9911796707
TMI Blog2020 (11) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... s uncertainty with regard to recovery / collection of the outstanding amount, the assessee for the AY in question decided not to recognize revenue of 52.89 Crores for wheeling charges. In the meeting held on 04.11.2000 and the same was approved by the board of the assessee. Aforesaid income never accrued to the assessee and was in fact, an hypothetical income and not a real income. Subsequently, on 16.03.2004 in 134th meeting of Southern Regional Electricity Board, the arrangement of cost sharing of wheeling charges by the constituent States itself was scrapped and on the date when the Assessing Officer passed an order i.e., on 31.12.2008, the aforesaid decision was already in existence. Income did not accrue to the assessee but was a hypot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transmission of electricity. The assessee filed its return of income for the Assessment Year 2001-02 on 31.10.2001 declaring a loss of ₹ 20,88,81,396/-. Subsequently, it filed a revised return on 31.10.2002 declaring the total income as 'NIL' after setting off the brought forward unabsorbed depreciation of earlier years of ₹ 2,16,63,815/-. The assessment was processed under Section 143(3) of the Act on 26.12.2005 determining total business profit of ₹ 72,02,83,028/- and after setting off unabsorbed depreciation of Assessment Years 1988-89 and 1989-90 amounting ₹ 72,02,83,028/-, the income was determined to be 'NIL'. The Commissioner in exercise of powers under Section 263 of the Act vide order dated 12.11.2007 hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Commissioner of Income Tax (Appeals) who by an order dated 31.08.2010 upheld the order of the Assessing Officer. Being aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The Tribunal vide impugned order dated 30.11.2012 held that no expenditure is incurred by the assessee for transmission of electricity to other states and assessee has not debited any expenditure towards transmission of electricity to other states. It was further held that there was a dispute with regard to wheeling charges amongst all the constituent states of Southern Regional Electricity Board. It was also held that there was an uncertainty of receiving the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue submitted that the assessee has been following mercantile system of accounting and therefore, the income accrues, on raising a demand on the other parties. It is also urged that the doubtfulness of the assessee to receive the amount is immaterial under the mercantile system of accounting and the only remedy available to the assessee is under Section 36 of the Act. It is further submitted that once the assessee has recognized the right to receive, the income accrues and the same is taxable irrespective of the fact whether or not the same is actually accrued to the assessee. It is also contended that reference to other Assessment Years by the tribunal is immaterial and the amount / demand made by the assessee was legally due to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis from which taxable income is to be computed. In this connection, reliance has been placed on the decision of the Supreme Court in 'J.K.INDUSTRIES LTD. VS. UNION OF INDIA', 297 ITR 176 (SC). It is also urged that hypothetical income cannot be brought to tax as income and only real income can be taxed. In this connection, reference has been made on decision of the Supreme Court in 'COMMISSIONER OF INCOME TAX VS. BOKARO STEEL LTD.', 263 ITR 315 (SC). It is also argued that decision relied upon by learned counsel for the revenue do not apply to the fact situation of the case as Accounting Standard-9 was not in existence at the time when the decisions were rendered. 6. We have considered the submissions made by learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of exchange of electricity amongst the States, which includes drawl of their share of energy from central generating station owned by central public sector undertakings and the energy flow and grid operations in the southern region. The Karnataka Electricity Board which owned transmission lines in Karnataka decided to recover wheeling charges from State Electricity Board's of Tamil Nadu, Andhra Pradesh and Kerala to the tune of ₹ 52.89 Crores. The assessee therefore, did not raise any demand on account of wheeling charges and since, there was uncertainty with regard to recovery / collection of the outstanding amount, the assessee for the Assessment Year in question decided not to recognize revenue of ₹ 52.89 Crores fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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