DRA BLA BCL (JV), New Delhi V. Addl. CIT, New Delhi

ITA 5702/DEL/2011

• Counselvise Citation: 570220114 RSA 2011
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 20-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH SHARMA
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER I.T.A NO. 5702/DEL/11 ASSTT. YEAR 2008-09 DRA BLA BCL (JV) A-7, MAHIPALPURT NH-8 CROSSING NEW DELHI (PAN AAAAD3168P) VS. ADDL. CIT RANGE-38 NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJESH SHARMA, CA RESPONDENT BY: MS. NIDHI SRIVASTAVA, SR. DR. PER RAJPAL YADAV, JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST T HE ORDER OF LD. CIT(A) DATED 18.10.2011 PASSED FOR ASSTT. YEAR 2008-09. TH E SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT(A) HAS EARED IN CON FIRMING THE ADDITION OF RS. 1,12,71,076/- WHICH WAS ADDED BY THE AO ON THE GROUND THAT GROSS RECEIPTS OF THE CONTRACT ACCRUED TO THE ASSESSEE OU GHT TO HAVE BEEN ITA NO. 5702/DEL/2011 ASSTT. YEAR 2008-09 2 SHOWN BY IT. THE ASSESSEE CANNOT DEBIT THE RETENTI ON MONEY WHILE COMPUTING THE INCOME. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSES EE IS A JOINT VENTURE . IT HAS FILED ITS RETURN OF INCOME ON 15.9.2008 DECLARI NG TOTAL LOSS OF RS. 1,39,63,495/-. THE CASE OF THE ASSESSEE WAS SELECTE D FOR SCRUTINY ASSESSMENT A NOTICE U/S 143(2) WAS ISSUED AND SERV ED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEAL TO THE AO THAT THE CONTRACTEE HAS KEPT A PART OF THE CONTRACT AMOUNT A S RETENTION MONEY. THE ASSESSEE WHILE COMPUTING THE INCOME DEDUCTED TH E RETENTION MONEY FROM THE NET PROFIT. IN THE OPINION OF AO, TH E RETENTION MONEY OUGHT TO HAVE NOT BEEN DEDUCTED BECAUSE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTANCY. IT HAS TO COUNT G ROSS RECEIPTS OF THE CONTRACT. IN THIS WAY LD. AO HAS TAKEN INTO CONSIDE RATION THE SUM OF RS. 1,12,71,076/- REPRESENTING THE RETENTION MONEY WHIL E COMPUTING THE INCOME OF THE ASSESSEE, HE DETERMINED THE TOTAL LOS S OF RS. 26,92,419/- AS AGAINST RS. 1,39,63,495/- SHOWN BY THE ASSESSEE. 3. APPEAL TO THE LD. CIT(A) DID NOT BRING AN Y RELIEF TO THE ASSESSEE. ITA NO. 5702/DEL/2011 ASSTT. YEAR 2008-09 3 4. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT A SIMILAR ISSUE AROSE IN ASSTT. YEAR 2007-08 AND THE TRIBUNAL HAS DELETED THE ADDITION. HE PLACED ON RECORD COPY OF THE TRIB UNALS ORDER. ON THE OTHER HAND LD. DR RELIED UPON THE ORDER OF LD. CIT( A). 5. ON DUE CONSIDERATION OF THE FACTS AND C IRCUMSTANCES WE DO NOT FIND ANY DISPARITY ON FACTS. THE FINDING RECORDED B Y THE TRIBUNAL IN ASSTT. YEAR 2007-08 READ AS UNDER :- WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MATERI AL ON RECORD AS WELL AS PRECEDENTS RELIED UPON AND FIND T HAT ISSUE IN RELATION TO RETENTION MONEY HAS BEEN CONSIDERED AND DECIDED BY THE C BENCH OF THE TRIBUNAL IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2008-09 IN I.T.A. 5701/DEL/2011 (SU PRA) AND PARA 6 OF THE ORDER IN ASSESSEES APPEAL IS REPRODU CED AS UNDER :- WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE T HAT ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTA NCY AND IT HAS TO RECOGNIZE THE REVENUE ON ACCRUAL BASIS, B UT THE QUESTION BEFORE US IS WHETHER RIGHT TO RECEIVE RET ENTION MONEY HAS ACCRUED TO THE ASSESSEE OR NOT? ACCORDIN G TO THE ASSESSEE, THE RETENTION MONEY WITHHELD BY THE CONTR ACTEE PENDING COMPLETION OF CONTRACT WORK DOES NOT ACCRUE TO THE ASSESSEE. THIS MONEY WAS TO BE PAID TO THE ASSESSEE ON SATISFACTORY COMPLETION OR PERFORMANCE OF THE CONTR ACT. THUS, THE RIGHT TO RECEIVE THE AMOUNT HAS NOT BEEN MATERIALIZED DURING THIS YEAR AND IT CANNOT BE HELD THAT ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTANCY, THE RIGHT TO RECEIVE ABOUT THE RETENTION MONEY HAS BEEN CRYSTALL IZED DURING THE ACCOUNTING PERIOD RELEVANT TO THE ASSESS MENT YEAR. THE ASSESSEE HAS POINTED OUT THAT IT WAS RECE IVED IN ITA NO. 5702/DEL/2011 ASSTT. YEAR 2008-09 4 SUBSEQUENT YEAR AND DULY SHOWN AS AN INCOME. THUS, THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF EAST COAST CONSTRUCTION LTD. (SUPRA), WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADDITION MADE BY THE AS SESSING OFFICER. 5. SUCH DECISION HAS BEEN UPHELD BY HONBLE HIGH CO URT BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES AND DISMISSED THE APPEAL OF THE REVENUE. SINCE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESEE BY ASSESSEES OWN CASE FOR ASSESSMENT YEAR UNDER CONSIDERATION NOT ONLY BY ITA T, BUT ALSO BY HONBLE HIGH COURT, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE CIT(A) AND DIS MISS THE APPEAL OF THE REVENUE. 6. AS A RESULT, THE APPEAL FILED BY THE DEPARTMENT GETS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22.2.2013. 6. THE TRIBUNAL HAS MADE REFERENCE TO THE OR DER OF THE ITAT IN ITA NO. 5701/D/2011. THE BASIC REASON FOR DELETING THE ADDITION IS THAT RIGHT TO RECEIVE RETENTION MONEY DID NOT ACCRUE TO THE AS SESSEE IN THIS ASSTT. YEAR. THIS RIGHT WOULD BE CRYSTALLIZED WHEN THE CON TRACTEE WOULD BE SATISFIED WITH THE QUALITY OF WORK PERFORMED UNDER THE CONTRACT. IT IS ALSO IMPORTANT TO NOTE THAT IN PRINCIPLE THE TAXABILITY OF SUCH AMOUNT MAY NOT BE DISPUTED. THE DISPUTE WOULD BE THE YEAR OF TAXAB ILITY AND QUANTIFICATION OF RECEIPT. BECAUSE IF THE CONTRACTE E IS SATISFIED WITH PERFORMANCE OF CONTRACT WORK, HE MAY NOT PAY THE FU LL AMOUNT. THIS IS THE REASON THAT RIGHT TO RECEIVE NOT CRYSTALLIZED I N THIS YEAR. ACCORDING TO ITA NO. 5702/DEL/2011 ASSTT. YEAR 2008-09 5 THE LD. COUNSEL FOR THE ASSESSEE, THIS AMOUNT HAS B EEN RECEIVED IN SUBSEQUENT YEAR AND IT WAS OFFERED FOR TAX. IN THE ABOVE FACTS AND CIRCUMSTANCES, THOUGH THE ADDITION IN THE PRESENT Y EAR IS NOT SUSTAINABLE. HOWEVER, AS A PRECAUTIONARY MEASURE WE REMIT THIS ISSUE TO THE AO FOR VERIFYING THE FACTS IN WHICH YEAR THIS A MOUNT WAS RECEIVED AND OFFERED FOR TAX BY THE ASSESSEE AND THEN, DECID E ITS TAXABILITY IN ACCORDANCE WITH LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH NOVEMBER, 2013. SD/- SD/- [R.S. SYAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: NOVEMBER, 2013 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT