ADIT (IT) 3 (2), MUMBAI V. BALLAST NEDAM DREDGING, MUMBAI

ITA 3620/MUM/2009

• Counselvise Citation: 362019914 RSA 2009
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 31-01-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 03-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIRMAJAN GOVINDKARDINESH BAFNA
• Keywords: Rule of consistency

Judgement Text

M/S BALLAST NADAM DREDGING IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI F FF F BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI G E VEERABH G E VEERABH G E VEERABH G E VEERABHA AA ADRAPPA, PRESIDENT & DRAPPA, PRESIDENT & DRAPPA, PRESIDENT & DRAPPA, PRESIDENT & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO ITA NO ITA NO ITA NOS. 3620 & 3621/MUM/2009 S. 3620 & 3621/MUM/2009 S. 3620 & 3621/MUM/2009 S. 3620 & 3621/MUM/2009 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEARS 2002 S 2002 S 2002 S 2002- -- -03 & 2005 03 & 2005 03 & 2005 03 & 2005- -- -06 0606 06) )) ) THE ASST DIRECTOR OF INCOME TAX(IT) 3(2), MUMBAI VS M/S BALLAST NADAM DREDGING 6 TH FLOOR, SHANGHVI UDYAN B-18 VAIKUNTHLAL MEHTA ROAD JVPD SCHEME, MUMBAI 49 (APPELLANT (APPELLANT (APPELLANT (APPELLANT ) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AABCB1700E AABCB1700E AABCB1700E AABCB1700E ASSESSEE BY SH NIRMAJAN GOVINDKAR/DINESH BAFNA REVENUE BY SH SUBACHAN RAM DT.OF HEARING 31 ST JAN 2012 DT OF PRONOUNCEMENT 8 TH , FEB 2012 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF THE CIT(A) BOTH DATED 13.3.2009 FOR THE AYS 2002-03 & 2005-06 RESPECTIVELY. 2 THE REVENUE HAS RAISED ONE COMMON EFFECTIVE GROUN D IN BOTH THESE APPEALS; THEREFORE, FOR THE SAKE OF CONVENIENCE, WE REPRODUCE THE GROUND NO.1 RAISED FOR THE ASSESSMENT YEAR 2005-06 AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE RETENTION MONEY OF RS. 3,05,52,566/ACCRUED TO THE ASSESSEE ON THE GROUND THAT THE RETENTION MONEY ACCRUES ONLY WHEN THE CONTRACT IS COMPLETED TO THE SATISFACTION OF TH E CONTRACTEE AS PER THE TERMS OF CONTRACT AGREEMENT. THE LD.CIT(A) NOT APPR ECIATED THE FACT THAT WHEN THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTE M OF ACCOUNTING, REDUCTION OF THE RETENTION MONEY FROM THE LOANS AND ADVANCES RECEIVABLE ACCOUNT IN THE BALANCE SHEET AND SHOWING ONLY NET A MOUNT RECEIVABLE IN THE BALANCE SHEET, CRYSTALLIZED THAT INCOME REPRESE NTED BY RETENTION MONEY HAD ACCRUED TO THE ASSESSEE. M/S BALLAST NADAM DREDGING 2 3 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED AND ADJUDICATED BY THE COORDIN ATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO.999/MUM/2008 VIDE ORDER DATED IN PARA 8 TO 10 AS UNDER: 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW AND SUBMISSIONS OF THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES. WE HAVE GONE THROUGH THE CASES (SUPRA) CITED BY LEARNED REP RESENTATIVES OF BOTH THE PARTIES. WE OBSERVE THAT THE SIMILAR ISSUE HAS BEEN CONSIDERED BY ITAT (TM) IN THE CASE OF ASSOCIATED CABLES PVT LTD (SUPRA) AS UNDER: 90 PERCENT OF VALUE OF ASSESSEES GOODS WERE BILLE D ON DISPATCH, AND 10 PERCENT WAS PAYABLE UPON COMPLETION OF WARRA NTY PERIOD. THIS AMOUNT RETAINED WAS CONDITIONAL ON FULFILLMENT OF CERTAIN REPRESENTATIONS MADE BY ASSESSEE TO CUSTOMERS. AS P ER THE AGREEMENT ENTERED INTO WITH THE CUSTOMERS, AMOUNT R ETAINED