ASSESSEE FOR ALL THE RELEVANT ASSESSMENT YEARS. AGGRIEVED BY THE COMMON ORDER OF THE LD.CIT(A) THE REVENUE IS NOW IN APPEAL BEFORE US. 4. GROUND NO.2.1 : DEDUCTION U/S.35D(1)(II) OF THE ACT:- 4 ITA NOS.2208 TO 2211/CHNY/2018 DURING THE RELEVANT ASSESSMENT YEARS, THE ASSESSEE HAD INCURRED EXPENDITURE TOWARDS COMMENCEMENT OF NEW FACTORY WHICH WAS CLAIMED AS DEDUCTION BY AMORTIZING THE SAME. THE LD.AO DISALLOWED THE CLAIM OF AMORTIZED EXPENDITURE AS DEDUCTION BECAUSE HE OPINED THAT THE ASSESSEE DID NOT FALL UNDER THE DEFINITION OF MANUFACTURING ACTIVITY AND HENCE THE PROVISIONS OF SECTION 35D(1)(II) OF THE ACT IS NOT APPLICABLE. ON APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER:- 21. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS. THE SECTION 10(15)(IV) COVERS THAT INDUSTRIAL UNDERTAKING INCLUDES MANUFACTURING ACTIVITY. SINCE THE APPELLANT COMPANY IS ENGAGED IN THE MANUFACTURING OF FURNITURE AND READYMADE WOODEN EQUIPMENT, THE APPELLANT IS CONSIDERED TO BE AN INDUSTRIAL UNDERTAKING. IN THIS REGARD, THE OBSERVATIONS OF THE HONBLE JURISDICTIONAL TRIBUNAL IN THE CASE OF THE APPELLANTS HOLDING COMPANY CONSOLIDATE CONSTRUCTION CONSORTIUM LTD FURTHER SUBSTANTIATES THE FINDING OF THE ASSESSEE. THE RELEVANT DECISION OF THE TRIBUNAL IS DISCUSSED IN THE FORTHCOMING PARA WHILE DISCUSSING THE ISSUE OF DISALLOWANCE OF ADDITIONAL DEPRECIATION. .. 24. THE APPELLANT COMPANY IN THE WRITTEN SUBMISSION DATED 25.04.2018 HAS REFERRED TO THE DECISION OF HONBLE ITAT, CHENNAI BENCH IN A CONSOLIDATED ORDER FOR THE AY 2006-07 TO AY 2009-10 IN ITA NO.1824/MDS/2011, 875, 701 & 702/MDS/2014 IN THE CASE OF THE APPELLANTS HOLDING COMPANYS CASE CONSOLIDATED 5 ITA NOS.2208 TO 2211/CHNY/2018 CONSTRUCTION CONSORTIUM LTD WHICH HAS COVERED SIMILAR ISSUE UNDER THE APPEAL AND DECIDED IN FAVOUR OF THE APPELLANTS PARENT COMPANY. 25. I HAVE CAREFULLY CONSIDERED THE FACTS AND ISSUE, THE VIEW TAKEN BY THE AO, THE ARGUMENTS ADVANCED BY THE APPELLANT AND MATERIAL ON RECORD. CONSIDERING THE ABOVE SUBMISSIONS AND THE DECISION OF THE HONBLE ITAT IN THE ABOVE MENTIONED CASE, THE CONTENTION OF APPELLANT THAT IT HAS BEEN IN MANUFACTURING ACTIVITY IS FOUND IN ORDER. HENCE, IN MY CONSIDERED OPINION, THE APPELLANT IS ELIGIBLE FOR ADDITIONAL DEPRECIATION U/S.32(1)(II). THIS GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE. 4.1 AT THE OUTSET THE LD.DR SUBMITTED THAT, ON THE ISSUE OF DEDUCTION U/S.35D(2)(C)(III) OF THE ACT, THE TRIBUNAL IN ITA NO.1824/MDS/2011, 875, 701 & 702/MDS/2014 VIDE ORDER