TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 531
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 11,35,00,240/-. The assessment was completed u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act') on 14.12.2007 determining the taxable income at Rs. 11,96,53,600/-. Subsequently, the case has been re-opened by issuance of notice u/s 148 of the Act, for the reason that the income chargeable to tax had been escaped assessment within the meaning of section 147 of the Act on the ground that on verification of records for the assessment year 2005-06, it is noticed that the assessee company during the financial year 2004-05 relevant to assessment year 2005-06 transferred an amount of Rs. 76,95,720/- to the contingent sales account from the total sales reducing the debtors to that effect in the balance sheet, with a single entry on 31.3.2005, with a narration that the income was not recognised as income. In response to notice u/s 148 of the Act, the assessee filed a letter on 6.3.2012 and requested to treat the return filed u/s 139 of the Act on 27.10.2012 shall be considered as return filed in response to the notice issued u/s 148 of the Act. 3. The case has been selected for scrutiny and accordingly, notices u/s 143(2) & 142(1) of the Act were issued. In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he date of balance sheet date. The assessee further submitted that the amount transferred to contingent sales represents differential sale price claimed from M/s. APTRANSCO, which is pending because of dispute between the company and M/s. APTRANSCO, with regard to selling price of power. Unless the price payable for power is finalized by the State Government or appellate authorities, the assessee cannot recognize the revenue. Though the assessee raised sales bills as per the original power purchase agreement, the assessee continues to receive amount from the customer as per the orders of the State Government, therefore, the difference amount has been kept under contingent sales which cannot be considered as revenue for the period. The CIT(A) after considering the relevant submissions of the assessee deleted additions made by the A.O. The CIT(A), referring to the decision of Hon'ble Supreme Court in the case of UCO Bank Vs. CIT 240 ITR 555, observed that the concept of real income is certainly applicable in the judging whether there has been income or not. Whether the income has really accrued or arisen to the assessee must be in the light of the reality of the situation. The tax mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....48 per unit up to the financial year ending 31.3.2004. Further, as per the said agreement after 1.4.2004, the APERC i.e. Andhra Pradesh Electricity Regulatory Commission is empowered to fix the purchase price. Accordingly, the APERC has fixed the purchase price of Rs. 2.76 per unit as against the assessee's claim of Rs. 3.48 per unit. Therefore, the Bio Mass Energy Developers Association (BEDA) has approached the A.P. High Court to resolve the issue. The A.P. High Court vide its interim order dated 20.8.2004 directed the APTRANSCO to pay a price fixed by the APERC together with 50% of difference between the price fixed by APERC and price as per original PPA. Further, subsequent to the setting up of the Appellate Tribunal for Electricity (ATE), the High Court directed the BEDA to file an appeal before the ATE. The ATE has allowed the appeal filed by the BEDA. But, the APERC and APTRANSCO have appealed against the order passed by the ATE before the Supreme Court, which has remanded the case back to the APERC with a direction to reconsider the claim of power generators while fixing the price. The APERC, as per the directions of the Supreme Court have heard the matter and could not rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is not defined under the Act. However, the Accounting Standards 9 issued by the ICAI, defined the term revenue as per which the term revenue is the gross inflow of cash receivables or other consideration accrued in the course of the ordinary activities of an enterprise from the sale of goods or from the rendering of services. Therefore, a particular revenue is accrued to the assessee is to be decided based on the facts which prevail at the time of selling goods or rendering services. Similarly, the accounting standard 9 deals with recognition of revenue of an enterprise in a financial year. As per the said standard, an essential criterion for the recognition of revenue is that the consideration receivable from the sale of goods, the rendering of services or from the use by others of enterprise resources is reasonably determinable. When such revenue is not determinable within reasonable limits, the recognition of revenue may be postponed. The assessee contend that in view of the fact that the matter is pending before the ATE for determination of price to be paid by