Amarshiv Construction Pvt. Ltd vs. DCIT (Gujarat High Court)

Retention money received, after TDS, but subject to bank guarantee, is not chargeable to tax as income till all conditions are satisfied

(i) Mere receipt of income is not the sole test of chargeability. Receipt of income refers to the first occasion when the recipient gets the money under his own control. The words “accrue” or “arises” do not mean actual receipt of profits or gains. Both these words are used in contradistinction to the word “receive” and include a right to receive. Thus, if an assessee acquires a right to receive the income, the income can be said to accrue to him though it may be received later on;

(ii) On facts, the right to receive the sum was uncertain and contingent upon satisfactory completion of several factors. Same uncertainly and unpredictability prevailed. The assessee had no absolute right to receive the amount. SSNNL had no obligation to release the same before completion of warranty period and even thereafter would release the amount only after making permissible adjustments. Mere fact that in the present case no recoveries were made from the bank guarantee or security deposit is of no consequence. The fact that tax was deducted at source on said amount also would be of no consequence. The assessee had no control over such deduction. Merely whether tax was deductible or not would not decide the taxability of certain receipts. The manner in which the assessee accounted for such receipt in its books of account can also not determine its tax liability (Anup Engineering 247 ITR 457 (Guj), Associated Cables 286 ITR 596 (Bom) & Excel Industries 358 ITR 295 (SC) referred)