DATED 06.01.2016, AT PARA NO.33, PAGE NO.29, HAD DISMISSED THE APPEAL OF THE ASSESSEE BY STATING THAT THIS GROUND WAS NOT PRESSED AT THE TIME OF HEARING. IT WAS THEREFORE PLEADED THAT THE OBSERVATION OF THE LD.CIT(A) ON THIS ISSUE WAS ERRONEOUS. THEREAFTER THE LD.DR ARGUED IN SUPPORT OF THE ORDER OF THE LD.AO AND PLEADED FOR UPHOLDING THE SAME. THE LD.AR ON THE OTHER HAND VEHEMENTLY ARGUED THAT THE BUSINESS OF THE ASSESSEE IS IN THE NATURE OF MANUFACTURING ACTIVITY. 6 ITA NOS.2208 TO 2211/CHNY/2018 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE IS IN THE BUSINESS OF OBTAINING CONTRACT WITH RESPECT TO INTERIOR DECORATION AND IN THE PROCESS ALSO SUB-CONTRACT PART OF THE CONTRACT. HENCE IT IS CRYSTAL CLEAR THAT THE ASSESSEE DOES NOT PRODUCE OR MANUFACTURE ANY SPECIFIC PRODUCT. MOREOVER IN THE ASSESSEES OWN CASE BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEARS 2006-07, 2007-08 TO 2009-10 CITED SUPRA, THE LD. AR DID NOT PRESS THE ISSUE AT THE TIME OF HEARING AND THEREFORE THE TRIBUNAL HAD DISMISSED THE GROUND RAISED BY THE ASSESSEE AS NOT PRESSED. HOWEVER FOR THE RELEVANT ASSESSMENT YEARS, THE LD.CIT(A) HAD MISINTERPRETED THE FINDING OF THE TRIBUNAL AND GRANTED RELIEF TO THE ASSESSEE. HENCE WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LD.CIT(A) ON THE ISSUE. BEFORE US ALSO THE LD.AR COULD NOT CONTROVERT TO THE SUBMISSIONS MADE BY THE LD.DR AND THE FINDING OF THE TRIBUNAL IN THE ASSESSEES OWN CASE CITED SUPRA. FOR THE AFORE- STATED REASONS, WE HEREBY HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF DEDUCTION U/S.35D OF THE ACT FOR ALL THE RELEVANT ASSESSMENT YEARS. THUS THIS GROUND RAISED BY THE REVENUE IS HELD IN ITS FAVOUR. 7 ITA NOS.2208 TO 2211/CHNY/2018 5. GROUND NO. 2(II) : RETENTION MONEY RETAINED BY THE CUSTOMERS OF THE ASSESSEE:- DURING THE RELEVANT ASSESSMENT YEARS, THE ASSESSEES CLIENTS WITHHELD CERTAIN AMOUNT ACCRUED TO THE ASSESSEE COMPANY TOWARDS COMPLETED CONTRACT, WHICH WAS INCLUDED IN THE INVOICE RAISED BY THE ASSESSEE COMPANY, FOR A CERTAIN PERIOD, IN ORDER TO SECURE SATISFACTORY PERFORMANCE OF THE CONTRACT. SINCE THE ASSESSEE COMPANY WAS OF THE VIEW THAT SUCH AMOUNT RETAINED BY THE CLIENTS OF THE ASSESSEE COMPANY ARE DOUBTFUL TO BE RECOVERED, DID NOT INCLUDE THE SAME AS ITS REVENUE RECEIPT. HOWEVER, THE LD.AO WAS OF THE VIEW THAT THE RETENTION MONEY RETAINED BY THE ASSESSEES CLIENTS IS REVENUE ACCRUED TO THE ASSESSEE COMPANY BECAUSE IT WAS PERTAINING TO COMPLETE CONTRACT AND THEREFORE THE SAME HAS TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE COMPANY HAD NOT INCLUDED THE RETENTION MONEY AS ITS INCOME, THE LD.AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) GRANTED RELIEF TO THE ASSESSEE . 