the APTRANSCO towards supply of power, the assessee continued to bill the sale of power as per the original PPA entere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rdingly, where the revenue has clearly accrued to the assessee the same has been recognized on accrual basis by making necessary entries. The impugned contingent sale amount is neither received by the assessee nor accrued to the assessee. The assessee made a claim for the higher sale price based on the old PPA, but, the purchaser APTRANSCO has disputed the price claimed by the assessee and taken the matter before the ATE. When the matter is pending before the ATE and the determination of sale price is not ascertained at the time of recognition of revenue, the only option for the assessee is to recognize the revenue as per the rate fixed by the state government. Therefore, the A.O. was not correct in coming to the conclusion that the said disputed amount which was shown as contingent sales has to be recognized as revenue for the relevant financial period. We further observed that the assessee has recognized the revenue as per the rate fixed by the state government. The impugned contingent sale is only a claim made by the assessee. The said amount is receivable or accrued to the assessee is depending upon the outcome of the decision of ATE. When the uncertainty relating to collectabi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er income can be said to have really accrued to the assessee-company. Even though the assessee-company was following g the mercantile system of accounting and had made entries in the books regarding enhanced charges for the supply made to the consumers, no real income had accrued to the assessee company in respect of those enhanced charges in view of the fact that soon after the assessee company decided to enhance the rates in 1963 representative suits (Civil Suits Nos. 152 of 1963 and 50 of 1964) were filed by the consumers which were decreed by the trial Court and which decree was affirmed by the appellate Court and the single Judge of the High Court and it is only on 8th Dec., 1968 that the Letters Patent Appeals filed by the assessee-company were allowed by the Division Bench of the High Court and the said suits were dismissed. But appeals were filed against the said judgment by the consumers in this Court and the same were dismissed by the judgment of this Court dt. 26th Feb., 1969. Shortly thereafter, on 19th March, 1969, the Under Secretary to the Government of Gujarat wrote a letter advising the assessee - company to maintain the status quo for the rates to the consumers fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....983) 32 CTR (Guj) 141 : (1983) 140 ITR 657 (Guj) : TC 39R.493 set aside; CIT vs. Shoorji Va!labhdas& Co. (1962) 46 ITR 144 (SC) : TC 39R.737; CIT vs. Birla Gwalior (P)Ltd. 1973 CTR (SC) 349 : (1973) 89 ITR 266 (SC) TC 39R.754; Poona Electric Supply Co. Ltd. vs. CIT (1965) 57 ITR 521 (SC) : TC 13R.287, State.Bank of Travancore vs. CIT (1986) 50 CTR (SC) 290 : (1986) 158 ITR 102 (SC) TC 39R.795 and H,M...Kashiparekh&Co. Ltd. vs. CIT (1960) 39 ITR 706 (Born) : TC 39R.791 applied." 15. The assessee relied upon the coordinate bench decision of ITAT, Hyderabad in the case of DCIT Vs. Sri Balaji Bio Mass Power Pvt. Ltd. in ITA No.1748/Hyd/2008. The coordinate bench of this Tribunal, under similar circumstances held that merely based on the invoices raised, the income cannot be deemed to accrue to the assessee, when the differential income was subject matter of litigation and also there is no certainty of the assessee being intended to such income unless it succeeds in such litigation. The relevant portion of the order is reproduced hereunder: "8. We have considered the rival submissions. There is no dispute with regard to the material facts of the case. The only question that arises ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT (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." 16. Considering the facts and circumstances of this case and also respectfully following the decision of Hon'ble Supreme Court of India, in the case of Godhara Electricity Supply company Vs. CIT (supra), we are of the view that the impugned contingent sale on account of differential sale price claimed by the assessee which was pending before the ATE for adjudication is not accrued to the assessee as revenue for the relevant financial year. The assessee has rightly recognized the revenue as per the sale price fixed by the state government which is the real income accrued to the assessee as per the prevailing situation. The additional claim made by the assessee is a mere claim which was not settled by the authorities. Unless the issue is settled, the assessee cannot recognize its revenue merely based on its claim. The assessee has rightly treated the difference between sale price claimed and the price paid by the APTRANSCO as co....