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TAXAP/2060/2009 3/ 3 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 2060 of 2009
=========================================================
COMMISSIONER
OF INCOME TAX-IV - Appellant(s)
Versus
SHAH
& DESAI - Opponent(s)
=========================================================
Appearance :
MR
MANISH R BHATT, SR. ADVOCATE with MRS MAUNA M BHATT
for Appellant(s) : 1,
None
for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 19/04/2011
ORAL ORDER
(Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The revenue is
in appeal against the order of the ITAT dated 27.2.2009 raising the
following question of law for our consideration:
“Whether
the Appellate Tribunal is right in law and on facts in confirming the
order passed by CIT(A) in deleting the addition of Rs.25,19,700/-
made on account of defect liability expenses debited in the P & L
A/c.?”
2. We have
perused the orders on record with the assistance of learned counsel
for the revenue. The issue pertains to deduction of the retention
money as claimed by the assessee. The CIT (Appeals) took into account
the relevant facts and observed that to rectify the possible defects,
the architects and engineers had worked out 2.5% of the gross
contract amount for the purpose of repairs and accordingly, retained
a sum of Rs.31,65,511/- from the disbursement to be made in favour of
the assessee though the work was completed and the amount had become
payable. In fact the assessee also offered retention money as income
for the year under consideration. He, however, had to carry out
repairs in respect of defects, if any, noticed within 15 months of
the contract period from 31.3.2000. The CIT (Appeals) further noticed
that on the basis of certificate of the architectures and engineers
and on the basis of the past experience, the assessee considered 2%
of the total contract receipt or about 18% of the retention money as
likely expenses to be incurred for meeting any defects in future. In
view of these facts, the CIT (Appeals) reversed the finding of the
Assessing Officer holding that he was not justified in allowing the
defect liability of the expenses when the entire retention money was
offered to tax of the assessee. It was this issue which was carried
in appeal by the revenue before the Tribunal. The Tribunal concurred
with the view of the CIT (Appeals) and rejected the revenue’s appeal.
However, while doing so, made an observation that the right to
receive the retention money of Rs.31,65,511/- had not accrued to the
assessee during the year under consideration. The Tribunal concluded
that:-
“We find
that the above plea is squarely supported by the decision of the
Hon’ble Calcutta High Court in the case of Simplex Concrete Pipes P.
Ltd. (supra), therefore, when disallowance of Rs.25,19,700/- was made
by the AO, then the AO ought not to have also charged Rs.31,60,511/-
to the tax during the year under consideration. In these
circumstances, we do not find any mistake in the order of the Ld.
CIT(A) which is confirmed and the appeal of the Revenue is
dismissed.”
3. From
the perusal of the orders on record, we find no reason to interfere.
The CIT (Appeals) has given cogent reasons to accept the plea of the
assessee that it had made provision for 2% of the contract amount for
carrying out repairs in case any defects are pointed out in the
execution of the work. It is not in dispute that the entire retention
money of Rs.31,65,511/-
was offered to tax as having accrued though not actually paid.
4. In our
opinion, no substantial question of law arises.
5. Counsel for
the revenue, however, voiced his apprehension that the observations
of the Tribunal that the right to receive retention money of
Rs.31,65,511/- had not accrued to the assessee during the year under
consideration may give rise to further disputes, would not pursue us
to entertain the appeal itself. Firstly we find that such an
observation was only in the nature of passing more. Subsequently, in
the concluding portion of the order which we have reproduced
hereinabove, the Tribunal has clarified the stand and confirmed the
view of the CIT (Appeals) which in turn pertains to deleting
disallowances of Rs.25,19,700/-. We additionally find that even
before the CIT (Appeals), the assessee’s own stand was that such
disallowances should be deleted.
6. Under the
circumstances, we are of the opinion that all that the Tribunal did
in the impugned order was to confirm CIT (Appeals) order and nothing
further.
7. With above
observation, this Tax Appeal is dismissed.
[Akil
Kureshi, J.]
[Ms.
Sonia Gokani, J.]
mrp
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