8 ITA NOS.2208 TO 2211/CHNY/2018 5.1 AT THE OUTSET IT IS PERTINENT TO MENTION THAT AS-9 OF ACCOUNTING STANDARDS WITH RESPECT TO REVENUE RECOGNITION PRESCRIBES AS FOLLOWS:- TIMING OF REVENUE RECOGNITION 9.2 REVENUE FROM SALE OF RENDERING SERVICES SHOULD BE RECOGNIZED AT THE TIME OF THE SALE OR RENDERING OF SERVICES. HOWEVER, IT AT THE TIME OF RENDERING OF SERVICES OR SALE THERE IS SIGNIFICANT UNCERTAINTY IN ULTIMATE COLLECTION OF THE REVENUE, THEN THE REVENUE RECOGNITION IS POSTPONED IN SUCH CASES REVENUE SHOULD BE RECOGNIZED ONLY WHEN IT BECOMES REASONABLY CERTAIN THAT ULTIMATE COLLECTION WILL BE MADE. IT ALSO APPLIES TO THE REVENUE ARISING OUT OF ESCALATION OF PRICE; EXPORT INCENTIVE, INTEREST, ETC., IN THE CASE OF THE ASSESSEE SINCE THE ASSESSEE IS OF THE OPINION THAT THE RETENTION MONEY RETAINED BY THE ASSESSEES CLIENTS TOWARDS PERFORMANCE OF CONTRACT MAY NOT BE RECOVERABLE, THEN IT IS OBVIOUS THAT AS PER THE ACCOUNTING STANDARDS-9, WHICH THE ASSESSEE COMPANY HAS TO MANDATORILY FOLLOW, DOES NOT REQUIRE TO RECOGNIZE THE SAME AS ITS REVENUE BECAUSE ACCOUNTING STANDARDS-9 SPECIFICALLY PRESCRIBES THAT INCOME NEED NOT BE RECOGNIZED WHEN THERE IS NO SURETY OF REALIZING THE SAME. FOR THE AFORESAID REASON WE HEREBY HOLD THAT THE RETENTION MONEY RETAINED BY THE CLIENTS OF THE ASSESSEE COMPANY WHICH IS DOUBTFUL TO BE RECOVERED IN THE 9 ITA NOS.2208 TO 2211/CHNY/2018 VIEW OF THE ASSESSEE COMPANY, NEED NOT BE RECOGNIZED AS REVENUE FOR THE RELEVANT ASSESSMENT YEARS AND THE SAME SHALL BE RECOGNIZED AS INCOME OF THE ASSESSEE COMPANY IN THE YEAR IN WHICH THE ASSESSEE COMPANY RECEIVES IT. IT IS ORDERED ACCORDINGLY. THEREFORE THIS GROUND RAISED BY THE REVENUE IS DEVOID OF MERITS. 6. GROUND NO.2(III) : RETENTION MONEY RETAINED BY THE ASSESSEE COMPANY FROM ITS SUB-CONTRACTORS:- DURING THE RELEVANT ASSESSMENT YEARS THE ASSESSEE COMPANY HAS ALSO RETAINED CERTAIN AMOUNT FROM ITS SUB-CONTRACTORS IN ORDER TO SECURE ITSELF ON THE SATISFACTORY PERFORMANCE OF THE SUB- CONTRACTORS. THE ASSESSEE HAD CLAIMED THE RETAINED AMOUNT AS ITS REVENUE EXPENDITURE FOR THE RELEVANT ASSESSMENT YEARS. HOWEVER THE LD.AO OPINED THAT THE PAYMENT OF THE RETENTION MONEY IS CONTINGENT IN NATURE AND THEREFORE IT CANNOT BE ALLOWED AS DEDUCTION TOWARDS EXPENDITURE IN THE RELEVANT ASSESSMENT YEARS AND CAN BE ONLY ALLOWED AS DEDUCTION IN THE YEAR IN WHICH ACTUAL PAYMENT IS MADE. ON APPEAL THE LD.CIT(A) GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS FOLLOWS:- 29. