TMI Blog2012 (5) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... 011, which is passed in the context of assessment made under S.43(3) read with S.147 of the Act. Since common issues are involved, these appeals are being disposed off with this common order for the sake of convenience. Cross Appeals for Assessment year 2001-02 Assessee s Appeal : ITA No.767/Hyd/2009: Revenue s Appeal : ITA No. 798/Hyd/2009: 2. The only dispute involved in these appeals relates to an addition of ₹ 102,36,11,915 made by the assessing officer, treating the entire amount of bills raised by the assessee in terms of Power Purchase Agreement entered into by the assessee with APTRANSCO notwithstanding the actual amount received, as the income of the assessee for the year under appeal, out of which addition to the extent of ₹ 84,06,80,727 only has been confirmed by the CIT(A). 3. Facts of the case in brief are that the assessee for the assessment year 2001-02 filed return of income on 31.10.2001 showing a loss of ₹ 157,65,85,311 under normal provisions of computation and Book Profit at ₹ 1,58,99,200 under S.115JB of the Act. During the assessment proceedings, the assessing officer noticed that the assessee has during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognised as income. Further, an amount of ₹ 2,08,06,515 was raised by the company towards supplementary charges, viz. Finance and Procurement cost of fuel and late charges, after commencement of Combined Cycle Commercial Operations, was not admitted by APTRANSCO and hence the same was not recognized as income. 5. Referring to the Accounting Policy followed by the assessee company for revenue recognition, the assessee submitted that the treatment of revenue receipts during the construction period and operation period in its case are as per the Accounting Standards and Guidelines issued by ICAI. It was stated that the figures reported by APTRANSCO should not be adopted for assessment in its case. Reliance was placed before the assessing officer on a number of decisions in support of its contentions, which are as follows- (a) Challapalli Sugars Ltd. V/s. CIT (98 ITR 167)-SC (b) CIT V/s. UP State Industrial Development Corporation (225 ITR 703)-SC (c) CIT Vs. Rajednra Prasaad Mody (115 ITR 519)-SC. (d) CIT V/s. Sarangpur Cotton Mfg. Cop. Ltd. (76 ITR 36)-PC (e) Metal Box Company of India Ltd. V/s. Their Workmen(73 ITR 53)-SC (f) Bhararth Earth Movers L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the assessee has disclosed only an amount of ₹ 280,18,75,856. 7. On appeal, the CIT(A), after elaborate consideration of the issue before him, in the light of the ratio laid down in the case-law relied upon by the assessee before him, directed the assessing officer to exclude the amount of ₹ 18,29,31,188 shown by the assessee as sale of electricity energy during trial run, vide Schedule 5 of the Balance Sheet, and confirmed the balance addition of ₹ 84,06,80,727 made by the assessing officer. 8. Aggrieved by the order of the CIT(A), assessee as well as Revenue are in appeal before us. 9. Reiterating the contentions urged before the lower authorities, learned counsel for the assessee submitted that the amount of ₹ 84,06,80,727 did not accrue to the assessee herein. It is submitted that the bills raised by the assessee claiming energy charges and capacity charges for a total sum of ₹ 382,54,87,771 were not accepted by APTRANSCO and as such the amount accepted as payable by the APTRANSCO alone was recorded in the books of account. The CIT(A) was not justified in holding that the entire amount for which bills were raised by the assessee accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said that income has accrued or crystallized in the hands of the assessee just because bills have been raised by the assessee. Accounting Standard No.9 issued by the ICAI, dealing with the effect of uncertainties on revenue recognition, stated as follows- 9. Effect of Uncertainties on Revenue Recognition 9.1 Recognition of revenue requires that revenue is measurable and that at the time of sale or the rendering of the service it would not be unreasonable to expect ultimate collection. 9.2 Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate collection will be made. Where there is no uncertainty as to ultimate collection, revenue is recognised at the time of sale or rendering of service even though payments are made by instalments. 9.3 to 9.4 9.5 When recognition of revenue is postponed due to the effect of uncertainties, it is conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal income and the impugned amounts as brought to tax by the Income-tax Officer did not represent the income which had really accrued to the assessee company during the relevant previous years. The High Court, in our opinion, was in error in upsetting the said view of the Tribunal. The Income-tax Appellate Tribunal, Hyderabad Bench, vide its order dated 31.1.2011 in the case of DCIT V/s. Sri Balaji Bio-Mass Power P. Ltd. in ITA No.1748/Hyd/2008, has considered a similar issue and held in the following manner- 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount as per the Power Purchase Agreement. We therefore, hold that addition of ₹ 84,06,80,727 cannot be sustained. We accordingly delete the same. However, we make it clear that the said amount will be taxable in the hands of the assessee in the year in which it is actually received. Assessee s grounds on this issue are allowed, and the same of the Revenue are dismissed. 12. In the result, while appeal of the assessee being ITA No.767/Hyd/2009 is allowed, appeal of the Revenue, being ITA No.798/Hyd/2009 is dismissed. Appeals for Assessment year 2003-04 Assessee s Appeal : ITA No.1435/Hyd/2011: 13. The first issue involved in this appeal relates to an addition of ₹ 31,88,79,138 made by the assessing officer, on account of difference in receipt vis- -vis APTRANSCO, which has been confirmed by the CIT(A). 