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TMI Blog2022 (12) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... has been consistent in following the said policy as can be seen from the audit report where bills raised for F.Y. 2010-11 have been accounted for in the year under consideration and which has infact, formed the basis for the action on part of the AO. AO cannot follow dual approach in taxing the revenues pertaining to earlier financial year and at the same time, disputing the deferment of revenues for the year under consideration on account of similar uncertainties involved. We see no justifiable basis to allow the disturbance of well-accepted accounting policy consistently followed by the assessee where the recognition of revenue is deferred where there are visible uncertainties involved in quantifying and realization of revenues. In the result, the addition on account of operation and maintenance service charges of transmission lines is hereby set-aside and the ground of appeal is allowed. - ITA No. 352/Chd/2019 - - - Dated:- 30-11-2022 - SHRI. SANJAY GARG , JM And SHRI. VIKRAM SINGH YADAV , AM Assessee by : Shri Vipen Sethi , Advocate Revenue by : Shri Akashdeep , JCIT , Sr. DR ORDER Per Vikram Singh Yadav , AM This is an appeal filed by the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the bills raised by erstwhile PSEB for F.Y. 2010-11. However, the company has contested that as no agreement for such Operation and Maintenance Services are executed and there is an uncertainty regarding the receipt of this income, therefore, the same has been accounted for on the basis of actual receipt. 2.2. In response, the assessee vide its submission dt. 07/09/2017 submitted that there is an uncertainty regarding the receipt of Rs. 1,43,06,414/- as the billing has been disputed by UT Chandigarh. Moreover there is no agreement regarding this between the assessee and UT Chandigarh. Therefore the same has to be accounted for on receipt basis as per the significant accounting policy adopted by the Company. 2.3. The submission so filed by the assessee was considered but not found acceptable to the AO. As per the AO, the assessee company is following mercantile system of accounting and under the said system of accounting, the income is required to be accounted for in the books of accounts particularly when the expenses, if any, attributable to earning of such income has already been accounted for and debited to the Profit Loss Account. 2.4. It has been further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le applicable to the assessee's internal accounting cannot supersede the express provisions of Income Tax Act which mandate that the companies follow the mercantile system of accounting. Regarding uncertainties of revenue recognition as discussed in Accounting Standard -9, the Ld. CIT(A) held that the revenue is measurable at time of raising the bill and the uncertainty arises only subsequent to the raising of bills for which the appellant was well within its right to make a separate provision to reflect the uncertainty which has not been done. Accordingly, the addition so made by the AO was sustained by the Ld. CIT(A). Against the said findings, the assessee is in appeal before us. 5. During the course of hearing, the Ld. AR reiterated the submissions made before the AO and in this regard our reference was drawn to the submissions filed by the assessee before the AO dt. 06/12/2017 which read as under: .... as per the significant accounting policy adopted by the Corporation given at Sr. No. 7 in Note-2 i.e. Income from natural interstate lines is accounted for on actual receipt basis. In this regard, as mentioned in the management reply of the annual accounts of FY 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 KV Ganguwal-Mohali single Circuit line The bills have been raised by the PSTCL authorities for Sr. no. (1) and (2). amounting to Rs. 1,43,06,414/- (copy enclosed). In this regard, it is submitted that the UT Chandigarh has no generation of its own and is drawing power from various Central generating Stations i.e. NTPC, NHPC; BBMB, NPC etc. besides procuring power through short term competitive bidding. Accordingly, the UT Chandigarh has been treated as one of the Withdrawal Zone i.e. Chandigarh Withdrawal Zone. The NRPC has been raising the bills for the Point of Connection charges for the total withdrawal during the period which includes regional transmission account based on scheduled power withdrawal and the transmission deviation account for the over drawls of power - As such UT Chandigarh has been paying the amount for total withdrawals carried out by the UT Chandigarh which includes all transmission facility available for withdrawal of power. This office is of the opinion that since all the transmission charges for the total withdrawal of power are being paid by UT Chandigarh as raised by NRPC as per the notification of the Regulation on sharing of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the State Government. In view of the mounting losses from year to year, it would hardly make any difference if the claim is allowed in year X or year Y as it would be tax neutral. For similar reasons, the assessee-board would also not gain anything in the process. 6. Per contra, the Ld. DR relied on the order of the lower authority. It was submitted that when the expenses have been accounted for and claimed by the assessee in the impugned assessment year, corresponding revenues necessarily needs to be recognized and accounted for. It was accordingly submitted that here the question is not of tax neutrality rather the question is of determining net income to be brought to tax for the impugned assessment year as each assessment year is a separate assessment year wherein the AO is required to determine correct income which can be taxed in the hands of the assessee company. It was accordingly submitted that the order so passed by the Ld. CIT(A) be sustained and the appeal of the assessee be dismissed. 7. We have heard the rival contentions and pursued the material available on record. It is noted that the invoice for Rs. 1,43,06,414/- was raised on UT Electricity Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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