DCIT CIR 15(3), MUMBAI V. SUNRISE STONE INDUSTRIES & J KUMAR JOINT VENTURE, MUMBAI

ITA 6390/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0947 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 11-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Assessee Lawyers: PAR VATHY R IYER

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI A.L. GEHLO T ,(AM) ITA NO.6390/MUM/2009 ASSESSMENT YEAR : 2005-06 DY. COMMISSIONER OF INCOME TAX CIRCLE 15(3), MATRU MANDIR, 1 ST FLOOR TARDEO ROAD MUMBAI-400 007. ..( APPELLANT ) VS. M/S. SUNRISE STONE INDUSTRIES & J. KUMAR JOINT VENTURE 42-A, DAMU PADA, AKURLI ROAD KANDIVALI EAST MUMBAI-400 101. ..( RESPONDENT ) P.A. NO. (AAAJS 1766 K) C.O. NO.134/MUM/2010 ARISING OUT OF ITA NO.6390/MUM/2009 ASSESSMENT YEAR : 2005-06 M/S. SUNRISE STONE INDUSTRIES & J. KUMAR JOINT VENTURE MUMBAI-400 101. ...( CROSS OBJECTOR ) VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 15(3) MUMBAI-400 007. ..( APPELLANT IN APPEAL ) DEPARTMENT BY : SHRI AMARD EEP ASSESSEE BY : MS. PAR VATHY R. IYER O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 1.10.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT ITA NO.6390/M/09 A.Y:05-06 2 YEAR 2005-06 AGAINST WHICH THE ASSESSEE HAS FILED CROSS OBJE CTION SUPPORTING THE ORDER OF THE LD. CIT(A). THE APPEAL AND C.O. ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIE NCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE I S A JOINT VENTURE OF M/S. SUNRISE STONE INDUSTRIES AND M/S. J. K UMAR & CO. HAVING CAPACITY OF AOP AND IS IN THE BUSINESS OF CIVIL C ONSTRUCTION. THE ASSESSEE HAD CONSTRUCTED TMC SWIMMING POOL THROUGH SUB- CONTRACTOR BEING ITS MEMBER AS PER AGREEMENT DATED 15.1 0.2003. THE ASSESSING OFFICER ON PERUSAL OF THE P&L A/C. AS ALSO THE T DS CERTIFICATES FILED ALONGWITH THE RETURN OF INCOME OBSERV ED THAT THE GROSS RECEIPTS CREDITED TO THE P&L A/C. AMOUNT TO ` 4,25,26,383/- WHEREAS THE TOTAL AS PER TDS CERTIFICATES AMOUNTS TO ` 4,37,96,043/-. THUS, THERE IS A DIFFERENCE OF ` 12,69,660/-. THE ASSESSEE WAS REQUIRED TO RECONCILE THE DIFFERENCE. IN RESPONSE TO TH E QUERY THE ASSESSEE SUBMITTED A STATEMENT OF INCOME RECONCILIATION, WH ICH SHOWS THAT OUT OF THE TOTAL AS PER THE TDS CERTIFICATES, THE AMOUNT OF ` 4,12,66,383/- HAS BEEN CREDITED TO THE P&L A/C. AND TH E BALANCE ` 25,29,660/- REPRESENTED THE RETENTION MONEY, WHICH HA S BEEN EXCLUDED BY THE ASSESSEE. IT HAS BEEN EXPLAINED THAT TH E SAID SUM MAY BE RECEIVED AFTER TWO OR THREE YEARS AND IS RETAI NED BY THE MUNICIPAL CORPORATION FOR PRESENT OR FUTURE PERFORMA NCE OF CONTRACTS AND THE RECEIPT OF THE SAME IS, THEREFORE, UNCERTAIN. HOWEVER THE ITA NO.6390/M/09 A.Y:05-06 3 ASSESSING OFFICER WAS OF THE VIEW THAT THE CONTENTION OF T HE ASSESSEE IS UNACCEPTABLE BECAUSE THE RETENTION MONEY HAS ALREADY B EEN INCLUDED BY THE MUNICIPAL CORPORATION INTO THE GROSS AM OUNT PAYABLE TO THE ASSESSEE IN THE TDS CERTIFICATE ITSELF. HENCE, THE SA ID RETENTION MONEY IS IN THE NATURE OF DEBTORS OUTSTANDING, WHICH COM PULSORILY FORM PART OF THE GROSS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. FURTHER, THE CREDIT FOR THE TAX DEDUCTE D AT SOURCE ON THE TOTAL RECEIPTS INCLUSIVE OF RETENTION MONEY HAS BEEN CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE YEAR UNDE R CONSIDERATION. