TMI Blog2011 (1) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... come 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2.88/- per unit for the first year of operation, comprising of the fixed cost per unit at ₹ 1.61/- and variable cost per unit of ₹ 1.27/-. Against the said revision, the assessee along with other power producing companies in the State of Andhra Pradesh went to the Court and the Hon ble Court directed the APERC vide interim order dated 20.8.2004, to pay 50% of the differential amount between the old and the revised tariff provisionally, subject to the final orders. In view of the interim orders of the Hon ble High Court, the APTRANSCO has paid at the rate of ₹ 3.18 per unit and settled the bills and consequently, the assessee also booked the income from sale of power at ₹ 3.18 per unit of power supplied though it had raised bills at the rate of ₹ 3.48 per unit during the relevant financial year. The Assessing Officer observing that the bills raised by the assessee at ₹ 3.48 per unit were the fundamental records for maintenance of accounts of the assessee, though the assessee has recorded the sales differently for its reasons, deviating from the generally accepted method of accounting. He was of the view that the assessee should have decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deemed income. She also filed detailed written submissions by distinguishing the decisions relied on by the learned counsel for the assessee and concluded that mere absence of the amount in the profit and loss account is not indicative of the fact that the income has not accrued to the assessee company. What are relevant are the nature of the receivable and the implications of the dispute. 7. The learned counsel for the assessee, on the other hand, strongly relied on the order of the CIT (A). He further submitted that the invoices were raised applying a higher rate just to keep the issue alive, and safeguard the interests of the assessee in the event of it succeeding in the litigation. He submitted that while the invoices are raised, working out the sales applying tariff as determined in terms of the escalation clauses contained in the Power Purchase Agreement, Revenue is recognized and entries were made in the books of account, applying a rate of ₹ 3.18/- only working out the same as per the interim order of the Hon ble High Court of Andhra Pradesh, notwithstanding the fact that the APERC has fixed the price at ₹ 2.88 per unit only, based on the revised agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. V/s. CIT (326 ITR 444)-Bom. (b) Sutlej cotton Mills Ltd vs. CIT [116 ITR 1]-SC (d) Godhra Electricity Co. LTd vs. CIT [225 ITR 746] - SC (e) State Bank of India vs. CIT [157 ITR 67] -SC 8. We have considered the rival submissions. There is no dispute with regard to the material facts of the case. The only question that arises for consideration is whether the differential amount of sales , viz. worked out at ₹ 3.48/- per unit as per the Power Purchase Agreement applying which invoices for supply of power to APTRANSCO were raised and ₹ 3.18/- applying which in terms of the interim orders of the Hon ble A.P. High Court, invoices of the assessee were settled by the APTRANSCO and accounted for by the assessee in the books of account, can be treated as the income of the assessee for the assessment year 2005-06. We find 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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