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TMI Blog1996 (4) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 were made up as under : (Rs.) (1) Net payments received 14,19,516 (2) Amount received by way of adjustment against securities to be made 1,97,490 (3) Amount received by way of adjustment against cement supplied 2,12,362 (4) Amount received by way of adjustment against steel supplied 1,42,357 (5) Amount received by way of adjustment against water charges for supply of water 3,188 ------------------------- Total 19,74,903 ------------------------- The above amounts of Rs. 19,74,903 also included an amount of Rs. 51,000 which was paid on June 13, 1968, i.e., in the accounting period relevant to the assessment year 1968-69. The Income-tax Officer, therefore, excluded this amount of Rs. 51,000 from the gross receipts and the taxable receipts for the assessment year 1970-71 under appeal were taken by him at Rs. 19,23,903 so far as receipts from Hindustan Copper Ltd., Khetri, are concerned. The details of receipts of Rs. 2,15,726 from Instrumentation Ltd., Kota are as under : (Rs.) 1. Net payments received 1,73,714 2. Amount received by way of adjustment against security deposit to be made 15,687 3. Amount received by way of adjustment of rebate 833 4. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were taken into consideration and it was found that the responsibility of supplying the material was on the contractor. They could purchase it from the market as well as from the Department at controlled prices. Since the purchase from the Department involve many advantages, the amount which has been deducted by the Department concerned from its bills could not be reduced. It was also observed that it was not shown while formulating their rates at the time of submission of tender, the assessee was influenced by any undertaking given by the corporation. The schedule of issue of material to the contractor makes it very clear that the corporation had agreed to supply cement and steel only in case they were available and for that purpose indent of 7 days was to be submitted in advance. If the cement and M. S. bars were not available in the central stores of the corporation, the corporation could have expressed its inability to supply the same and in that eventuality it was incumbent on the contractor to make its own arrangement. Since no funds were blocked and the assessee was relieved of the botheration of purchasing it in the market and transporting it to the work site it was consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the contract and the tax liability would be only on the balance payment. The second question relates with regard to liability of tax on security deducted while making the payment and contract executed by the assessee. The learned Appellate Assistant Commissioner was of the view that since the amount has not been received and the assessee was having the mercantile system, but was following the cash system with regard to security, therefore, the amount of security could be taxed only when the amount is received. It was found that the total amount of security is to be restricted to 10 per cent. of the value of total work and security was for due and faithful and efficient performance of the contract by contractors keeping in view the time schedule for completion of the work. The said security could be applied towards any sum due or payable by the contractor which has not been disbursed and has been retained with the corporation towards meeting wholly or in part any expenditure, damages or losses to which the corporation may be put as a result of any act of omission or commission, negligence or default on the part of the contractor in relation to the contract and/or for defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons therefrom are only appropriations of the bill amount. The security deposits are payable after six months of the expiry of contract and the corporation has the absolute right to adjust the said security deposit against its claim on the contractor. As and when such adjustment is made an independent trading loss would arise to the contractor which may give rise to the liability and one of the modes of satisfying this liability is adjustment out of the security deposit. We have considered the matter. The nature of the security deposit has to be seen on the basis of contract entered into. It is after the work is performed in part or full, that the amount of 10 per cent. is deducted from the running bills. The total amount of security has to be 10 per cent. of the work done. This amount is for due and satisfactory performance of the contract. The amount which has become due and payable and for which the bill is prepared is the amount which has been considered as receipt by the assessee. The nature of the security deposit is like an amount which is kept in trust with the corporation on behalf of the assessee and the corporation is bound to refund the said amount on faithful completi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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