TaxTMI 
TaxTMI 
2018 (6) TMI 1101
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....nd in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of Hon'ble Bombay High Court in the case of M/s Associated Capsules P Ltd.286 ITR 596(BOM) in which the money was retained and hence the facts of the case are clearly distinguishable." 3. "The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal." 4. "The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the assessing officer be restored." 4. Rival contentions have been heard and record perused. 5. Facts in brief are that the assessee is primarily engaged in the business of design, engineering, integrated testing, supply, installation and commissioning of state of the art telecommunication systems. The assessee undertakes various turnkey projects for supply, engineering, integrated testing, installation and commissioning of high end telecommunication systems and related technology solutions for its valued customers across different industries like oil & gas, power, railways, etc., 6. During the course of scrutiny assessment....
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....nt is reported in the case of CIT vs. Simplex Concrete Piles (India) P. Ltd.(1989) 79 CTR (Cal) 71: (1989) 179 ITR 8 (Cal). A division Bench of the Calcutta High Court in that matter has held that the payment of retention money I the case of contract is deferred and is contingent on satisfactory completion of contract work. Right to receive the retention money is accrued only after the obligations under the contract are fulfilled and, therefore, it would not amount to an income of the assessee in the year in which the amount is retained. The other judgement relied upon is in the case of CIT vs. Ignified Boilers (I) Ltd. (2006) 203 CTR (Mad) 458 : (2006) 283 ITR 295 (Mad). In that judgement also, a Division Bench of the Madras High Court has held that the amount retained does not accrue to the assessee and therefore, the assessee would not be liable. 23. In view of what is stated above, there is no reason to entertain the appeal. Appeal is dismissed." ' (Emphasis Supplied) The aforesaid appeal arose from the Tribunal's order in Associated Cables (P) Ltd. vs. DOT CIT (2994) 48 ITD 141 (Bom)(TM), wherein the assessee, a manufacturer of speciality cables, was ....
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....nvited our attention to the decision of Bombay High Court in the case of Associated Capsules Pvt. Ltd., 286 ITR 596, by relying on which, the CIT(A) has deleted the addition. Learned DR further contended that Co-ordinate Bench in case of Emerson Network Power India Pvt. Ltd., (supra) have duly considered the decision of Bombay High Court and after considering the same decided the issue in Revenue's favour. Accordingly, he prayed that order of the AO should be upheld. 11. On the other hand, learned AR firstly argued on the principle of consistency and contended that from the Asst. year 2003-04 to A. Y. 2009-10, the assessee's method was accepted by the department and in Asstt. Year 2004-05 there was a Scrutiny assessment. As per learned AR even though Res judicata does not apply to tax proceedings. Again each assessment year being a Unit, what is decided in one year may not apply in the following year, but where a fundamental aspect permeating through the different Assessment Years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not at all be appropriate to allow the position to be cha....
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....merson Network Power India Pvt. Ltd., (supra) as relied on by learned DR, and are more closure to the facts of M/s. Associated Cables Pvt. Ltd., (supra) and Commtel Networks Pvt. Ltd., (supra). The distinguishing features of the assessee's case vis-à-vis the case relied by learned DR and AR was indicated as below. Associated Cables Pvt. Ltd. Commtel Networks Pvt. Ltd. Emerson Network Nature of business/activity Manufacture of instrumentation cables for the specification of the customers Design, engineering, integration, testing, supply, installation and commissioning state of the art telecommunication system as per customers' specific requirements. Manufacturing and supplying standard equipment (UPS) without receiving specifications from the customers Terms of contracts - 10% of the price on acceptance of contract; - 80% of the price on presentation of the despatch documents of the goods; - Terms of contract varies from project to project, payments are made on milestone basis, but typically, in such projects 10% of the total contract value is - In spite of the promise made to the Hon'ble Bench, the assessee did not produce tende....
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....ve the retention money of the respective projects, did not accrue to, or vest in, the assessee during the previous year ended 31.3.2012, because the same in terms of time fell beyond that year. Therefore, the retention moneys did not accrue to the assessee during that year, notwithstanding the accounting as revenue in the books of account on completion of work of the respective projects. Accordingly, considering the terms of the contract, unless assessee satisfies the customers as to the performance of the work, during the pre-fixed period after completion of the contract, the assessee has no right to receive retention money. However, AO has failed to appreciate the legal position and erroneously comparing this legal obligation in a manner to post sale warranty obligations. In the post sale warranty obligations the suppliers right to receive the sale consideration is never at stake because he fully collects the same at the time of completion of sale; nor does he give any performance bank guarantee to the customer. His only obligation is to provide after-sales service, and in case he falls therein, the only recourse to the customer is to sue him for the damages; there is absolutely ....
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.... that the principles of res judicata do not apply to tax assessments, yet there ought to be uniformity of treatment and consistency when facts and circumstances are identical. In this context reliance is placed on the decision of the Hon'ble Bombay High Court in CIT vs. Gopal Purohit (2011) 336ITR 287 (Bom). 19. After comparing the early return income of the assessee vis-à-vis rate of tax, even after exclusion of retention money does not confer on the assessee any permanent" tax benefit, but it is only a deferment of tax liability. There is no issue that it is taxable / income; the only crucial question is whether it is taxable in the year in which ( the relevant work is completed, or in the year in which it accrues to the assessee as per the law when the right to receive vest in it. In other words, this issue is whether the sum is taxable in one or the other year. Such an issue, really speaking, is not material in case of a company, where the income is always taxed at a flat rate. 20. While deciding the issue, the CIT(A) has relied on the decision of Bombay High Court in case of Associated Cables Pvt. Ltd., wherein also assessee was engaged in the very similar act....
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....s per customers' specific requirements. Every fact is identical to the facts of the case of Associated Cables Ltd is identical to the facts in respect of assessee's case. 23. Furthermore, we observe that assessee is in the 30% bracket in all the years under consideration. Earlier years retention money is taxed in this year and this year's retention is taxed in the subsequent years. Hence there is no loss of revenue. Therefore, the treatment adopted by the assessee should not be declined. Our view is supported by the decision of Hon'ble Supreme Court in case of Excel Industries Ltd., 358 ITR 295 and by the Jurisdictional High Court in case of Nagri Mills Co. Ltd., 33 IT 681. Furthermore, we also observe that the accounting treatment given by the assessee in its Books of account cannot decide the accrual of income in law. It is now well settled that accounting entries are not determinative of taxability of income or deductibility of any expenditure. A mere book keeping entry cannot be income unless income has actually resulted. If income does not result at all, there cannot be a tax, even though in book keeping an entry is made about a 'hypothetical income.' 24. The dec....