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER ADDED THE SUM OF ` 25,29,660/- CLAIMED TO BE RETENTION MONEY TO THE TOT AL INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) FOLLOWING THE DECISION OF T HE TRIBUNAL IN THE CASE OF ACIT VS. SUNRISE STONE INDUSTRIE S IN ITA NO.5537/MUM/2006 AND C.O. NO.47/M/2007 ORDER DATED 15.9.2008 FOR THE ASSESSMENT YEAR 2003-04 WHEREIN THE TRIBUNAL HA S DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY REFERRING THE CA SE OF M/S. RELIANCE CONSTRUCTION COMPANY IN ITA NO.6629/M/2005 D ATED 24.7.2008, HELD THAT THE FACTS OF THE PRESENT CASE ARE I DENTICAL AND DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 25,29,660/- BEING THE RETENTION MONEY/SECURITY DEPOSIT DEDUCTION FR OM CONTRACT PRICE BY THE CONTRACTEE . ITA NO.6390/M/09 A.Y:05-06 4 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING SOLE GROUND OF APPE AL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LD. CIT(A) ERRED ON FACT AS WELL AS IN LAW IN DELETING THE ADDITION OF RS.25,29,660/- BEING THE RETENTION MONEY/SECURITY DEPOSIT KEPT BY THE CONTRA CTEE ON WHICH TDS AMOUNT HAS BEEN MADE AND CREDIT ALLOWE D THEREON IGNORING THE VITAL FACT THAT INCOME HAS AL READY ACCRUED IN THE HANDS OF THE ASSESSEE ON THE SAID AM OUNT IN VIEW OF THE PRINCIPLE LAID DOWN BY THE HONBLE S UPREME COURT IN THE CASE OF KCP LTD. VS. CIT (245 ITR 421) . 4. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE OR DER OF THE ASSESSING OFFICER. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE, A T THE OUTSET SUBMITS THAT THE ISSUE IS DIRECTLY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN JOINT VENTURE CASE IN S UNRISE STONE INDUSTRIES SUPRA. SHE FURTHER SUBMITS THAT FOR THE ASSESSME NT YEAR 2004-05 THE TRIBUNAL HAS FOLLOWED THE SAID ORDER IN THE CASE OF THAT ASSESSEE AND UPHELD THE ORDER OF THE LD. CIT(A) IN DELE TING THE ADDITION MADE BY THE ASSESSING OFFICER. SHE ALSO PLACED O N RECORD THE COPY OF THE SAID ORDERS OF THE TRIBUNAL. SHE THEREFOR E, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE AD DITION BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIN D THAT THE FACTS ARE NOT IN DISPUTE. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ITA NO.6390/M/09 A.Y:05-06 5 ASSESSEE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF SUNRISE ST ONE INDUSTRIES SUPRA, WHEREIN THE TRIBUNAL ON THE SIMILAR ISSUE HAS HELD VIDE PARA-6 OF ITS ORDER AS UNDER : 6. AS REGARDS THE REVENUES PLEA THAT SINCE TDS W AS DEDUCTED BY THE PAYER, THEREFORE, INCOME HAD ACCRUE D TO THE ASSESSEE, WE DO NOT FIND ANY MERIT IN THE SAME BECAUSE AS PER THE PROVISIONS OF SECTION 194C, IF A NY PAYMENT IS MADE BY ANY PERSON TO THE CONTRACTEE, TH EN THAT PERSON IS REQUIRED TO DEDUCT TAX AT SOURCE EIT HER AT THE TIME OF ACTUAL PAYMENT OR AT THE TIME OF CREDIT ING THE SAME TO THE PARTYS ACCOUNT. MERELY BECAUSE THE TD S HAD BEEN DEDUCTED ON THE FULL AMOUNT, IT WOULD NOT AUTOMATICALLY FOLLOW THAT THE FULL AMOUNT HAD ACCRU ED TO THE ASSESSEE. RETENTION MONEY DID NOT ACCRUE TO TH E ASSESSEE BECAUSE THE RIGHT TO RECEIPT WAS DEPENDENT ON THE PERFORMANCE OF CONTRACTUAL OBLIGATION AT A LATE R POINT OF TIME AT WHICH CONTRACTEE CONCERNED BEING SATISFI ED WITH THE PERFORMANCE OF THE OBLIGATION PAYS THE MONEY T O THE CONTRACTOR. THEREFORE, MERELY AMOUNT BEING SUBJECT ED TO TDS WOULD NOT LEAD TO THE CONCLUSION THAT THE INCOM E HAD ACCRUED TO THE ASSESSEE. WE ACCORDINGLY, UPHOLD TH E ORDER OF THE LEARNED CIT(A) DELETING THE ADDITION. IN VIEW OF THE ABOVE DISCUSSION, THE REVENUES APPEAL IS DISMISSED. 7. IN THE CASE OF K.C.P. LIMITED VS. CIT (2000) 245 I TR 421(SC) IT HAS BEEN HELD (HEADNOTES): HELD, DISMISSING THE APPEAL, THAT THE EXCESS AMOUNT OF RS. 14,96,130 WAS REALISED BY THE ASSESSEE IN THE ORDINARY MANNER OF ITS BUSINESS ACTIVITIES AND AS T HE PRICE OF SUGAR SOLD BY IT. THE AMOUNT WAS RETAINED BY THE ASSESSEE AS PRICE OF THE SUGAR SOLD BY IT THOUGH TH E RIGHT OF THE ASSESSEE TO REALISE THE AMOUNT WAS THE SUBJE CT OF DISPUTE. THOUGH THE EXCESS AMOUNT WAS RETAINED IN A SEPARATE ACCOUNT, THAT WOULD NOT MAKE ANY DIFFERENC E. MERELY MAINTAINING A SEPARATE ACCOUNT UNDER A HEADI NG GIVEN BY THE ASSESSEE WOULD NOT ALTER THE NATURE OF THE RECEIPT IF IT IS ACTUALLY A TRADING RECEIPT. SECOND LY, NOTHING ITA NO.6390/M/09 A.Y:05-06 6 WAS AVAILABLE ON RECORD TO FIND OUT HOW AND IN WHAT MANNER THE SEPARATE ACCOUNT WAS MAINTAINED BY THE ASSESSEE. THE TRANSFER OF THE AMOUNT TO THE SUGAR EQUALISATION FUND OF THE GOVERNMENT WOULD NOT HAVE ANY BEARING ON THE TAXABILITY OF THE AMOUNT WHICH WAS A TRADING RECEIPT IN THE ASSESSMENT YEAR 1972-73. 8. WHEREAS IN THE CASE BEFORE US THE RETENTION MONEY DI D NOT ACCRUE TO THE ASSESSEE BECAUSE THE RIGHT TO RECEIPT WAS DEPEN DENT ON THE PERFORMANCE OF CONTRACTUAL OBLIGATION AT A LATER P OINT OF TIME AT WHICH CONTRACTEE CONCERNED BEING SATISFIED WITH THE PERFO RMANCE OF THE OBLIGATION PAYS THE MONEY TO THE CONTRACTOR. THER EFORE, THE DECISION RELIED ON BY THE REVENUE IS DISTINGUISHABLE A ND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 9. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER DISTIN GUISHABLE FEATURE BROUGHT ON RECORD BY THE REVENUE WE RESPECTFUL LY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL SUPRA, UPHOLD THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSI NG OFFICER. THE GROUND TAKEN BY THE REVENUE IS THEREFORE REJECTED. C.O. NO.134/M/09 (A.Y. 2005-06): 10. IN THE CROSS OBJECTION THE ASSESSEE MERELY SUPPORTS THE O RDER OF THE LD. CIT(A). THIS BEING SO, AND KEEPING IN VIEW O F OUR FINDING RECORDED IN PARAS 6,8 AND 9 OF THIS ORDER, THE GROUND TAKEN BY THE ITA NO.6390/M/09 A.Y:05-06 7 ASSESSEE AT THIS STAGE DOES NOT REQUIRE ANY ADJUDICATION AN D ACCORDINGLY THE SAME IS REJECTED. 11. IN THE RESULT, THE REVENUES APPEAL AND ASSESSEE'S C.O . STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.7.2010. SD/- SD/- (A.L. GEHLOT) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.7.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.