Ajit K.Sengupta, J. - (1.) At the instance of the Commissioner of Income-tax, West Bengal-IV, the following question of law has been referred to this court under Section 256(2) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case and in view of the fact that the assessee follows the mercantile system of accounting, the Tribunal was right in holding that the retention money in respect of the jobs completed by the assessee during the relevant previous year should not be taken into account in computing the profits and gains of the assessee's business for the assessment year 1.965-66 ?"
(2.) The facts, shortly stated, are that the assessee is a private limited company carrying on business of concrete piling for buildings. Up to and including the assessment year 1964-65, the assessee-company was crediting 100 per cent. of the job value but, from the assessment year 1965-66, it started the practice of crediting only 90 per cent., deducting the retention money, which resulted in the reduction of income. The Income-tax Officer treated it as a change in the method of accounting. He did not accept the change. This resulted in the addition of Rs. 20,77,161 for the assessment year 1965-66 and Rs. 14,43,479 for the assessment year 1966-67.
(3.) The assessee-company filed appeals before the Appellate Assistant Commissioner. In the appeal against the assessment for the year 1965-66, the Appellate Assistant Commissioner examined the matter in great detail, both with reference to the law on the subject and the terms of the contract, and held that the retention money did not arise or accrue in the years in which the job was executed but at a later date depending on the completion of the contract and the certificate of the architect/engineer that the work had been satisfactorily completed. Therefore, he allowed the appeal of the assessee-company. Following that order, the appeal for the assessment year 1966-67 was also allowed.;