9911796707
TMI Blog1980 (9) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... as carrying on business as contractor. There was a contract for construction of blast furnaces at Rourkela for M/s. Hindustan Steel Private Ltd. That contract was big contract for Rs. 4 crores according to the statement of case. The assessee was given two amounts amounting to Rs. 13,00,000 for purchasing timber for shuttering in connection with that contract. There was separate arrangement regarding this amount. The assessee received Rs. 5,00,000 in the calendar year 1957 corresponding to the assessment year 1958-59, and a sum of Rs. 8,00,000 in the year 1958 corresponding to the assessment year 1959-60. The arrangement with M/s. Hindustan Steel Private Ltd. was that in case the main contract was not completed in accordance with the dates a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... get back the amount in the event of the assessee failing to complete the contract according to the schedule did not in any manner reduce the income which had already accrued. All the assessee could do subsequently was to claim deduction on account of any amount that was refunded. It was also observed that as the assessee had debited the expenditure on the work to the trading account, hence the work-in-progress had also to be shown. It was noted that the assessee claimed that the payment was on account, and, therefore, the actual accrual would take place only when the work was complete. The Tribunal, however, held that the amount could not be ignored in the assessment year 1959-60, and accordingly it was, held that the ITO was right in makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it can be said that as no work was done in 1957, the sum of Rs. 5,00,000 which was received in that year can be treated to be a kind of advance payment. However, in the year 1958, corresponding to the assessment year in question, the work was done for 12 months and the expenditure has been debited to the profit and loss account, so it is not understandable how it can be said that the income to the extent noted by the ITO has not actually been received. Learned counsel for the assessee relies only on the fact that in case there is a default in the completion of the whole work, then this amount of Rs. 13,00,000 is refundable. For the purpose of seeing the correct position, documents relating to the arrangement have been filed on record and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contract that the sum of Rs. 13,00,000 was payment for the timber which was to belong to M/s. Hindustan Steel Private Ltd. If the contractor failed to perform the work in time, this amount was refundable. This latter term appears to be a kind of penalty, but it cannot be said that the money paid for the timber was not a payment towards the timber to be supplied. Thus, it cannot be said that the sum of Rs. 13,00,000 was an advance. Rather, it was payment for work to be done or goods to be supplied. In the event of the amount becoming refundable due to a default, then the question whether it had to be written back in the account, etc., would have to be considered. No doubt, the income had accrued and also been received by the assessee, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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