Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Estimation of profit - Assessee was a firm of contractors maintaining accounts on mercantile basis - A part of payments due to assessee was retained by Government as security under terms of contract which was to be paid later after final checking and acceptance of works - ITO included said amount in total receipts for purpose of arriving at profits - It was confirmed by Tribunal - Whether, when there was stipulation in contract postponing time for payment of whole or part of balance, until after expiry of period during which assessee was liable for defects, payment could not have become due to assessee - Held, yes - Whether, since, Tribunal had not ascertained and considered nature of contract, exact practice followed by department, question whether money had become due to assessee could not be answered - Held, yes - Whether, therefore, matter was to be remitted to Tribunal for disposal afresh - Held, yes (-Matter remitted) FACTS The assessee was a firm of contractors carrying on work consisting of constructing buildings, roads etc. For the accounting period relevant to the assessment year 1964-65, the ITO found that the Government had withheld certain amount, inter alia, in terms of clause 9 of the contract to be subsequently appropriated wholly or partly by them or paid off to the contractor after the final checking and acceptance of works. Clause 9 of the contract provided, inter alia, "To allow of a guarantee fund being formed on the part of the Government a deduction of 10 per cent from all payments to contractors is to be made by the executive engineer at the time of payments. But the amount so held as retention plus the security deposit of 4 per cent as per clause (1) shall not at any time exceed 8 per cent of the contract amount. This retention amount will not be released before the expiry of 3 months (6 months in the case of road works) after the issue of certificate or otherwise of completion of work or the final bill has been prepared and passed whichever is later." The assessee 's case was that it had a right to receive the said amount only after the checking was completed and,…

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