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TMI Blog2018 (6) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... the year of completion of contract. X X X X Extracts X X X X X X X X Extracts X X X X ..... accrues only when it is paid by the contractee to them. Further appellant relied on Bombay High Court decision where identical issue was discussed in the case of CIT vs. Associated Cables P. Ltd. 286 ITR 596 (Bom) wherein it is held as under; "In this case Hon'ble Bombay High Court dismissed the Revenue's appeal holding as under: 2. The question of law sought to be raised in this appeal is as to whether the retention money could be considered to be income of the assessee in the year in which the amount was retained. The Tribunal has referred to a judgement of the Tribunal in Associated Cables (P) Ltd. vs. Dy. CIT (1994) 49 TTJ (Bom)(TM) 191 : (1994) 206 ITR 48 (Bom)(TM)(AT). Mr. Sathe appearing for the respondent has however, drawn our attention to two judgements viz. of Calcutta High Court and the Madras High Court. The Calcutta High Court judgement is reported in the case of CIT vs. Simplex Concrete Piles (India) P. Ltd.(1989) 79 CTR (Cal) 71: (1989) 179 ITR 8 (Cal). A division Bench of the Calcutta High Court in that matter has held that the payment of retention money I the case of contract is deferred and is contingent on satisfactory completion of contract work. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illed. This income will be assessed as assessee's income only when contractee fulfills all the conditions of the contract and pays the amount. In view of the above decision of the various High Courts, addition of the retention money of ₹ 2,66,92,253/- is deleted. This ground of appeal is allowed. 8. Revenue is in further appeal before us against the above order of CIT(A). 9. It was argued by learned DR that retention money was duly received by the assessee against the bank guarantee, therefore, CIT(A) was not justified in deleting the same. Reliance was placed on the decision of Co-ordinate Bench in case of Emerson Network Power India Pvt. Ltd., 27 SOT 593, wherein it was held that retention money accrued in the year the work is completed, accordingly the same is liable to tax in the very same year. 10. Learned DR further invited our attention to the decision of Bombay High Court in the case of Associated Capsules Pvt. Ltd., 286 ITR 596, by relying on which, the CIT(A) has deleted the addition. Learned DR further contended that Co-ordinate Bench in case of Emerson Network Power India Pvt. Ltd., (supra) have duly considered the decision of Bombay High Court and after c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Co. Ltd., (1971) 82 ITR 363, Birla Gwalior Pvt. Ltd., (1973) 89 ITR 266, 273(SC) and Sutlej Cotton Mills Ltd., (1979) 116 1,5. Reliance was also placed on the decision of the Hon'ble Supreme Court in the judgement delivered on 23.03.2015 in Taparia Tools Ltd. v. CIT [ Civil Appeal No. 6366-6368 of 2013] reiterated the above principles. It is well settled that income is to be computed as per the provisions of the law, and it is not necessary that law should follow the footsteps of accountancy. Income-tax law does not march step by step in the divergent footprint of the accountancy profession. [See - Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (1997) 227 ITR 172 (SC)]. He further contended that the facts of the assessee's case are distinguishable from the facts of the decision in case of Emerson Network Power India Pvt. Ltd., (supra) as relied on by learned DR, and are more closure to the facts of M/s. Associated Cables Pvt. Ltd., (supra) and Commtel Networks Pvt. Ltd., (supra). The distinguishing features of the assessee's case vis-à-vis the case relied by learned DR and AR was indicated as below. Associated Cables Pvt. Ltd. Commtel Networks Pvt. Ltd. Emer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the various judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. Only the issue for our consideration is as to year in which retention money to be taxed (Retention money of 10% of Contract Value) to be taxed in the year of completion of contract or when the performance guarantee period is over and the contractee releases the payment. 16. We had carefully gone through the terms of contracts executed by the assessee with contractee i.e., ONGC The contracts show that the right to receive the retention money of the respective projects, did not accrue to, or vest in, the assessee during the previous year ended 31.3.2012, because the same in terms of time fell beyond that year. Therefore, the retention moneys did not accrue to the assessee during that year, notwithstanding the accounting as revenue in the books of account on completion of work of the respective projects. Accordingly, considering the terms of the contract, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otsteps of accountancy. Income-tax law does not march step by step in the divergent footprint of the accountancy profession - Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT (1997) 227 ITR 172 (SC). 18. In view of the above, merely because retention money was accounted for in the books of accounts that same cannot be brought in the tax net without income having been accrued to the assessee. Furthermore, the assessee is consistently following the above practice for the retention moneys year after year since the A. Y.2003-04 and onwards. In the A. Y.2004 05, the then AO after examining the claim in detail and on consideration of detailed submissions, accepted the same. For the first time in A.Y.2010-11 this claim was rejected. It is true that the principles of res judicata do not apply to tax assessments, yet there ought to be uniformity of treatment and consistency when facts and circumstances are identical. In this context reliance is placed on the decision of the Hon'ble Bombay High Court in CIT vs. Gopal Purohit (2011) 336ITR 287 (Bom). 19. After comparing the early return income of the assessee vis-à-vis rate of tax, even after exclusion of retention money doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat High Court in case of Amarshiv Construction (P) Ltd., 45 Taxmann.com 429 and Madras High Court in case of Ignifluid Boilers (I) Ltd., 283 ITR 295 and also in the case of East Coast Constructions Ind. Ltd., 160 Taxmann 399 held that retention money accrues only when the performance period has been successfully completed and the Bank guarantees have been released. We categorically observe that the facts of the assessee's case is identical to that of the case of the Associated Cables Ltd. Associated Cables were also doing manufacturing Cables as per specifications of the Contractee. Assessee is involved in Design, Engineering, integration, testing, supply, installation and commissioning state of the art telecommunication system as per customers' specific requirements. Every fact is identical to the facts of the case of Associated Cables Ltd is identical to the facts in respect of assessee's case. 23. Furthermore, we observe that assessee is in the 30% bracket in all the years under consideration. Earlier years retention money is taxed in this year and this year's retention is taxed in the subsequent years. Hence there is no loss of revenue. Therefore, the treatment ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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