M/S.tomco Engineering (P) Ltd v. Menonsmt.meera V.menonsmt.k.krishna

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 28 DAY OF SEPTEMBER 2022 / 6TH ASWINA, 1944 ITA NO. 4 OF 2019 ITA 134/2017 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: M/S.TOMCO ENGINEERING (P) LTD.163, PALANNATTIL, KUNNACKAL.P.O., MUVATTUPUZHA, ERNAKULAM DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR, PAUL P.THOMAS.BY ADVS.HARISANKAR V. MENONSMT.MEERA V.MENONSMT.K.KRISHNA RESPONDENT/S: THE ASST. COMMISSIONER OF INCOME TAX,CORPORATE WARD-2(1), KOCHI.BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX OTHER PRESENT: SR ADV. P.K.R. MENON THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON28.09.2022, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: ITA NO. 4 OF 2019 -2- S.V.BHATTI & BASANT BALAJI, JJ. - - - - - - - - - - - - - - -- - - -- - - - - - - - - - -- - - - - - - - - I.T.A NO.4 OF 2019 - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - JUDGMENT (Dated this the 28[th] day of September 2022) Basant Balaji J., A private limited company engaged in execution of contract works is the appellant. During the financial year 2011-12, the appellant had undertaken works awarded by the Kerala Water Authority for supplying, laying, jointing,testing and commissioning of pipes in the trenches having a depth of 1.5 mtr. as per Annex.A tender notification. During 2011-12, the Kerala Water Authority deducted Rs.73,86,402/- by virtue of clauses 8.12, 8.14 and 8.16. The appellant claimed the amount deducted by the WaterAuthority as expenditure eligible for deduction under the -3- Income Tax Act. 2. The assessing authority, by Annexure-B assessment order, disallowed the deduction as the assessee is debitingan expenditure which has not yet incurred. Relying onsections 36 and 37 of the Income Tax Act the assessingAuthority held that recoveries made by the Kerala WaterAuthority are contingent in nature and have not beencrystalised as expenditure during the year and therefore theamount was added back to the income of the assessee. Challenging the order of the assessment, the appellant filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner, by Annexure - C order, allowed theappeal in part and held that the dis-allowance ofRs.73,86,402/- made by the assessing officer is to directedto be deleted. ITA NO. 4 OF 2019 -4- 3. The Revenue filed further appeal before the Income Tax Appellate Tribunal Cochin Bench as ITANo.134/COCH/17. The Tribunal on appreciation of the facts and circumstances of the case and Sections 36 and 37 of the Income Tax Act, allowed the appeal filed by therevenue for statistical purpose and remitted the issue backto the Assessing officer for fresh consideration afresh. TheTribunal has allowed the appeal based on the fact that thevoucher produced by the assessee before the authority wasnot considered by the authority and does not reflect in theorder. The Tribunal was of the view that the matterrequires reconsideration since the question whether theretention amount can be allowed as an expenditure or not,is specifically considered by the Assessing authority. Weare in full agreement with the impugned order in the ITA NO. 4 OF 2019 -5- Income Tax Appeal and the matter is remitted to the Assessing Authority for consideration afresh. We clarify that the remand to the Assessing Officer is open and theassessing authority shall consider the merits of the caseincluding the deduction of the retention amount retained bythe Kerala Water Authority merits the claim of expenditurein the circumstances of the case and pass appropriateorders. Income Tax Appeal is disposed of with the aboveobservations. sd S.V.BHATTI, JUDGE sd BASANT BALAJI, JUDGE -6- APPENDIX OF ITA 4/2019 PETITIONER ANNEXURES