14. Facts of the case in brief are that the assessing officer during the course of assessment proceedings obtained information from APTRANSCO through the Deputy Chief Controller of Accounts PP S, Andhra Pradesh Power Coordination Committee, Vidyut Soudha, Hyderabad, vide their letter dated 13.3.2006. The assessing officer noticed that there was diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) concluded that there is absolutely no evidence to show that the amount in question of ₹ 31,88,79,138 has been accounted for in the books, and in fact the relevant papers filed at page Nos.28 an d29 of the paper-book before him, clearly shows that all the bills have been admitted by the APTRANSCO and there is no difference. After examining the totality of the matter, the CIT(A) concluded that the receipts and the amounts billed by the assessee do not correspond to the actual amount fo units sold upto 31.3.2003. As per mercantile system of accounting, the CIT(A) held, the moment a unit of electricity is sold, it has to be taken into account for the purpose of Revenue. Since it was not done, and the difference was clearly pointed out by APTRANSCO, the CIT(A) upheld the addition of ₹ 31,88,79,138 made by the assessing officer. 16. Aggrieved by the order of the CIT(A), assessee preferred second appeal on this issue before us. 17. We heard both sides and perused the material on record. Undisputed facts in relation to this issue are that there was some differential amount of ₹ 31,88,79,138 being the provision for the period from 10.3.2003 to 31.3.2003. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 5,87,99,000 made by the assessing officer. 21. Aggrieved by the order of the CIT(A), assessee preferred appeal before us on this issue. 22. The learned counsel for the assessee contended that though the assessee has raised the bills for reimbursement of advance tax payments, in terms with Article 3.8 to 3.10 of the Power Purchase Agreement, the APTRANSCO never admitted such claims and refused to reimburse the income-tax paid by the assessee. In order to resolve the dispute, the assessee company, has invoked the arbitration clause and has filed an application before the Hon ble Andhra Pradesh High Court for appointment of an Arbitrator, which is still pending. The learned Authorised Representative contended that there is still uncertainty about the receipt of reimbursement of advance taxes paid. The assessee has not recognised it as a revenue in the assessment year under dispute, as per the guidelines issued by the ICAI in Accounting Standard 9. 23. The learned Departmental Representative, supporting the orders of the Revenue authorities submitted that since the assessee has raised the bills in terms of the Power Purchase Agreement, in the assessment year under dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 5%. Not finding merit in the contentions of the assessee, and observing that as per the provisions of DTAA with Mauritius tax on dividend paid to the foreign companies holding more than 10% of the shares of the company should be deducted at 15% and not 5%, the assessing officer completed the re-assessment under S.143(3) read with S.147 of the Act, by levying tax under S.201(1) amounting to ₹ 9,75,80,000 and interest under S.201(1A) amounting to ₹ 9,44,08,650 on account of short fall of TDS on the payment of dividends paid to foreign companies. 28. On appeal, the CIT(A), in the first place, noted that Article 10 of the DTAA between India and Mauritius clearly shows that tax has to be deducted on dividends paid at 5% if the recipient company owns a share of 10% or more. On the other hand, if the number of shares held is less than10%, then tax on dividends has to be withheld at the rate of 15%. Since in the present case, the three companies of Mauritius to whom interim dividend was paid by the assessee, were holding more than 10% shares in the assessee company, and this fact has been noted by the assessing officer himself in the reasons recorded while reopening the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) has clearly brought out that the tax has been deducted by the assessee applying correct rate, applicable to the foreign companies holding more than 10% shares as per article 10 of DTAA with Mauritius. In these circumstances, we uphold the order of the CIT(A), and reject the grounds of the Revenue in this appeal. 31. In the result, this appeal of the Revenue is dismissed. Assessee s Appeals: ITA No.1436/Hyd/2011 : Assessment year 2004-05 ITA No.1437/Hyd/2011 : Assessment year 2005-06 ITA No.1438/Hyd/2011 : Assessment year 2006-07 32. In the first two of these appeals for assessment years 2004- 05 and 2005-06, the first effective grievance of the assessee is against the additions made on account of the difference in receipt vis- -vis APTRANSCO. Such additions made by the assessing officer, which have been confirmed by the CIT(A) for these two years under appeal are as follows- Assessment year Addition Rs. 2004-05 2,55,60,283 2005-06 2,75,15,430 33. The learned counsel for the assessee contended before us that the difference i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 5,90,71,000 2005-06 4,58,04,400 2006-07 5,06,40,000 37. We heard both sides and perused the orders of the lower authorities. We find that the facts and circumstances of the case leading to the above additions and so also the contentions of the parties before us on this issue are identical to those considered by us while considering the appeal of the assessee for the assessment year 2003-04. Hence, for the detailed reasons discussed, hereinabove vide para 24 of this order, we set aside the impugned orders of the lower authorities, deleting the additions in question. Grounds of appeal of the assessee on this issue are accordingly allowed 38. In the result, all the three appeals of the assessee for assessment year 2004-05 to 2006-07 are allowed. 39. To sum up, (a) Out of five appeals of the assessee, ITA No.767/Hyd/2009 for assessment year 2001-02 and ITA Nos.1436 to 1438/Hyd/2011 are allowed; and ITA No.1435/Hyd/2009 for assessment year 2003-04 is partly allowed; and (b) Both the appeals of the Revenue, being ITA No.798/Hyd/2008 for a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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