Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

September 2013

Income: Accrual: Retention money: Sections 4 and 5: A. Y. 2003-04: Amount retained to ensure satisfactory performance of contract does not accrue: Not income of that year:

By K. B. Bhujle, Advocate
Reading Time 1 mins
fiogf49gjkf0d
DIT vs. Ballast Nedam International; 355 ITR 300 (Guj):

The assessee executed contracts. In terms of the contracts, the amounts at the rate of 10% on the onshore activities, and at the rate of 15% on the construction and erection activities, were withheld by the principal towards retention money. For the A. Y. 2003-04, the assessee claimed that the retention money of Rs. 14.31 crore did not accrue and accordingly cannot be assessed as income. However, the Assessing Officer held that the amount is the accrued income and made addition. The Commissioner and the Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under:

“i) Unless and until a debt is created in favour of the assessee, which is due by somebody, it cannot be said that the assessee has acquired a right to receive the income or that the income has accrued to him.
ii) The amount retained had not accrued to the assessee in the accounting year relevant to the A.Y. 2003-04.”

Download PDF

You May Also Like

Depreciation: Actual cost: Subsidy: Section 43(1), Expln. 10: A.Ys. 2001-02 and 2002-03: Assessee a Government Company took over the telecommunication business from Government Department: Assets transferred at book value: Consideration in form of shares, debts and reserves: Reserve not a subsidy, grant or reimbursement for meeting cost of assets transferred: Reserves not to be reduced from fixed assets to arrive at actual cost: Reopening of the assessment for reducing the actual cost by reserve<

Industrial undertaking: Deduction u/s. 80-IA/80-IB: Computation: A.Ys. 1997-98 to 1999-00, 2003-04 and 2004-05: Assessee printing and publishing magazines: Four units: One unit doing job work of printing for publishing unit: Expenses attributable to publishing unit not to be allocated to printing unit for computation of the amount deductible u/s. 80-IA/80-IB: