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CMA Final · Direct Tax Laws and International Taxation · Income Computation and Disclosure Standards (ICDS)

Hind Constructions Ltd. has a construction contract with contract revenue of ₹4,00,000 that includes ₹40,000 of retention money. Under section 57 of the Income-tax Act, 2025, what amount is treated as contract revenue for the percentage of completion method?

Contract revenue is ₹4,00,000. Section 57(3)(a) says the contract revenue for the percentage of completion method includes retention money, so the ₹40,000 retention is not deducted and is not added again, since it is already part of the stated revenue.

  1. A₹3,60,000, excluding retention money
  2. B₹4,00,000, including retention moneyCorrect
  3. C₹4,40,000, adding retention money again
  4. D₹40,000, being only the retention money

Explanation

Section 57(3)(a) states that contract revenue shall include retention money. The ₹4,00,000 therefore already includes the ₹40,000 and is not reduced. Excluding it, as the first option does, contradicts the section.

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