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2021 (3) TMI 936 - AT - Income TaxAccrual of income - production and sale of steam without any consideration - transaction between holding and subsidiary company - estimating notional receipt by the AO towards the supply of power as against the real income Nil. - HELD THAT:- As decided in M/S SBEC BIOENERGY LTD., DELHI [2012 (3) TMI 665 - ITAT DELHI] Sale price is the income of seller & liability being purchase price to the purchaser. It can be treated as income accrued in the hands of the seller (and liability crystallized in the hands of the purchaser) only if the relevant contract is accepted by both the parties to contract. There is no doubt that the steam was supplied by the SSL as it was done in earlier years. Earlier the income (being sale value of steam) was credited in the accounts at the rate agreed and confirmed by the SSL. In fact the rate was retrospectively rendered & such reduction was agreed to by both the parties. On this basis itself the ITAT in A Y 00-01 allowed reduction of income from sale of steam. The point to be noted is that the income from any contract (sale) can be said to accrue as per agreed terms of such contract. If there is any dispute by ether party the accrual of income (of expenditure in the hands of other party) will be subject to the outcome of such dispute & accordingly contingent. Normally the income in such cases can be said to accrue in the year in which the dispute is resolved & other party acknowledges the debt. Even in such cases some party may choose to recognize its income or liability as accrued accordingly to facts & circumstances whereby it is certain to be able to enforce the terms of the contract. However, the appellant did not recognize any revenue from sale of steam in current year according to AS-9, since SSL had categorically refused to make any payment for supply of steam. Therefore, non-recognition of any accrual of income from supply of steam does not appear to be, unjustified. As the income of one company will be a deductible expenditure for the other and between the two there is no tax gain from this transaction. The income in the case of appellant is eligible to 100% deduction u/ s80 lA also. Hence no allegation of tax planning can be attributed in this transaction, which appears to be wholly for business considerations. The transaction is between the holding and subsidiary company. Therefore in my opinion the action of the appellant company in not charging for steam supplied to SSL is quite justified on fact and cannot be said to be deliberate or motivated. Moreover even if an assessee gives (sells) his goods free of cost to other, there is no provision in the IT Act to tax its sale value as income on presumptive basis. Legally Speaking since no income has accrued & neither any payment has actually been received by the appellant company, making addition in respect of estimated price of steam amounts to taxing of notional income which is not permissible. In view of this addition is deleted. - Decided against revenue.
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