2015 (10) TMI 304

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....f interest income allegedly accrued to the assessee at the rate of 15% on delayed payments made by the DISCOMs. 2. The assessee in the present case is a State Government Undertaking of Andhra Pradesh which is engaged in the business of power generation. It supplies power inter alia to DISCOMs, which again are undertakings of the State Government. During the year under consideration, huge amount due to the assessee by the DISCOMs running into thousand of cores was outstanding. According to the Assessing Officer, the assessee had right to claim interest on such dues and accordingly interest receivable worked out at Rs. 233.75 crores was added by him to the total income of the assessee for the following reasons given in the assessment compl....

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....diction to the notes on accounts where it was stated that the interest was accounted for on receipt basis. (g) As per the Accounting Standard-9 revenue should be recognized unless there is a significant uncertainty as to measurability and collectability. And in the present case there is no uncertainty as to the receipt of interest. (h) From the year 2003 onwards regular bills were raised by the assessee for penal interest. (i) There is no Board resolution to the effect that penal interest should not be recognised, nor it was waived off by the board's resolution. (j) As per the Power Projects Agreement between AP GENCO and APDISCOM clause 3.1.15 in case the bills are delayed beyond two months, late payment fee @ 1.25% per month s....

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....s can be said to have accrued to the assessee. (d) The agreement between APGE#NCOI and APDISCOMs do not provide for charging of interest on late payments. Therefore, the AO cannot tax unreal/hypothetical/notional income to tax which is legally impermissible. (e) In power Purchase Agreement (PPA) dated 22.12.2009, there is a specific clause to charge 'delayed payment interest' at the rate of 1.25% per month. However, this agreement is effective from 22.12.2009 and is not relevant for A.Y. 2009-10. In any case this clause of PPA was not approved by the A.P. Electricity Regulatory Commission (APERC). (f) The assessee has not raised any bills on the DISCOM claiming interest on delayed payments. Further, there is no provision for chargi....

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....arned CIT(A), Revenue has preferred this appeal before us. 5. We have heard the arguments of both the sides and also perused the relevant material on record. Although the Learned Departmental Representative has submitted that as per the Power Purchase Agreement between the assessee and the DISCOMs dated 22nd December, 2009 applicable for the period from 1.4.2006 to 31.3.2009, interest for delayed payments beyond a period of two months from the date of billings was receivable by the assessee form the DISCOMs at the rate of 1.25% per month in the form of surcharge, the said surcharge, as pointed out by the learned counsel for the assessee from clause 3.1.15 of the agreement is leviable only with effect from the date of signing of the agree....