The Commissioner Of Income-Tax, Erode v. P & C Constructions (P) Ltd. Eorde

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 14.07.2009 CORAM: THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLAandTHE HONOURABLE MR.JUSTICE B.RAJENDRAN Tax Case Appeal Nos.577 & 578 of 2009 The Commissioner of Income-tax,Erode...Appellant in both Appealsvs.P & C Constructions (P) Ltd.Eorde. ..Respondent in both Appeals TC(A)577/09: Tax appeal filed under Section 260-A of the Income TaxAct arising the order dated.31.10.2007 passed by the Income TaxAppellate Tribunal'D' Bench Chennai in ITA.No.2557/Mds/05 arising theorderoftheCommissionerofIncomeTax(Appeal)-I,Coimbatore,dated.22.8.2005 and made in Appeal No.248/2005-2006,arising the order of the Deputy Commissioner of Income Tax,Circle-I,Erode, dated.29.3.05 and passed in AABCP 2483L/ICCP 0002,AssessmentYear 1999-2000.TC(A)578/09: Tax appeal filed under Section 260-A of the Income TaxAct arising the order dated.31.10.2007 passed by the Income TaxAppellate Tribunal'D' Bench Chennai in ITA.No.2558/Mds/05 arising theorderoftheCommissionerofIncomeTax(Appeal)-I,Coimbatore,dated.22.8.2005 and made in Appeal No.249/2005-2006,arising the order of the Deputy Commissioner of Income Tax,Circle-I,Erode, dated.24.3.05 and passed in AABCP 2483L/ICCP0002,AssessmentYear 2000-2001. The Revenue filed these appeals against the order of the IncomeTax Appellate Tribunal, Chennai Bench "D", made in I.T.A. Nos.2557 &2558/Mds/05 dated 31.10.2007. https://hcservices.ecourts.gov.in/hcservices/ 2. The Assessing Officer, while completing the proceedings underSection 143(3) r/w. Section 147, brought to tax the retention moneyand additional security deposit in the account of the assessee. TheAssessing Officer found that the assessee omitted to admit the entirecontract receipts that had been shown in the TDS Certificate and inthe P & L Account. Aggrieved against the said assessment order, theassessee filed an appeal to the Commissioner of Income Tax (Appeal),who deleted the addition made by the assessing officer in relation tothe retention money as well as the additional security deposit.Aggrieved against the said order of CIT (A), the Revenue filed anappeal to the Tribunal. The Tribunal, after considering thedecisions rendered by this Court in Igni Fluid Boilers (283 ITR 295)and East Coast Constructions (283 ITR 297), concluded that these twoamounts cannot be included in the assessee's income and thus rejectedthe appeal preferred by the Revenue and confirmed the order passed bythe Commissioner of Income Tax (Appeal). Aggrieved against the saiddecision, the Revenue has come forward with the present appeals. 3. The only question of law which was sought to be presentedbefore this Court by the Revenue is " whether in the facts andcircumstances of the case, the Tribunal was right in holding that theretention money and the additional security deposit had not accruedto the assessee and was not taxable during the assessment year underappeal? " 3. The only question of law which was sought to be presentedbefore this Court by the Revenue is " whether in the facts andcircumstances of the case, the Tribunal was right in holding that theretention money and the additional security deposit had not accruedto the assessee and was not taxable during the assessment year underappeal? " 4. On a careful reading of the facts and circumstances of thecase, it is very clear that the assessee could not receive theretention money in the case of a contract which was retained by thecontractee for the purpose of the successful completion of thecontract. We are guided by the two earlier rulings of the DivisionBench of this Court reported in Igni Fluid Boilers (283 ITR 295),wherein in identical circumstances, this Court has held that theretention money had not been received in respect of the relevantassessment year, though the work had been completed and that theassessee was only entitled to receive the amount after the successfulcompletion of the work. In such circumstances, it could not be saidthat 10 per cent of the amount retained had accrued to the assesseeand hence, it was not assessable in the assessment year wherein itwas sought to be done by the department. Similarly, in the decisionreported in East Coast Constructions (283 ITR 297), in identicalcircumstances, while dismissing the appeal filed by the Revenue, theCourt has come to the conclusion that the assessee was entitled toreceive the retention money after completion of the contract. On thedate of the bill, no enforceable liability had accrued or arisen.When the assessee had no right to receive the money by virtue of thecontract between the parties and the assessee also had no right toenforce payment, it could not be said that the right to receivepayment of the remaining 10 per cent of the value of job had accrued. 5. Following the above said two decisions, we also come to theconclusion that as regards the additional security deposit amount, itadmittedly could be lying with the department or contractee till thesuccessful completion of the contract to the satisfaction of thecontractee. This amount of additional security deposit, if at all itis to be repaid by the department concerned, it would be only afterthe total completion of the contract. Therefore, even though thecontract was over, the assessee would not be able to lay his handstill the contract is successfully concluded and accepted by thecontractee. Therefore, what applies to the retention money in theabove said two decisions would equally apply to the additionalsecurity deposit amount also. Accordingly, we concur with the abovereferred to decisions in respect of additional security deposit alsoand we hold that the department cannot include the said amount forthe assessment year when actually this amount has not been paid tothe assessee. 6. For the foregoing reasons, we conclude that the finding givenby the Tribunal was well reasonable and in accordance with law.Hence, we find no reason to interfere with the order of the Tribunalinasmuch as the question of law sought to be pleaded by the Revenuehas already been answered by this Court in the above said twodecisions. The appeals do not merit acceptance and they standdismissed. Consequently, M.P.No.1 of 2009 is closed. NO costs. Sd/- Asst.Registrar/True Copy/ Sub.Asst.Registrar gsTo1. The Assistant Registrar, Income Tax Appellate Tribunal, Rajaji Bhavan,3rd Floor, Besant Nagar, Chennai-90. 2. The Secretary, Central Board of Revenue, New Delhi.3. The Income Tax Appellate Tribunal, Chennai Bench "D".4. The Commissioner, Income Tax (Appeal_-I, Coimbatore.5. The Deputy Commissioner, Income Tax, Circle I, Erode. + 1 cc to Mr.J.Naresh Kumar,Advocate,SR.31204 CKN(CO)EM/21.8.09 Tax Case Appeal Nos.577 & 578 of 2009