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25-10-2019, Consolidated Construction, Section 32(2)(a), 32, Tribunal Chennai

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1 week 4 days ago #11266 by amit
Section - 32(2)(a), 32, 2(29BA), 14A, 8D
Order Date - 25-10.2019
Favouring - Assessee
Court - Tribunal Chennai
Appellant - ACIT
Respondent - Consolidated Construction Consortium Limited
Justice - Ramit Kochar AM & Duvvuru RL Reddy JM
Citation - 1119Taxpundit8
Appeal No. - I.T.A. Nos. 473/Chny/2017, 2676 and 757/Chny/2018
Asstt. Year - 2012-13, 2013-14 & 2014-15



These three appeals filed by the Revenue pertaining to same assessee are directed against different orders of the ld. Commissioner of Income Tax (Appeals) 1/4, dated 30.11.2016, 09.07.2018 & 05.12.2017 relevant to the assessment years 2012-13, 2013-14 and 2014-15 respectively. Since common issues have been raised in these appeals, heard together and are being disposed of by this common order for the sake of brevity.

2. The first common issue raised in these appeals is that the ld. CIT(A) erred in directing the Assessing Officer to allow the claim of deduction of retention money payment on accrual basis.

3. During the course of assessment proceedings, on verification of details furnished by the assessee, the Assessing Officer noticed that the assessee has claimed the retention money payable and as per the computation statement, the assessee has reduced retention money receivable from its clients. Since the assessee company has not offered to tax the retention money receivable, on matching concept, the retention money payable claimed as deduction was disallowed and brought to tax.

4. On appeal, by following the decision of the Tribunal in assessee’s own case for earlier assessment yea s, the ld. CIT(A) directed the Assessing Officer to allow the claim of the assessee of retention money payable on accrual basis after quantification thereof.

5. Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR has submitted that the assesse cannot take a dual stand on receipt and payment of retention money by excluding from its income the retention money receivable from its clients while claiming the retention money payable to its sub-contractors in its expenses and pleaded for reversing the orders of the ld. CIT(A). On the other hand, the ld. Counsel for the assessee has submitted that the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for earlier assessment years.

6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Similar issue was subject matter in appeal before the Tribunal in assessee’s own case for the assessment years 2007-08 to 2009-10 in I.T.A. Nos. 592 to 594/Mds/2014, wherein, vide order dated 06.01.2016, the Coordinate Benches of the Tribunal has observed and held as under:

“12. We have heard both the parties and perused the material on record. Generally, the expenditure which is actually incurred or is incurred in a relevant year would be allowed as deduction while computing the income from business. Such a liability has to be in praesenti. However, at the same time, it relates to the works undertaken by the assessee, completed contract method of accounting is followed which is consistent with the Accounting Standards and these Accounting Standards also laid down the norms indicting the particular point of time when the provisions for all known liabilities and losses have to be made. The making of such a provision by the assessee appears to be justified more so when the assessee had recognized gain as well on such project during the assessment year under consideration. This appears to be in consonance with the principle of matching cost and revenue as well. The reason given by the Department is that the retention money which is receivable was not recognized as income as such, retention payment also cannot be allowed as deduction while computing the income of the assessee. As rightly argued by the assessee, both these are governed by different Accounting Standards. Retention payment is governed by AS-7 issued by ICAI, New Delhi. On the other hand, retention money receivable is governed by AS-9. What is applicable to retention money receivable cannot be applied to retention money payable as these are governed by different Accounting Standard. Further it is undisputed that whenever assessee incurred expenditure on the project it is admissible for deduction. The only dispute raised by the Revenue is regarding the year of liability of expenditure. Considering that the assessee company is assessed at uniform rate of tax, the entire exercise of seeking to disturb the year of allowability of expenditure is, in any case, revenue neutral. We are reminded of the classic observation

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