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2020 (7) TMI 754 - HC - Income TaxAccrual of income - retention money on contract included in the Assessee's income for the AY.2009-10? - whether tribunal wrong in holding that the retention amounts cannot be considered as income of the Assessee because such amounts were still to be received, when the Assessee follows the Mercantile System of Accounting and income is to be assessed on accrual basis ? - HELD THAT - Assessee's own case for the previous Assessment Year 2008-2009 has been decided in favour of the Assessee 2014 (11) TMI 1233 - MADRAS HIGH COURT . Since the issue raised in this appeal had already been decided against the department by the Supreme Court in Commissioner of Income Tax v. M/s Ignified Boilers India Ltd. 2006 (7) TMI 726 - SC ORDER and in Commissioner of Income Tax v. East Coast Constructions Industries Limited 2006 (12) TMI 574 - SC ORDER no question of law arises for consideration. Decided in favour of the Assessee
Issues:
1. Correctness of the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2009-10. 2. Whether the retention money on contract can be included in the Assessee's income for the AY 2009-10. 3. Whether the Tribunal was correct in not considering the retention amounts as income of the Assessee. 4. Application of the Mercantile System of Accounting in assessing income. 5. Whether the retention amounts form part of the Assessee's income for the AY 2009-10. Issue 1: Correctness of the Tribunal's Order The High Court was called upon to determine the correctness of the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2009-10. The Revenue challenged the Tribunal's decision, raising substantial questions of law related to the inclusion of retention money in the Assessee's income. Issue 2: Inclusion of Retention Money The primary issue revolved around whether the retention money of a substantial amount on contract should be considered as part of the Assessee's income for the Assessment Year 2009-10. The Tribunal's decision not to include this amount in the Assessee's income was questioned by the Revenue. Issue 3: Accrual Basis of Accounting A significant aspect of the case was the application of the Mercantile System of Accounting and the principle of income assessment on an "accrual basis." The Tribunal's stance on the retention amounts, which were yet to be received, raised questions about whether such amounts should be considered as income under this accounting system. Issue 4: Accrual of Income The Tribunal's failure to acknowledge that the income had accrued to the Assessee due to work done in the relevant assessment year, even though the payment had been postponed, was a key point of contention. The question of whether the retention amounts should be deemed as part of the Assessee's income for the Assessment Year 2009-10 was crucial in this regard. Judgment Analysis: The High Court, after considering the arguments presented by both parties, referred to a previous decision related to the Assessee's case for the Assessment Year 2008-2009. The Court highlighted a co-ordinate Bench's ruling in favor of the Assessee in that instance, emphasizing the non-inclusion of retained amounts in the income calculation. Citing this precedent, the High Court dismissed the present Appeal by the Revenue, aligning with the view that the controversy was settled by the previous judgment. Consequently, the Court ruled in favor of the Assessee and against the Revenue, with no order as to costs. This detailed analysis of the judgment showcases the Court's thorough consideration of the issues raised, the legal principles involved, and the application of precedent in arriving at a decision that favored the Assessee based on established legal interpretations.
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