TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 949
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....with Lanco Power Trading Ltd. (LANCO) (now National Energy Trading and Services Ltd.), agreeing to sell 150 kwh of power each month from May, 2010 to March 2011, save for the month of January, 2011. As per clause-2(f) of the said agreement (PB pgs. 4-11), a failure on the part of the purchasing company (LANCO) to schedule at least 80% of the agreed power purchase would make it liable for compensation to the assessee @ Rs. 2 per kwh (of short supply). On account of shortfall in sourcing power during the period of the agreement, the assessee company raised a compensation for Rs. 86.56 crores on the buyer-company in terms of clause-2(f) of the agreement. The same was disputed by the latter, even as the assessee-company appropriated Rs. 5 cr. by realising a letter of credit (LC) opened by LANCO in it"s favour for that amount. The assessee admitting the income of Rs. 5 cr. for the relevant year, i.e., AY 2011-12, the issue arose as to the accrual of income, if any, qua the balance, unrealized claim of Rs. 81.56 cr. The AO regarded the same as the assessee's income for the current year, at Rs. 72.50 cr. This, as explained by Sh. Kumar, the ld. counsel for the assessee, during hearing, wa....
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.... to the assessee-company under clause-2(f) of the agreement, binding on the parties, due to the shortfall in scheduling power as per the terms of the agreement. The purchaser company"s denial of the assessee's valid claim would not alter the assessee's right to receive the same, being only in terms of the agreement. Further, the subsequent resolution of the dispute through an arbitral award, and it"s acceptance by both the parties, was irrelevant, and would only entitle the assessee to claim the difference as loss on account of a bad debt. This sums up the case of either side before us. 4. We have heard the parties, and perused the material on record. 4.1 The Revenue"s entire case is that once the assessee is regularly raising bills (for sale of power) to LANCO and, further, despite it not sourcing power to the requisite extent, the compensation in terms of the agreement stands accrued; the assessee-company having in fact incurred corresponding expenditure on procurement of power (which cannot be stored). That being so, the AO ought to have added Rs. 81.56 cr., and not Rs. 72.50 cr. There is no finding by him of the assessee having disclosed Rs. 9.06 cr. for AY 2014-15, or even i....
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....contracted period instead of on monthly basis, and the same had been acceded to by it (pg.10, para 19(b) of it"s order). 4.3 It is these factors which, as a reading of it"s detailed order (at PB pgs.15-39) shows, prevailed with MPERC, leading it to calculate the loss to the assessee. With reference to the decisions by the Apex Court in Fateh Chand vs. Balkishan Dass, AIR 1963 SC 1405 and Union of India vs. Raman Iron Foundry, AIR 1974 SC 1265, expounding sections 73 & 74 of the Indian Contract Act, it was explained that the jurisdiction of a Court to award compensation for damages is unqualified except as to the maximum amount stipulated. The same though has to be reasonable. Where the quantum of damages for the breach of contract is specified in the contract itself, the same only dispenses with the proof of actual loss or damage. It would not be just to award compensation where no legal injury had at all resulted. Further, in Maula Bux vs. UoI [1970] 1 SCR 928, the Hon'ble Court observed that when loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him. The Commission went on to further observe that in the instant case the....
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....if any, on actual award, would stand to be adjusted there-upon, i.e., December, 2013 (fy 2013-14). The fact of the assessee having, as claimed, disclosed this income (Rs. 9.06 cr.) for AY 2014-15, would be of little moment considering that it follows mercantile system of accounting, so that the basis of recognition of income is accrual and not receipt of income. It is trite law that income is to be brought to tax, in the hands of the right person and for the right year (refer ss. 4 & 5 r/w ss. 28 & 145 of the Act; ITO v. Ch. Atchaiah [1996] 218 ITR 239 (SC); CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC)). This plea, it may be noted, so also taken in Chunilal V. Mehta & Sons P. Ltd. (supra), though found by the Hon'ble Court to be not relevant, i.e., the fact that the assessee had included on receipt in its profit & loss account for the year 1955 was a wholly immaterial circumstance. Inasmuch as, however, there can be no double tax, the assessee is at liberty to take steps for the adjustment of its income for that year on the basis of the finding for this year as permissible under law. 4.6 The assessee has relied, besides Godra Electricity Co. Ltd. (supra), on the dec....
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....e therefor, which would otherwise need to be worked out, and toward which we have suggested a formula based on PSA itself. The loss awarded by the Commission is on 109.74 MU (million units), which were agreed to be sold at Rs. 5/5.50 per unit. The profit (loss) as per the P&L A/c, assuming the sale of excess power at that rate, as against that obtaining, would easily yield the extent of the loss suffered by the assessee, which, where in excess of Rs. 2 per kwh (Rs. 21.89 cr.), is to be capped at that sum. The assessee made an exorbitant claim, which led to its non-acceptance. It is for this reason that we have found the facts of the case and, therefore, the issue at hand, as squarely covered by Chunilal V. Mehta & Sons P. Ltd. (supra), with reference to which, as indeed the order of MPERC read with PSA, the parties were required to address their arguments during hearing, though choose to do so de hors the same. There is no mention of the nature and extent of the dispute in FGP Ltd. (supra), in which case the Hon'ble Court did not have the benefit of the arbitral award, available in the instant case even before the AO. The matter of accrual, pertain as it does to the accrual of ....
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....vision made during the year, which (i.e., provision for the year) only could be added u/s. 43B. The said payment is in respect of the opening provision (Rs. 218.83 lacs), of which Rs. 165.75 lacs, being in respect of AY 2009-10 (Rs. 63,37,359) and Rs. 1,02,37,178 (AY 2010-11), has been disallowed suo motu by the assessee for those years (PB pgs. 48-53), even as noted in the assessment order itself (para3). Thus, against a total provision of Rs. 349.72 lacs, Rs. 296.64 lacs (i.e., Rs. 165.75 lacs + Rs. 130.89 lacs) stands disallowed, even as the assessee has paid Rs. 240.29 lacs. Now if this is not travesty of justice, what is? Rather, for all we know, some part of the balance provision for the current year, i.e., Rs. 20.60 lacs (Rs.130.89 lacs - Rs. 110.29 lacs) may have been paid by the due date of filing of the return for current year u/s. 139(1), in which case the same also qualifies for deduction u/s. 37(1) r/w s. 43B. The order of the ld. CIT(A), who has allowed the assessee a relief of Rs. 21.47 lacs is, thus, on the face of it, incorrect. He, in doing so, allows the assessee credit for Rs. 130 lacs paid on 31/03/2011, even as he specifically notes (at para 6.2.3 (iii)/pg. 26....