Right to receive the retention money is accrued only after the obligations under the contract are fulfilled and the assessee had no vested right to receive the same in this assessment year, therefore, it would not amount to an income of the assessee in the year in which it is retained.

 

 

Addition of retention money – disallow the TDS credit claimed in respect of the retention money – HELD THAT:- CIT(A) has taken care of the TDS issue and the assessee has not preferred to challenge the action of Ld. CIT(A) which crystallizes. Therefore, the direction of the Ld. CIT(A) to the AO to disallow the TDS credit claimed in respect of the retention money not shown as income by the assessee in the revised return and to allow it in the year in which the assessee declares retention money as its income takes care of the TDS credit even if erroneously claimed by the assessee in respect of the retention money.

 

 

The relevant clauses of the contract that the contractees had the right to withhold certain percentage of the consideration till the conclusion of the project and only after certification of concluded projects the retained portion of the amounts are disbursed finally which may be in the succeeding assessment years and is contingent upon the terms and conditions of the contract.

 

 

AO has not disputed the amount which has been retained by the contractees. In such a scenario, merely because the assessee had booked the income in this year without actual receipt of it, cannot be chargeable to tax as per the Act. The reasons given by the AO to disallow the claim of the assessee cannot be sustained and was rightly repelled by the Ld. CIT(A) whose view to accept the claim of assessee is based on the accepted judicial precedents laid down by the Hon’ble jurisdictional High Court in CIT Vs. Simplex Concrete Piles [1988 (12) TMI 52 – CALCUTTA HIGH COURT]; Hon’ble Gujarat High Court in Anup Engineering Ltd. [2000 (7) TMI 17 – GUJARAT HIGH COURT]; Hon’ble Bombay High court in CIT Vs. Associated Cables P. Ld. [2006 (8) TMI 135 – BOMBAY HIGH COURT]and in CIT Vs. Ignifluid Boilers (I) Ltd. [2006 (1) TMI 76 – MADRAS HIGH COURT]. We hold that in the factual circumstances especially as per the terms of contract between the assessee and the contractee, the retention money retained by the contractee is deferred payment and is contingent upon satisfactory completion of contract work.

 

 

Right to receive the retention money is accrued only after the obligations under the contract are fulfilled and the assessee had no vested right to receive the same in this assessment year, therefore, it would not amount to an income of the assessee in the year in which it is retained. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and so, we confirm it and dismiss the appeal of the Revenue.

 

 

Order is being pronounced after ninety (90) days of hearing – COVID-19 pandemic and lockdown – HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited [2020 (5) TMI 359 – ITAT MUMBAI]

 

 

ITAT KOLKATA

 

 

DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1 (3) , KOLKATA VERSUS M/S. EMC LIMITED

I.T.A. No. 2149/Kol/2017