2014 (1) TMI 536

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.... Revenue disputes the deletion of the addition in the sum of Rs.30 lakhs by the Assessing Officer (A.O.). The brief facts in respect thereof are that the assessee is a company engaged in the business of supply and distribution of the piped natural gas to domestic, commercial and industrial consumers, as well as CNG for vehicles. It follows accrual method of accounting, which is even otherwise obligatory on it u/s. 209 of the Companies Act, 1956. However, in respect of two items of its income, i.e., compensation receivable from customers for the short-fall in the minimum guaranteed off-take of gas, and delayed payment charges, revenue is recognized, in view of the uncertainty of collection, on cash basis. That is, for these two items, it fol....

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....ception of the afore-referred two items of income, and which is the subject matter of lis in the instant case. The 'Notes to the Accounts', forming part of the annual accounts, seek to justify the adoption of the cash method of accounting for these two items of revenue on the basis of uncertainty in collection or the realization of income. The same is in fact a valid ground for postponing or deferring recognition of revenue for any item of income. It would, however, not justify adoption of cash method of accounting, which would imply that the uncertainty is resolved only on actual receipt in all cases and all the time. Accrual or otherwise is a matter of fact, and an uncertainty as to the ultimate realisation of revenue impinges adversely t....

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....s income for the current year on receipt basis is in relation to the current year, toward which the A.O. has estimated a sum of Rs.30 lakhs. Perhaps, preparation of memoranda accounts would lend clarity in the matter. During hearing, it was proposed that the matter be set aside to the file of the A.O. for the assessee to furnish the necessary details. The assessee we presume would be able to do so; the same being charged only in the regular course either through bills or debit notes, so that the said details, on a year-wise basis, would be required to be seen, i.e., as how much of the charges pertaining to each year stand collected subsequently and offered to tax on receipt basis. We say so as it is only on so doing that it would have been ....