TaxTMI 
TaxTMI 
2013 (4) TMI 634
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.... the amount was written off during the year itself. 4. The learned CIT (appeals) ought to have considered the fact that AP Tranco did not appoint the Arbitrator in spite of the request made by the appellant herein and the appellant had to approach the Honourable High Court of Andhra Pradesh and the matter is pending . 5. The learned CIT (appeals), in the circumstances of the case, ought to have held that the said amount did not accrue to the appellant during the previous year and is not assessable as the income of the appellant for the year under consideration. 6. The learned CIT (appeals) erred in holding that the profit of Rs. 3,00,09,300 represents income from other sources and not the income from business of power generation. The learned CIT (Appeals) ought to have held that the said income is a part of business income derived by the appellant from the power generation unit and directed that the consequential deduction be allowed. 3. The Revenue raised the following ground: 1. The CIT(A)-V is not correct in holding that reimbursement of advance tax payments to the assessee form part of business inc....
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....by it amounting to Rs. 329,39,89,958 after commencement of combined cycle commercial operation and an amount of Rs.50,62,32,391 before commencement of combined cycle commercial operation, total amounting to Rs. 382,54,87,771, the APTRANSCO has admitted only an amount of Rs. 296,67,25,943. As is evident from the orders of the Revenue authorities, for the differential amount, dispute is going on between parties at different levels. Assessee company having claimed to get the disputed amount from APTRANSCO and has even invoked the arbitration clause and has moved an Arbitration application before the Hon'ble Andhra Pradesh High Court seeking appointment of an arbitrator, the whole issue is in a stage of suspended animation. Admittedly, the assessee company has not received the whole amount as raised in the bills on APTRANSCO. Whatever amount has been received from APTRANSCO has been shown in the books of account. When there is uncertainty over receipt of the disputed amount by the assessee company, until finalisation of litigation, it cannot be said that income has accrued or crystallized in the hands of the assessee just because bills have been raised by the assessee. Accounting Stand....
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.... even though in bookkeeping, an entry is made about a hypothetical income, which does not materialise." The Hon'ble Supreme Court, after analyzing its earlier decision, very succinctly observed in the penultimate para of its decision, vide page 760 of the Reports (225 ITR), in the following manner "The question whether there was real accrual of income to the assessee company in respect of the enhanced charges for supply of electricity has to be considered by taking the probability or improbability of realisation in a realistic manner. If the matter is considered in this light, it is not possible to hold that there was real accrual of income to the assessee company in respect of the enhanced charges for supply of electricity which were added by the Income-tax Officer while passing the assessment orders in respect of the assessment years under consideration. The Appellate Assistant Commissioner was right in deleting the said addition made by the Income-tax Officer and the Tribunal had rightly held that the claim at the increased rates as made by the assessee company on the basis of which necessary entries were made represented only hypothetical....
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....constitute fundamental record for maintenance of accounts in the normal course, as observed by the Assessing Officer, that logic does not hold good when the subject matter was under dispute and was under litigation before the judicial fora, including the jurisdictional High Court and Hon'ble Supreme Court during the relevant points of time. Assessee's method of accounting only the amount which was not subject matter of litigation and which in fact was received by it from the APTRANSCO in terms of the interim order of the A.P. High Court, was in conformity with the Accounting Standard 9 and the ratio laid down by the Apex Court, among others, in the case law discussed by the CIT (A) in the impugned order, and also in the case-law relied upon by the assessee before us. In this view of the matter, we find no infirmity in the order of the CIT (A), which is accordingly confirmed and the grounds of appeal of the Revenue are rejected.". Considered in the light of the aforesaid principle of law, it cannot be said that the amount disputed by APTRANSCO has really accrued to the assessee company in the assessment year under dispute. Only because, the assessee company has r....