2006 (1) TMI 77

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..... completed is to be treated as income only when the moneys are actually received, even though the appellant is following mercantile system of accounting - - - - - Dated:- 21-1-2006 - Judge(s) : P. D. DINAKARAN., P. P. S. JANARTHANA RAJA. JUDGMENT The judgment of the court was delivered by P.P.S. Janarthana Raja J.- The present appeals are filed under section 260A of the Income-tax Act, 1961 by the Revenue, in I.T.A. Nos. 1720 and 1721/Mds/2002 dated March 13, 2003, passed by the Income-tax Appellate Tribunal, Madras "B" Bench, raising the following substantial question of law: "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that moneys retained by the contractee, as a percentage of the bil .....

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..... l income for the assessment years in consideration, since the contract was not yet completed. Learned counsel appearing for the Revenue contended that the retention money accrues only when the contract is complete. He also further submitted that the said retention money had accrued on the ground that the work relating to it had already been done and billed. It is also further submitted that the main feature of the mercantile system of accounting is that, regardless of whether an amount is received or not, it is accounted as a receipt as soon as it had accrued. In the case of retention money, the amount already billed, but not received, should be treated as income for the period when it had been billed. Learned counsel for the respondent s .....

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..... nly if the customer is satisfied about the completion of the work entrusted to the assessee and hence it is taxable only on receipt basis. The Calcutta High Court, in the case of CIT v. Simplex Concrete Piles (India) P. Ltd. [1989] 179 ITR 8) at page No. 15, held as follows: "Having regard to the facts and circumstances of the case, we are of the view that on the terms and conditions of the contract as examined by the Tribunal, it cannot be held that either 10 per cent, or 5 per cent., as the case may be, being the retention money, became legally due to the assessee on the completion of the work. Only after the assessee fulfils the obligation under the contract, that the retention money would be released and the assessee would acquire the .....

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