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TMI Blog2024 (11) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and gains arising from the construction contract. Section 43CB(2)(i) clearly provides that for the purposes of percentage completion method, the project completion method or straight-line method, the contract revenue shall include retention money. In view of the clear provision of law, the assessee was right in including the retention money in contract receipts. It is consistent case of both the parties that the retention money was retained by the contractor pertaining to the construction activities for which the assessee was eligible for section 80IA of the Act. The retention money cannot have a different characteristics than that of the principle amount of the contract as both are part and parcel of the revenue which would be received by the assessee or was received by the assessee for carrying out the construction activities. In view of the above, the order passed by the ld.CIT(A) is without any merit and therefore, the appeal of the assessee is required to be allowed. In the present case, the reliance of the ld.CIT(A) in the case of DCIT, Circle 1 Vs. M/s. McNally Bharat Engineering Co. Ltd (supra) form basis of deciding the issue against the assessee. However, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d gr in facts and in law, in disregarding the claim as per the Form 10CCB. 2.6. Without prejudice to above grounds, accepting without admitting that deduction u/s 80-IA should not be allowed on retention money due to its uncertain nature, the Appellant prays that the Ld. Assessing Officer be directed to exclude the same from the taxable profits of the Appellant. 3.1. The Ld. CIT(A) was not justified and grossly erred in fact in upholding the addition of interest income amounting to INR 1,00,252/- by stating that the same has not been offered to tax even though the same was offered to tax in subsequent years. 3.2. Without prejudice to the ground 3.1 above, accepting without admitting that the interest income amounting to INR 1,00,252/- should be added due to not being offered to tax, the Ld. CIT(A) has erred in not allowing the corresponding TDS credit of INR 10,025/- against the said interest income. 3.3. The Ld. CIT(A) erred in not allowing the TDS credit of INR 60,958/- in AY 2018-19 and erred in not appreciating the fact that the said TDS credit was not claimed in 'subsequent years against the interest income of INR 6,09,583 which was offered to tax in subsequent years. 3.4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed as under: In a normal business parlance, Retention money is described as the sum of money held by the employer as a safeguard for any defective or non-conforming work by the contractor. Retention money safeguards the employer, in case, the contractor fails to meet up to the satisfaction of Contract terms and conditions. As per Para 9 of ICDS III, retention money would be recognized as 'Contract Revenue' in accordance with stage of project completion when there is reasonable certainty of its collection. Therefore, the definition of retention money itself implies that the contract money is retained by the contractor and will be released to the contractee subject to the satisfaction of the contractor. Therefore, there is certain amount of uncertainty and ambiguity whether the retained money will finally be realized in the hands of the contractee. However, an assessee as per the accounting standards and CBDT Circulars, also have to recognize the Retention money as income in the financial statements, on the basis of the percentage of completion of work. The assessee is at liberty to reduce the income from business in the subsequent financial years if the money retained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e retention money as income as per ICDS III and by relying on various judicial pronouncements claimed that the deduction should be allowed as per Form No.10CCB. Alternatively the appellant submitted on without prejudice basis that if the deduction u/s 80IA is not allowed then the retention money should be reduced from the total income. During the course VC, the appellant contended that the similar addition made by the AO for AY 2017-18, the CIT(A), NFAC has allowed the ground of appeal raised by the appellant. I have considered the facts of the case and submission filed by the appellant carefully. I find from the CIT(A) order for AY 2017-18 that the facts of that year were different. The appellant had not claimed the deduction u/s 80IA on retention money in the original return of income and in original form No. 10CCB. The appellant had filed revised return of income and revised form No.10CCB in which enhanced deduction u/s 801A was claimed. The AO had rejected the revised return of income and revised form No.1000B. It is noticed from the appellant order of CIT(A) NFAC that the action of the AO of rejecting the revised return/revised form No.10CCB was decided as incorrect since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey till the verification of satisfactory execution of the contract. Therefore, the Tribunal was right in holding that the retention money in respect of the jobs completed by the assessee during the relevant previous year should not be taken into account in computing the profits of the assessee for the assessment year in question. In view of the above facts, the appellant is not entitled for deduction u/s 801A on the retention money since the same cannot be taken into account while computing the profits and gains of the business. Therefore the contention of the appellant is not found acceptable. Regarding the alternative claim of the appellant that if the deduction u/s 801A is not allowed then the retention money should be reduced from the total income, I find that the AO or CIT(A) has no power to reduce the returned income. Only the appellant can reduce the returned income by way of filing revised return of income within the prescribed time limits. In the instant case the appellant has not filed revised return of income to reduce the retention money from the returned income, therefore the contention of the appellant is not found acceptable. The facts of the case laws relied upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closure standards notified under sub-section (2) of section 145: Provided that profits and gains arising from a contract for providing services, - (i) with duration of not more than ninety days shall be determined on the basis of project completion method; (ii) involving indeterminate number of acts over a specific period of time shall be determined on the basis of straight line method. (2) For the purposes of percentage of completion method, project completion method or straight line method referred to in sub-section (1)- (i) the contract revenue shall include retention money; (ii) the contract costs shall not be reduced by any incidental income in the nature of interest, dividends or capital gains.] 7.1. For the purpose of computation of income from construction and service contracts, furthermore, it was submitted that once the retention money has been taken into account while computing the total income of the assessee, and in that case, the assessed income cannot be lower than the returned income. Therefore, retention from the income of the JV while computing profit and loss under the head income from profits and gains from business and profession cannot be granted. 8. We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore the deductions claimed as per the revised return of income has to be allowed, if admissible, I find that the appellant has also filed the revised audit report in Form No.10CCB. However the reasons given by the AO for denial of revised deduction u/s 80IA are not justifiable. Therefore Considering the submission filed by the appellant, the disallowance made by the AO of Rs. 11,38,54,187/- is deleted. Thus the ground of appeal raised by the appellant is allowed. 8.2. From perusal of the above, it is abundantly clear that the LD.CIT(A) for the assessment year 2017-18 has deleted the disallowance made by the Assessing Officer for retention money to the extent of Rs. 11,36,37,740/-. Therefore, the finding of the ld.CIT(A) is not correct to that extent. In our view, the Revenue should take a consistent view unless there is a change of fact or law. We do not approve the approach of the ld.CIT(A) for deciding the issue when the issue has already been considered and examined by the ld.CIT(A) in the earlier assessment year i.e., 2017-18. 8.3 Further, the LD.CIT(A) while deciding the issue against the assessee, has relied upon the decision of Kolkata Tribunal in the case of DCIT, Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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