Dismissing the appeal of the revenue the Court held that by the specific terms of the contract itself, the awarder was entitled to retain the amounts so as to rectify any defects arising in the period in which as per the terms of the contract the amount was retained. There could be no accrual found on the completion of contract, since the assessee’s right to such amount would depend on there being no defects arising in the subsequent period during which the awarder was enabled retention of such amounts. ( AY. 2002 -03 to 2005 -06)
CIT v. Chandragiri Construction Co. (2019) 415 ITR 63 (Ker.) (HC)
S. 5 : Scope of total income–Accrual-Method of accounting- Amount retained under contract to ensure there are no defects in execution of contract–Amount retained did not accrue hence cannot be taxed on accrual basis. [S. 145]