Right to receive retention money accrues only after the obligations under the contract are fulfilled

 HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH

Date of decision: 06.05.2013
ITA No. 720 of 2008

Commissioner of Income Tax Chandigarh-II
vs.

M/s SAB Industries Limited

CORAM: – HONORABLE MR. JUSTICE HEMANT GUPTA

                     HONORABLE MS. JUSTICE RITU BAHRI

Present: – Ms. Urvashi Dhugga, Advocate for the appellant.

M/s Akshay Bhan and Alok Mittal, Advocates for respondent.

Hemant Gupta, J

Present appeal under Section 260-A of the Income Tax Act, 1961 (for short the ‘Act’) arises out of an order passed by Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh on 06.06.2006 for the assessment year 1996-97. The revenue has claimed following substantial question of law: –

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 4,15,011/- retained by the authorities, could not be treated as assessee’s income for the year in spite of fact that income was being assessed on accrual basis”?

Respondent-company is engaged in construction work. For the relevant accounting year, the assessee filed its return of income declaring net loss of Rs. 2,85,60,913/-. The Assessing Officer made additions during the course of assessment which includes disallowance on account of retention money retained by the authority on whose behalf work was carried out, awaiting successful completion of the work. The dis allowance ordered by the Assesssing Officer was set aside by the Commissioner of Income Tax (Appeals). The said order was affirmed by the Tribunal.