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TMI Blog1976 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... ct between the assessee and the department, as income which accrued to the assessee and in including the said sum in the total income of the assessee for the account year ended 31st March, 1964 ?" The assessment year was 1964-65 and the corresponding accounting period was that which ended on March 31, 1964. The assessee is a firm of contractors carrying on contract work consisting of levelling sites, constructing buildings, etc., at Idikki and construction of roads, buildings, etc., for the Medical College at Kottayam. For the accounting period that ended on March 31, 1964, the assessee had filed a return showing an income of Rs. 1,30,469 and the return was accompanied by a profit and loss account and balance-sheet. The total receipts s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese terms: "The bill above alluded to shall be submitted in exact accordance with the form supplied by the executive engineer and the rates at which the value of the work is calculated shall be those entered in the attached schedule of rates. To allow of a guarantee fund being formed on the part of the Government a deduction of 10% from all payments to contractors is to be made by the executive engineer at the time of payments. But the amount so held as retention plus the security deposit of 4% as per clause (1) shall not at any time exceed 8% of the contract amount. This retention amount will not be released before the expiry of 3 months (6 months in the case of road works) after the issue of certificate or otherwise of completion of wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the assessee on the completion of the work and on the submission of the bills. But certain amounts are appropriated out of such bills by the engineering department for proper fulfilment of the contract. The assessee could have as well given the security separately. We hold that the assessee is maintaining its accounts on mercantile basis and therefore these amounts should have been brought into account and treated as receipts of the year. We uphold the Appellate Assistant Commissioner's decision in this respect." It is no doubt accepted that the assessee has been following the mercantile system of accounting. If the money had become due during the accounting period it will be income which would have to be taken into account in deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor on account. In the case of contracts not otherwise entire, such a provision is not necessary for the protection of the builder, as payments would accrue due from time to time even in its absence; on the other hand, the insertion of such a provision would be desirable in the interest and for the protection of the building owner. These progress certificates are merely in the nature of approximate estimates by the certifier of the value of the work done, and are not conclusive in favour of either party either as an expression of satisfaction with the quality of the work done or as a determination of its quantity or price. Progress certificates are subject to readjustment at the final settlement between the parties." In the same book, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, recovery on account of storage charges of materials, hire charges of tools and plants and other disputed items of recovery, etc., are retained from the bills which are accounted as cash payment, of which the retention for the satisfactory fulfilment of the contract will be released on completion of the work". What is the nature of the contract and whether money had become due will have to be ascertained by interpreting all the relevant terms of the contract and finding out the exact practice followed by the department. Whether there was a certificate for payment, if so whether it was a final certificate, and even in cases where there has been a final certificate, whether there was a further stipulation for retention, will all have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of what we have stated in this judgment. We decline to answer the question because the relevant materials are not before us and these have not even been considered by the Tribunal before reaching the conclusion that it did. It will be open to the Tribunal to rehear the appeal and dispose of the appeal in accordance with law bearing in mind the observations in this judgment. The Tribunal may remand the case to the Appellate Assistant Commissioner or the Income-tax Officer and further may take additional evidence or direct additional evidence being taken. The income-tax referred cases are disposed of on the above terms. There will be no direction regarding costs. A copy of this judgment under the seal of the court and the signature of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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