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND HAVE ALSO PERUSED THE RELEVANT ORDER OF THE HONBLE ITAT. IT IS 10 ITA NOS.2208 TO 2211/CHNY/2018 NOTICED THAT IN THE CASE OF THE APPELLANTS HOLDING COMPANY M/S. CONSOLIDATED CONSTRUCTION CONSORTIUM LTD, THE TRIBUNAL HAS ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE AND REFERRED THE ISSUE TO THE AO FOR QUANTIFICATION. THE SAME WAS FULLY ALLOWED BY THE AO IN FAVOUR OF THE ASSESSEE. SINCE THE FACTS AND THE ISSUES ARE IDENTICAL, I RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE ITAT, DIRECT THE AO TO DELETE THE ADDITION. 6.1 AT THE OUTSET WE DO NOT FIND ANY ERROR IN THE CLAIM MADE BY THE ASSESSEE COMPANY. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE COMPANY HAD ACCEPTED THE COMPLETION OF THE SUB-CONTRACT BY THE SUB-CONTRACTOR/S. THE ASSESSEE COMPANY HAS ALSO AGREED TO PAY THE FULL CONTRACT AMOUNT TO IT SUB-CONTRACTOR/S. THUS THE ASSESSEE COMPANY HAS ACKNOWLEDGED THE LIABILITY INCURRED TOWARDS THE COMPLETED CONTRACT AND AS PER THE ACCRUAL CONCEPT AND MERCANTILE SYSTEM OF ACCOUNTING THE ASSESSEE HAS INCURRED THE EXPENDITURE TOWARDS THE SUB-CONTRACT. NEEDLESS TO MENTION THAT THE EXPENSE INCURRED TOWARDS THE EXECUTION OF THE SUB-CONTRACT HAS CRYSTALLIZED DURING THE RELEVANT ASSESSMENT YEARS. THE ASSESSEE COMPANY HAS RETAINED CERTAIN PORTION OF THE CONTRACT AMOUNT AGREED UPON ONLY FOR THE PURPOSE OF SECURING ITSELF AGAINST ANY DEFECTS IN THE CONTRACT EXECUTED BY THE SUB-CONTRACTORS. THEREFORE THE RETENTION MONEY IS THE LIABILITY OF THE ASSESSEE COMPANY TOWARDS AN EXPENDITURE INCURRED DURING THE RELEVANT 11 ITA NOS.2208 TO 2211/CHNY/2018 ASSESSMENT YEARS AND THE LIABILITY MAY NOT BE ATTRACTED IN THE EVENT WHEN ANY DEFECT IS FOUND IN THE EXECUTION OF THE SUB-CONTRACT WITHIN THE STIPULATED PERIOD AGREED UPON. IT IS ALSO PERTINENT TO MENTION AT THIS JUNCTURE THAT IF THE ASSESSEE COMPANY APPROPRIATES THE RETENTION MONEY DUE TO DISCREPANCY IN THE COMPLETED SUB-CONTRACT THEN THE APPROPRIATED RETENTION MONEY SHALL BE TREATED AS THE INCOME OF THE ASSESSEE COMPANY IN THE YEAR IN WHICH SUCH APPROPRIATION HAS TAKEN PLACE BY VIRTUE OF THE PROVISIONS OF SECTION 41 OF THE ACT. HENCE RETENTION OF CERTAIN MONEY FOR THE SATISFACTORY COMPLETION OF THE CONTRACT CANNOT BE TERMED AS CONTINGENT EXPENDITURE AS OPINED BY THE REVENUE AUTHORITIES AND THE