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TMI Blog2019 (3) TMI 1644X X X X Extracts X X X X X X X X Extracts X X X X ..... 172/Kol/2017 - - - Dated:- 15-3-2019 - Sri J. Sudhakar Reddy, Accountant Member AND Sri S.S. Godara, Judicial Member For the Appellant : Shri Pankaj Parakh, FCA For the Respondent : Shri A.K. Nayak, CIT Sr. D/R. ORDER Per J. Sudhakar Reddy, AM :- These appeals filed by the assessee are directed against the common order of the Learned Commissioner of Income Tax (Appeals) - 5, Kolkata, (hereinafter the Ld. CIT(A) ), dt. 23/02/2017, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the Act ), relating to Assessment Years 2007-08, 2008-09 2009-10. 2. As the issues arising in all these appeals are common, for the sake of convenience they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of damages, etc. - Assessee was crediting 100 per cent of job value in past years but from assessment year 1965-66, it had started practice of crediting only 90 per cent value for work done after deducting retention money -Whether it could be said that on date of submission of bills assessee had no right to receive entire amount on completion of work and retention money did not accrue to it on such date but on later date in accordance with terms of contracts and ITO would be unjustified in making any addition by treating entire contract amount as accrued on submission of bills on completion of work - Held, yes 5. The decision of the ITAT Mumbai H Bench of the Tribunal in the case of Emerson Network Power India (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is in appeal before us. 7.1. After hearing rival contentions, we find that the ld. CIT(A) has considered the submissions of the assessee that retention of money cannot be considered as income of the assessee. At para 1.2. 1.3. of his order the ld. CIT(A) held as follows:- 1.2. I have gone through the A.O.'s contention and the appellant's submission on the point. As per the judicial decisions relied upon it does appear that the appellant has a case when he claims that retention money has not fallen due in the year when the bill was raised and included in the sales, as the right to claim the said money is contingent on satisfaction of some conditions such as verification of satisfactory execution of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ojects get aggregated in the last year in which the project is completed. Even this financial result was found unreasonable and distorted and, therefore, the percentage completion method was brought in to distribute the profit equitably over the years. The judicial decisions relied upon by the appellant is thus making the situation worse where the profit almost may be equal to the retention money as in most of the cases the net profit on the contract varies in the region 5 to 10%. Thus reduction of the retention money from the profit amounts to postponing the whole of the profit contained in the contract to later years where it is not rightly due. As regards the right to claim the retention money is concerned that cannot be ignored. But red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant contracts. This distortion needs to be corrected. By applying matching principle to the retention money claimed to be due only in later year the profit contained in the corresponding money so retained is about ₹ 16,43, 104/ - computed at the rate of net profit of 4.88%. Thus it is held that the profit of ₹ 16,43,104/- out of the money retained be taken to later year(s), when the said money becomes due and thus the profit therein arises. The sum of ₹ 3,20,27,063/- being balance out of the retention money is treated as the profit or revenue realizable in the current year. The ground is thus partly allowed. 7.2. A perusal of the above demonstrates that the ld. CIT(A) has accepted the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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