WAS RELEASED AGAINST FURNISHING BANK GUARANTEE BY A SCH EDULED BANK. THE THIRD MEMBER HELD OF THE TRIBUNAL HAD HELD AS F OLLOWS: .AS THE PERFORMANCE GUARANTEE REMAINS AND IS ENF ORCEABLE WITHOUT NOTICE TO THE ASSESSEE, THE INCOME FROM THE RETENTION MONEY CANNOT BE RECOGNIZED. CONSEQUENTLY, I HAVE TO AGREE WITH THE LEARNED ACCOUNTANT MEMBER THAT THE RETENTION MO NEY OF 10% HAS TO BE EXCLUDED IN COMPUTING THE TOTAL INCOME UN TIL THE PERIOD OF GUARANTEE IS OVER. WE OBSERVE THAT THE HONBLE JURISDICTIONAL HIGH COUR T IN THE SUBSEQUENT ASSESSMENT YEAR OF SAME ASSESSEE CONSIDERED THE ABO VE DECISION OF ITAT AND AFFIRMED THE SAID DECISION. IT WAS HELD THAT RE TENTION MONEY WITHHELD BY THE CONTRACTEE PENDING COMPLETION OF CONTRACT WO RK DOES NOT ACCRUE TO THE ASSESSEE/CONTRACTOR IN THE YEAR IN WHICH THE AM OUNT IS RETAINED. WE ALSO OBSERVE THAT SIMILAR ISSUE WAS ALSO CONSIDERED BY ITAT IN THE CASE OF SPIRAX MARSHALL LTD (SUPRA) WHEREIN IT WAS HELD THA T RECEIPT OF RETENTION MONEY AGAINST FURNISHING BANK GUARANTEE CANNOT PART AKE CHARACTER OF INCOME SINCE IT CANNOT BE APPORTIONED UNTIL GUARANT EE PERIOD WAS OVER. THE RETENTION MONEY MAY BE RECEIVED BY THE ASSESSEE ; IT CANNOT BE APPORTIONED UNTIL EXPIRY OF WARRANTY PERIOD. WE OBS ERVE THAT THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. YATINDR A AND CO. (SUPRA) HELD THAT AN AMOUNT RECEIVED BY ASSESSEE AGAINST BANK GU ARANTEE WAS NOT ACCRUED TO THE ASSESSEE DURING THE YEAR AS NO ABSOL UTE RIGHT TO RECEIVE THE AMOUNT AT THAT STAGE VESTED. M/S BALLAST NADAM DREDGING 3 9. FURTHER WE OBSERVED THAT THE ASSESSEE RECEIVED A PART OF RETENTION MONEY AGAINST BANK GUARANTEE IN THE PRECEDING ASSES SMENT YEARS, THE DETAILS OF WHICH ARE GIVEN BY ASSESSING OFFICER AT PAGE 2 AND ALSO MENTIONED HEREIN ABOVE IN PARA 3 AT PAGE 3 OF THIS ORDER. DURING THE COURSE OF HEARING THE LEARNED AUTHORIZED REPRESENTA TIVE SUBMITTED THAT THE ASSESSEE IS FOLLOWING CONSISTENTLY TO OFFER FOR TAXATION THE PART RELEASED OF RETENTION MONEY AGAINST BANK GUARANTEE IN THE ASSESSMENT YEAR IN WHICH RIGHT TO RECEIVE THE SAID RELEASE OF RETENTION MONEY ACCRUED TO THE ASSESSEE UNCONDITIONALLY. THE LEARNED DEPART MENTAL REPRESENTATIVE ALSO DID NOT DISPUTE THE ABOVE CONTENTION OF LEARNE D AUTHORIZED REPRESENTATIVE AT THE TIME OF HEARING. 10. IN VIEW OF ABOVE FACTS AND DECISIONS, AND PARTI CULARLY THAT SIMILAR ISSUE HAS BEEN CONSIDERED BY THE HONBLE MUMBAI HIGH COUR T IN THE CASE OF ASSOCIATED CABLES PVT. LTD. (SUPRA) WHICH HAS BEEN FOLLOWED BY THE LEARNED CIT (A), WE DO NOT FIND ANY REASON TO INTERFERE WIT H THE ORDER OF LD.CIT (A). HENCE, WE UPHOLD HIS ORDER AND REJECT THE GROUND OF APPEAL TAKEN BY THE DEPARTMENT. 4 ACCORDINGLY, TO MAINTAIN THE RULE OF CONSISTENCY, WE FOLLOW THE EARLIER ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AND DE CIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5 IN THE RESULT, APPEALS FILED BY THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED ON THE 8 TH ,DAY OF FEB 2012. SD/ SD/- ( (( ( G E VEERABH G E VEERABH G E VEERABH G E VEERABHA AA ADRAPPA DRAPPA DRAPPA DRAPPA ) )) ) PRESIDENT ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:8 TH , FEB 2012 RAJ* RAJ* RAJ* RAJ* M/S BALLAST NADAM DREDGING 4 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI