2019 (3) TMI 1644 - AT - Income Tax

Accrual of income - whether retention money is not income of the assessee as it has not accrued or arisen during the year? - HELD THAT - As replying on SIMPLEX CONCRETE PILES (INDIA) PVT. LIMITED 1988 (12) TMI 52 - CALCUTTA HIGH COURT we uphold the contention of the assessee and direct the AO to exclude the retention money included in the sales. This retention money can be brought to tax in the year when the assessee received the same. Accordingly this ground of the assessee is allowed for all the Assessment Years.

Summary

Issues:
1. Rejection of claim by the revenue that retention money is not income of the assessee as it has not accrued or arisen during the year.
2. Assessment for the year 2007-08 under section 143(3) of the Income Tax Act following an order under section 263 by the Principal Commissioner.

Issue 1: Rejection of Claim Regarding Retention Money:
The appeals filed by the assessee contested the rejection by the revenue of the claim that retention money is not the income of the assessee as it has not accrued or arisen during the year. The Tribunal considered the arguments presented by both parties and referred to the decision of the Jurisdictional High Court in the case of Commissioner Of Income-Tax vs Simplex Concrete Piles (India) Pvt. Ltd. The Tribunal held that the retention money can be brought to tax in the year when the assessee receives it. The Tribunal distinguished the case from the decision of the ITAT Mumbai 'H' Bench in Emerson Network Power India (P.) Ltd. v. Assistant Commissioner of Income-tax, as it pertained to performance bank guarantee, not retention money.

Issue 2: Assessment for the Year 2007-08 under Section 143(3):
For the Assessment Year 2007-08, the order was passed under section 143(3) of the Act following an order under section 263 by the Principal Commissioner. The assessee appealed the decision before the Tribunal. The Tribunal noted that the CIT(A) partly allowed the appeal of the assessee, considering the submissions that retention money should not be considered as the income of the assessee. The CIT(A) analyzed the impact of excluding retention money on profit figures, highlighting the importance of matching principles in accounting. The Tribunal upheld the decision of the CIT(A) and dismissed the appeal of the assessee for the Assessment Year 2007-08. The Tribunal also noted that the assessee did not press other grounds raised in all three Assessment Years, leading to the dismissal of those grounds.

In conclusion, the Tribunal's judgment addressed the rejection of the claim regarding retention money as income and the assessment for the year 2007-08 under section 143(3) of the Income Tax Act. The Tribunal relied on legal precedents and accounting principles to make its decisions, ultimately upholding the contentions of the assessee in one issue while dismissing the appeal in another.