SAME HAS TO BE TREATED AS LIABILITY TOWARDS COMPLETED SUB-CONTRACT WITH RESPECT TO THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE YEAR IN WHICH THE SUB-CONTRACT IS COMPLETED WHICH IS NOTHING BUT THE RELEVANT ASSESSMENT YEARS IN THESE CASES BEFORE US. ACCOUNTING STANDARDS-7 ALSO RECOGNIZES THE ACCRUAL SYSTEM OF ACCOUNTING WHICH IS A FUNDAMENTAL ACCOUNTING ASSUMPTION AND THE ASSESSEE COMPANY IS BOUND TO FOLLOW. FOR THE AFORESAID REASONS, WE HEREBY HOLD THAT THE RETENTION MONEY RETAINED BY THE ASSESSEE FROM ITS SUB-CONTRACTORS HAS TO BE INCLUDED IN THE TOTAL COST OF THE EXECUTED 12 ITA NOS.2208 TO 2211/CHNY/2018 SUB-CONTRACT AND TREATED AS REVENUE EXPENDITURE FOR THE RELEVANT ASSESSMENT YEARS CONSIDERING THE FACTS IN THE CASE OF THE ASSESSEE COMPANY. HENCE THIS GROUND RAISED BY THE REVENUE IS ALSO DEVOID OF MERITS. 6.2 WE HAVE ARRIVED AT THE ABOVE DECISION IRRESPECTIVE OF THE FACT THAT IN THE CASE OF THE ASSESSEE COMPANY IN THIS SAME ORDER WE HAVE HELD THAT RETENTION MONEY RETAINED BY THE CLIENTS OF THE ASSESSEE COMPANY FROM WHOM THE ASSESSEE COMPANY HAD OBTAINED WORKS CONTRACT NEED NOT BE RECOGNIZED AS THE REVENUE FOR THE RELEVANT ASSESSMENT YEARS BY RELYING ON THE ACCOUNTING STANDARDS-9 BECAUSE THE ASSESSEE COMPANY IS OF THE BONAFIDE BELIEF THAT THE RETENTION MONEY MAY NOT BE RECOVERABLE, HOWEVER WITH RESPECT TO THE RETENTION MONEY WITHHELD BY THE ASSESSEE COMPANY TOWARDS THE SUB-CONTRACT ASSIGNED TO SUB CONTRACTORS WE HAVE CONVERSELY HELD THAT THE RETENTION MONEY SHALL BE TREATED AS THE EXPENDITURE INCURRED DURING THE RELEVANT ASSESSMENT YEARS EVEN THOUGH ACTUAL PAYMENT IS NOT MADE BECAUSE THE ASSESSEE COMPANY HAS ADMITTED THE LIABILITY ON ACCOUNT OF THE COMPLETED SUB-CONTRACT AND THEREFORE THE EXPENDITURE TOWARDS THE SUB- 13 ITA NOS.2208 TO 2211/CHNY/2018 CONTRACT HAS CRYSTALLIZED AND IN SUCH SITUATION THE ACCOUNTING STANDARD-7 PRESCRIBES ACCRUAL SYSTEM OF ACCOUNTING WHICH IS THE FUNDAMENTAL ACCOUNTING ASSUMPTION WHICH THE ASSESSEE COMPANY IS BOUND TO FOLLOW. MOREOVER THE PROVISIONS OF SECTION 41 OF THE ACT SAFE GUARD THE INTEREST OF REVENUE BECAUSE WHEN THE RETENTION MONEY IS APPROPRIATED BY THE ASSESSEE COMPANY THE SAME IS BROUGHT INTO THE AMBIT OF TAX IN THE YEAR IN WHICH SUCH RETENTION MONEY IS APPROPRIATED. 7. IN THE RESULT, THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THE 18 TH JANUARY, 2019 AT CHENNAI. SD/- SD/- ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 18 TH JANUARY, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF