2015 (3) TMI 540 - HC - Income Tax

Computation of deduction u/s 80HHB - CIT (Appeals) allowed the appellant's appeal by holding that when each project is different and the deduction is per project, then it would not be justified in clubbing the income of all projects for the purposes of working out the deduction available under Section 80HHB - Held that - It is not disputed by the revenue that the issue stands concluded by the decision in Hindustan Construction Co. Ltd. (2015 (2) TMI 718 - BOMBAY HIGH COURT) wherein holding that the assessee was entitled to the deduction under section 80HHB in respect of each project instead of netting up of profits from all the overseas projects. In such circumstances, the Tribunal was in no error in directing the Assessing Officer to allow the deduction as claimed by the assessee without setting off all the losses suffered in other foreign projects - Decided in the favour of the assessee. Entitlement to deduction for Retention Money - Held that - Question (B) stands concluded in favour of the respondent-assessee and against the appellant-revenue by the decision of this Court in CIT Vs. Associated Cables P. Ltd. 2006 (8) TMI 135 - BOMBAY High Court wherein held the payment of retention money in the case of contract is deferred and is contingent on satisfactory completion of contract work. The right to receive the retention money is accrued only after the obligations under the contract are fulfilled and, therefore, it would not amount to an income of the assessee in the year in which the amount is retained - Decided in favour of asseesse.

Summary

Issues:
1. Computation of deduction under Section 80HHB of the Income Tax Act, 1961.
2. Entitlement to deduction for Retention Money.

Analysis:

Issue 1: Computation of deduction under Section 80HHB:
The appellant was involved in executing foreign projects and claimed deduction under Section 80HHB for each individual project where profit was earned. The Assessing Officer, however, clubbed income/losses of all foreign projects, restricting the deduction available under Section 80HHB. The Commissioner of Income Tax (Appeals) allowed the appellant's appeal, emphasizing that the deduction should be worked out for each profit-making foreign project separately without considering losses from other projects. The Tribunal upheld this decision, stating that for computing the deduction under Section 80HHB, profits and losses of each project should be considered separately. The overall deduction is limited to the gross total income returned by the assessee, as per Section 80A(2) of the Act. The issue was settled in a previous case, CIT Vs. Hindustan Construction Co. Ltd., where it was held that the deduction under Section 80HHB should be granted for each project without offsetting profits and losses from different projects. The Court affirmed this position, concluding that the appellant was entitled to the deduction under Section 80HHB for each project individually.

Issue 2: Entitlement to deduction for Retention Money:
The Court noted that the issue of entitlement to deduction for Retention Money was already settled in a previous case, CIT Vs. Associated Cables P. Ltd., where it was decided in favor of the assessee. Consequently, the Court answered this question in the affirmative, in favor of the respondent-assessee and against the appellant-revenue. As both issues were decided in favor of the respondent-assessee based on previous judgments, the appeal was dismissed with no order as to costs.

In conclusion, the judgment upheld the appellant's right to compute deductions under Section 80HHB for each project separately and confirmed their entitlement to deduction for Retention Money based on established legal precedents.