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TMI Blog2019 (8) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... aim, The assessee has rightly treated the difference between sale price claimed and the price paid by the APTRANSCO as contingent sales. Since, there is no change in the facts and the Ld.CIT(A) allowed the appeal of the assessee following the order of this Tribunal, we do not find any reason to interfere with the order of the Ld.CIT(A) and uphold the same. - Decided in favour of assessee. - I.T.A.No.347/VIZ/2018, Cross Objection Nos.98/Viz/2018 and 123/Viz/2018 (Arising out of I.T.A. No.347/Viz/2018) - - - Dated:- 21-8-2019 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Assessee : Shri C.Subrahmanyam, AR For the Revenue : Shri P.Srinivasa Murthy, DR ORDER PER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : This appeal is filed by the revenue against the order of the Commissioner of Income Tax [CIT(A)]-1, Guntur vide Appeal No.23/2015-16 dated 06.04.2018 and the cross objections are filed by the assessee in support of the order of the Ld.CIT(A) for the Assessment Year (A.Y.)2007-08. 2. All the grounds of appeal are rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he APTRANSCO to arrange payments for the supply of power purchased from developers of non-conventional energy by opening a letter of credit in favour of the suppliers of power. Hence, it is evident that there is short admission of sales to the tune of ₹ 76,08,678/- and the same is to be brought for taxation. During the course of scrutiny proceedings, with regard to the sale of power to AP TRANSCO and difference in sale price recorded; the authorized representative of the assessee vide their letter dated 12.12.2014 has submitted as follows: The assessee company established a 6 MW Bio-mass power plant in March, 2001. Part of the electricity so generated is consumed by the company for its own manufacture process of fatty acids, soap noodles, toilet soap, etc. and the surplus electricity generated is sold to APTRANSCO. The company had entered into Power Purchase Agreement (PPA) with APTRANSCO on 6.7.2002 which supersedes in its entirety the Power Purchase and Wheeling agreement entered on 12.4.2000 and 25,4.2001. As per agreement the purchase price of surplus power generated by the company is at the rate of ₹ 2.25/unit with 5% escalati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3.2007. However, the company recognized the income towards sale of power as per the price applicable for payment by AP TRANSCO, i.e., APERC price plus 50% of the difference between ₹ 3.48/unit and applicable price which worked out to ₹ 3.14/unit. Accordingly, the company has not recognized as income the billed amount over and above the amount payable as per interim orders of High Court which amounts to ₹ 76,08,678/- the detailed workings of which are enclosed for your perusal. The fact of following of said method and recognition of income was disclosed by the company by way of note in the notes forming part of annual accounts. From the above, it is clear that the prices escalation made by the assessee 5% p.a. with 1994-95 as base year, is according to the Andhra Pradesh State Government Orders and as per the order of the APERC. Vide above order, the Commission has also ensured the payments to suppliers by directing the APTRANSCO to arrange payment for the supply of power purchased from developers of non-conventional energy by opening a Letter of Credit in favour of the suppliers of power. The Power Tarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will be appropriate to make a separate contribution to reflect the uncertainty rather than to adjust the amount of revenue originally recorded. By resorting the reversal of revenue, the assessee also violated the AS- 9 dealing with revenue recognition. (b) On perusal of the Tax Audit Report, it is dear that the assessee has adopted mercantile system of accounts. When an invoice is raised, money is due to the assessee as per the principles of mercantile system. In this regard reliance can be placed on the ruling of Hon'ble Madras High Court in the case of CIT Vs. Planten Co.(P) Ltd. (124 ITR 648), wherein it was held that In mercantile system of accounts the accrual of income is independent of its receipts. So long as the amount is due to the assessee, the system of accounts would envisage the grant by treating the same as revenue to the assessee. 3. Not being convinced with the explanation of the assessee, the AO viewed that the assessee is following mercantile system of accounting and hence the assessee is required to admit the total sales in the Profit Loss account as per the bills raised. Thus, the AO made the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities. 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 contingent sales. The CIT(A) after considering the facts and circumstances of the case has rightly deleted the additions made by the A.O. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to uphold the CIT(A) order and dismiss the appeal filed by the revenue. Following the decision for the AY 2009-10, the Hon'ble ITAT, Visakhapatnam in ITA Nos. 68 to 71/Vizag/2016 dated 28.04.2017 for AYs. 2005-06, 2006-07, 2010-11, 2011-12, has decided the identical issue in favour of the assessee. Since, there is no change in the facts and the Ld.CIT(A) allowed the appeal of the assessee following the order of this Tribunal, we do not find any reason to interfere with the order of the Ld.CIT(A) and uphold the same. 5. In the result, appeal of the revenue is dismissed and the cross objections filed by the assessee becomes infructuous and hence dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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