Acg Associated Capsules P.Ltd vs C.I.T Central-Iv Mumbai on 8 February, 2012
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 to receive 90% of the sale price upon dispatch of
goods and the balance 10% was to be released by its customers
against a performance bank guarantee covering the warranty
period. On these facts, the assessee claimed that the though
the 10% of the sale value was received by it on furnishing a
bank guarantee, the same did not accrue to it as there was no
unconditional right to receive that amount because of the
significant risk arising from the contingency of the buyer
invoking the bank guarantee. When the matter reached the
Hon'ble Tribunal, there was a cleavage of opinion between the
two learned Members constituting the Bench. While the learned
Judicial member held against the assessee the learned
Accountant Member held in favour of the assessee. On a
5
ITA Nos.4872/Mum/2015,
4340/Mum/2015 & 4873/Mum/2015
M/s. Commtel Networks Pvt. Ltd.,
reference to the Third Member it was held as under: ".....,/ have
to agree with the learned Accountant Member that as long 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 under the
period of guarantee is over.......................
(Emphasis Supplied)
Following the above decision of Bombay High Court which
referred various decision of the other Courts where it held that
right to receive retention money accrued only after the
conditions under the contract are fulfilled, it will not accrue till
that conditions are fulfilled. This income will be assessed as
assessee's income only when contractee fulfills all the conditions
of the contract and pays the amount. In view of the above
decision of the various High Courts, addition of the retention
money of Rs. 2,66,92,253/- is deleted. This ground of appeal is
allowed.