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2011 (1) TMI 1405 - AT - Income TaxTax on amount of differential sales - Difference between the old and the revised tariff - Price Escalation clause - sale as per Power Purchase Agreement (PPA) - assessee raised invoice applying a rate of ₹ 3.48 per unit, in the books of account, however, the assessee accounted for sales only at ₹ 3.18 per unit - whether the differential amount of sales, as per the Power Purchase Agreement applying which invoices for supply of power to APTRANSCO were raised, can be treated as the income of the assessee for the assessment year 2005-06? HELD THAT:- The CIT(A) has given elaborate reasoning before concluding that the income worked at the rate of ₹ 3.48/- per unit of power supplied had neither accrued to the assessee nor was receivable during the previous year and therefore, no corresponding debt in respect of the differential amount stood created in the books of the purchaser, i.e. APTRANSCO. Merely based on the invoices raised, income cannot be deemed to accrue to the assessee, when the differential income was subject matter of litigation, and there is no certainty of the assessee being entitled to such income, unless it succeeds in such litigation. Even if an assessee succeeds ultimately in the litigation, a debt enforceable against the other party does not get created, unless a claim in that behalf was raised before the same being barred by limitation. It is for this reason that an assessee, to keep the issue alive, has to raise the claim against the other party within the period of limitation, which in its view is due to it according to the terms of the contract, so as to get an enforceable right for the recovery of the amount as and when it succeeds in the litigation. Though invoices raised constitute fundamental record for maintenance of accounts in the normal course, as observed by the Assessing Officer, that logic does not hold good when the subject matter was under dispute and was under litigation before the judicial fora, including the jurisdictional High Court and Hon’ble Supreme Court during the relevant points of time. Assessee’s method of accounting only the amount which was not subject matter of litigation and which in fact was received by it from the APTRANSCO in terms of the interim order of the A.P.High Court, was in conformity with the Accounting Standard 9 - thus, there are no infirmity in the order of the CIT (A), which is accordingly confirmed and the grounds of appeal of the Revenue are rejected. Revenue’s appeal is dismissed.
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