DCIT Vs NTPC Vidyut Vyapar Nigam Limited (ITAT Delhi)
Bank Guarantee Encashment Not Taxable as Income Due to Government Directions, Rules ITAT; ITAT Rejects Revenue Appeal Because Encashed Guarantee Amount Was Treated as Liability; Amount Received from Encashed Bank Guarantees Cannot Be Taxed When Assessee Is Mere Custodian: ITAT.
The Income Tax Appellate Tribunal (ITAT) Delhi dismissed the Revenue’s appeal for assessment year 2016-17 and upheld the deletion of an addition of Rs. 5,68,60,563 relating to retention of amounts received from encashment of bank guarantees. The appeal arose from the order of the CIT(A)/NFAC dated 12.09.2025 passed under Section 143(3) of the Income Tax Act.
The Revenue challenged the CIT(A)’s decision deleting the addition made by the Assessing Officer, who had treated the retained amount from bank guarantee encashment as income in the hands of the assessee.
The Tribunal noted that the same issue had already been decided against the Revenue in the assessee’s own case for assessment years 2013-14 and 2015-16. In those earlier years, the Tribunal had observed that the assessee was carrying out Government of India missions under policies and directions issued by the Government. The contracts were executed under government directions, and the bank guarantees were taken and encashed according to guidelines issued by the concerned Ministry. The encashed amounts were deposited in a separate bank account as directed by the Government of India.
