Itxa/125/2018 Of Pr. Commissioner Of Income Tax-6 v. Imperial Procurement Services Ltd

PURTI IN THE HIGH COURT OF JUDICATURE AT BOMBAYPRASADPRASADPARABORDINARY ORIGINAL CIVIL JURISDICTIONDigitally signed byPURTI PRASADPARABDate: 2023.07.17Digitally signed byPURTI PRASADPARABDate: 2023.07.1717:49:33 +0530INCOME TAX APPEAL NO. 125 OF 2018 Principal Commissioner of IncomeTax -6….Appellant V/s.Imperial Procurement Services Ltd.…Respondent ---- Mr. Suresh Kumar for Appellant.Mr. Niraj Sheth i/b Mr. Sameer G. Dalal for Respondent. ---- CORAM : K.R. SHRIRAM & DATED : 12[th] JULY 2023 FIRDOSH P. POONIWALLA, JJ. P.C. : 1.Revenue is impugning an order pronounced on 10[th] February 2017 by the Income Tax Appellate Tribunal (ITAT) whereby the appeal thatwas filed by respondent was allowed. 2.Respondent had procured a contract from one Essar Projects(India) Ltd. (EPIL) and received a sum of Rs.54,08,75,555/- as mobilizationadvance. In turn Respondent sub contracted the work to Essar EngineeringServices Limited (EESL) for an amount of Rs.58,68,33,788/-. Respondenthanded over a sum of Rs.54,04,47,510/- to EESL as mobilization advance inrespect of the same contract to be executed by them. EPIL had deductedTDS of Rs.5,68,84,546/- on the mobilization advance of Rs.54,08,75,555/-that it had given to respondent which respondent claimed as refund in itsreturn of income filed for Assessment Year 2010-2011. It was respondent’s case that income from the contract shall be recognized on percentagecompletion method as per the Accounting Standard 7 issued by Institute ofChartered Accountants of India (ICAI). The whole contract gotcancelled. The Assessing Officer (A.O.) denied credit for TDS to respondentfor primary reason that respondent has not offered income for AssessmentYear 2010-11 and therefore credit cannot be granted in view of theprovisions of Section 199 of the Income Tax Act, 1961 (the Act). Sincerespondent had not executed any part of the contract during the saidAssessment Year 2010-11 respondent contended that no income is accruedto respondent and therefore no income is offered from the said contract. 3.It is respondent’s case that the receipt on which the TDS wasmade in the case of respondent was advance in nature which would bededucted in the bills to be raised in future on execution of contract and thuscannot be treated as taxable income. Since the contract itself has beencancelled without performing any work and the advance is to be refunded infull as clearly mentioned in the Assessment Order itself, the question oftaxability of this advance does not arise at all and hence, the question of anytax payable against the said contract for the relevant Assessment Year alsowould not arise. 4.This view of the A.O. was upheld by the Commissioner ofIncome Tax (Appeals) (CIT[A]) and respondent challenged the findings ofCIT[A] before the ITAT. 5.The ITAT in our view has correctly come to the conclusion thatif a particular amount on which tax was deducted at source is notchargeable to tax, assessee is entitled for credit of the TDS paid.Respondent had received mobilization advance and in turn this was passedon to EESL for execution as sub contractor. The whole contract, however,got cancelled by virtue of which EESL refunded to respondent the entiresub-contract amount of Rs.54,04,47,510/- and respondent in turn hasrefunded/to refund the entire contract amount which was agreed betweenassessee and EPIL. Therefore, in our view, the ITAT correctly came to theconclusion that no part of the income has been accrued to respondent. Insuch a situation, there is nothing taxable in the hands of respondent.Therefore, there was no justification in denying the credit for TDS on theground that respondent has not offered income to tax. 6.In our view, no substantial question of law arise. Appealdismissed. (FIRDOSH P. POONIWALLA, J.) (K.R. SHRIRAM, J.)