Income Tax Appellate Tribunal - Ahmedabad
Ballast Nedam International B.V.India ... vs Assessee on 26 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD
"C" BENCH
Before: Shri D.K. Tyagi, Judicial Member and
Shri Anil Chaturvedi, Accountant Member
I.T.A. Nos.514 & 364/Ahd/2010
A. Y.2004-05
Ballast Ned am International B.V., Vs. The Assistant
India Project Office, Director of Income
C/o C.C. Chokshi & Co., Tax (International
Chartered Accountants, Taxation),
31, Nutan Bharat Society, Ahmedab ad
Alkap uri, Barod a-390 007
PAN-AABCB5966C
(Assessee) (Department)
Department by : Shri D.C. Patwari, CIT- D.R.
Assessee by : Shri Sanjay R. Shah, A.R.
Date of hearing : 26.09.2012
Date of pronouncement : 26.09.2012
आदे श/ORDER
PER : D.K. TYAGI, JUDICIAL MEMBER
These are cross appeals against the order of ld. CIT(A), Gandhinagar, Ahmedabad dted 03.11.2009.
ITA No.514/Ahd/20102. At the time of hearing, ld. counsel of the assessee prayed for withdrawal of this appeal which was allowed and accordingly, assessee's appeal is dismissed as withdrawn.
I.T.A. Nos.514 & 364/Ahd/2010 2A. Y.2004-05 ITA No.364/Ahd/2010
3. The Revenue has taken following grounds of appeal:-
"1. The ld. CIT(A)-Gandhinagar has erred in law and facts by holding that retention money cannot be included in total income of the assessee.
2. The ld. CIT(A) has erred in facts and in law by deciding that retention money does not accrue or arise to the assessee when the bills are raised, but, only on final receipt of retention money on satisfactory completion of work.
3. The ld. CIT(A)-Gandhinagar has erred in law by not following the decision of Hon'ble ITAT in the case of DCIT vs. Amarshiv Construction P. Ltd. 88 ITD 381."
4. At the time of hearing, at the outset, ld. counsel of the assessee submitted that the issue involved in this appeal is covered in favour of the assessee and against the Revenue by the decision of this Tribunal in assessee's own case for the A.Ys. 2002-03 and 2003-04. Ld. D.R. did not object to this submission of the assessee.
5. After hearing both the parties and perusing the record, we find that the issue is covered by the order of this Tribunal in assessee's own case in ITA No.209/Ahd/2010 with ITA No.363/Ahd/2010 in which following was held:-
"6. Heard both the parties and perused the various case laws cited by the assessee and the Revenue and find that the order passed by ld. CIT(A) is in conformity with the decision of Hon'ble ITAT, Mumbai Bench in the case of ADIT Vs. Ballast Nadam Dredging wherein on identical facts the Hon'ble ITAT, while deciding the issue in favour of the assessee has observed as under:-
"We have carefully considered the orders of the authorities below and submissions of the learned representatives of both the parties. We have gone through the cases (supra) cited by learned representatives of both parties. We observe that the I.T.A. Nos.514 & 364/Ahd/2010 3 A. Y.2004-05 similar issue has been considered by ITAT (TM) in the case of Associated Cables Pvt. Ltd. (supra) as under:
"90 percent of value of assessee's goods were billed on dispatch, and 10 percent was payable upon completion of warranty period. This amount retained was conditional on fulfillment of certain representations made by assessee to customers. As per the agreement entered into with the customers, amount retained was released against furnishing bank guarantee by a scheduled bank."
The third member held of the tribunal had held as follows:
".......... As the performance guarantee remains and is enforceable without notice to the assessee, the income from the retention money cannot be recognized. Consequently, I have to agree with the learned Accountant Member that the retention money of 10% has to be excluded in computing the total income until the period of guarantee is over."
We observe that the Hon'ble Jurisdictional High Court in the subsequent assessment year of same assessee considered the above decision of ITAT and affirmed the said decision. It was held that retention money withheld by the contractee pending completion of contract work does not accrue to the assessee/contractor in the year in which the amount is retained. We also observe that similar issue was also considered by ITAT in the case of Spirax arshall Ltd. (supra) wherein it was held that receipt of retention money against furnishing bank guarantee cannot partake character of income since it cannot be apportioned until guarantee period was over. The retention money may be received by the assessee; it cannot be apportioned until expiry of warranty period. We observe that the Hon'ble Allabahad High Court in the case of CIT vs. Yatindra and Co. (supra) held that an amount received by assessee against bank guarantee was not accrued to the assessee during the year as no absolute right to receive the amount at that stage vested.
Further we observed that the assessee received a part of retention money against bank guarantee in the preceding assessment years, the details of which are given by Assessing Officer at Page 2 and also mentioned herein above in Para 3 at Page 3 of this order. During the course of hearing the learned Authorized Representative submitted that the assessee is following consistently to offer for taxation the part released of I.T.A. Nos.514 & 364/Ahd/2010 4 A. Y.2004-05 retention money against bank guarantee in the assessment year in which right to receive the said release of retention money accrued to the assessee unconditionally. The learned Departmental Representative also did not dispute the above contention of learned Authorized Representative at the time of hearing.
In view of above facts and decisions, and particularly that similar issue has been considered by the Hon'ble Mumbai High Court in the case of Associated Cables Pvt. Ltd. (supra) which has been followed by the learned CIT(A), we do not find any reason to interfere with the order of Ld. CIT(A). Hence, we uphold his order and reject the ground of appeal taken by the department."
7. We further find that that the facts of the case relied by the Revenue in the case of DCIT Vs. Amarshiv Construction (P) Ltd. (supra) are different than that of the present case. The issue in the case of DCIT Vs. Amarshiv Construction (P) Ltd. (supra) decision was regarding the year in which the income has accrued whereas the issue in the case of the assessee is the accrual of the income. This would be clear from reading of para 21 of DCIT Vs. Amarshiv Construction (P) Ltd. (supra) decision which reads as under:-
"In all these three cases, the Supreme Court held that there was no real income and, therefore, not exigible to income-tax; whereas in the present case, it is nobody's case that no income has resulted at all. The question is only as to in which year it accrued to the assessee. According to the Revenue, it was in the year when the bills were presented and passed for payment and the assessee received the money by furnishing bank guarantee and as per the assessee it was the year after the performance liability clause was over and the bank guarantee were released and ceased to be operative."
8. We further find that DCIT Vs. Amarshiv Construction (P) Ltd. (supra) decision dealt with the issue whether the assessee had in fact received the amount of security deposit by furnishing bank guarantee which is clear from para 15 of that decision which reads as under:-
"............ In our opinion, it accrued to the assessee and thereafter retained by way of additional security and in fact received by the assessee by furnishing a bank guarantee...."I.T.A. Nos.514 & 364/Ahd/2010 5
A. Y.2004-05
6. In view of the above, the order passed by ld. CIT(A) is hereby upheld and the Revenue's appeal is dismissed.
7. In the result, both the appeals are dismissed.
Order pronounced in open Court on 26 .09.2012
Sd/- Sd/-
(Anil Chaturvedi) (D.K. Tyagi)
Accountant Member Judicial Member
True copy
N.K. Chaudhary, Sr. P.S.
Copy of the Order forwarded to:
1. The applicant
2. The Respondent
3. The CIT Concerned
4. The Ld. CIT (Appeals)
5. The DR, Ahmedabad
6. The Guard File
By order
AR,ITAT,Ahmedabad