Section 43CB

Section 43CB — the law in short

What the courts have decided on section 43CB, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Aryacon Contractors and Engineers Pvt Ltd v ACIT — retention money is contract revenue from AY 2017-18, whatever the older case law says ITATHelps departmentNo later treatment found
  My contractor client did not offer performance retention withheld by the awarder. The Assessing Officer has added it for AY 2017-18. Can I rely on the accrual cases?
  Not for AY 2017-18 onwards. The Tribunal held that where the assessee follows the mercantile system it must account for all receipts on accrual basis, and that retention money could not be excluded when there is an express provision in the Act brought in by the Finance Act 2018 with retrospective effect from 1 April 2017. Section 43CB and ICDS III state that contract revenue shall include retention money, so the earlier case law is not relevant in determining the taxability of retention money in the case of a contractor.
• Hi-Tech Estates and Promoters Pvt Ltd v PCIT — s.43CB cannot be used to revise an assessment for a year before AY 2017-18 ITATHelps taxpayerNo later treatment found
  The Commissioner has revised my client's assessment under s.263 saying he should have followed percentage of completion. The year is before AY 2017-18. Is that revision good?
  No. The Tribunal held that percentage of completion became mandatory for revenue recognition only from 1 April 2017, that is AY 2017-18, by the insertion of s.43CB, and that this method was not mandatory or compulsory for AY 2013-14; the Commissioner therefore could not revise or revisit the assessment order by pressing s.43CB into service. It quashed the s.263 order, the s.263 notice and all proceedings and orders passed in pursuance of it.
• Statutory position — the Finance Act 2018 answer to Chamber of Tax Consultants: s.36(1)(xviii), s.40A(13), s.43AA, s.43CB, s.145A and s.145B CBDT Circulars & InstructionsCuts both ways
  The Delhi High Court struck down parts of the ICDS in 2017. Can I still rely on that for an AY 2017-18 assessment?
  Only in part, and for most of what was struck down the answer is no. The Finance Act 2018 inserted s.36(1)(xviii), s.40A(13), s.43AA and s.43CB, and substituted new sections 145A and 145B, in every case with the words "shall be deemed to have been inserted" or "deemed to have been substituted" with effect from the 1st day of April 2017 — that is, retrospectively from AY 2017-18, the very first year in which the ICDS operated. What Parliament could not do by executive notification it did by statute, so the substance of the struck-down ICDS provisions now stands in the Act itself and the 2017 judgment no longer answers the point.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.