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TMI Blog2016 (5) TMI 1006X X X X Extracts X X X X X X X X Extracts X X X X ..... account of power and fuel expenses when the said expenses has occurred for residential colonies of the staff of assessee company and thus has no business connection or meant for business expediency? 3. The appellant craves leave to add, amend or alter any of the above grounds of appeal." 3. The first Ground concerns the addition on account of interest on loan accrued to subsidiary companies at Rs. 2,02,38,082/-. 3.1 The facts concerning the issue in brief are that the assessee is a public sector enterprise engaged in the business of pharmaceuticals which has got two subsidiaries viz. Maharashtra Antibiotics and Pharmaceuticals Ltd. (MAPL) and Manipur State Drugs & Pharmaceuticals Ltd. (MSDPL). The Assessing Officer noticed that the assessee had not accounted for interest income from the two companies on the loans and advances given by it. The Assessing Officer confronted the assessee company on this issue. It was replied by the assessee that interest income on such loans was not accounted for as the two subsidiary companies were sick industrial units and were referred to BIFR. It was further stated that both the subsidiary companies had stopped manufacturing operations since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 respectively, order dated 31.01.2013 wherein the Tribunal decided impugned issue in favour of assessee. 3.5 The Ld. Departmental Representative placed reliance on the order of the Assessing Officer. 3.6 We have carefully considered the rival submission. We find that the identical issue has been decided by the Pune Bench of the Tribunal in assessee's own case vide ITA No.737/PN/2008, 878 to 880/PN/2008 & 306/PN/2009 relating to assessment years 2001-02 to 2005-06 respectively, order dated 31.01.2013. The relevant portion of the order of the Tribunal dated 31.01.2013 (supra) is reproduced for ready reference :- "7. We have carefully considered the rival submissions. In the present case, the crux of the issue relates to the interest income with respect to the loans made to two subsidiaries of the appellant company, viz. MAPL AND MSDPL. The loans in question were advanced in the earlier assessment years and as per the Tabulation at page 1 of the Paper Book, it is seen that upto the preceding assessment year i.e. upto A.Y. 2000-01, assessee had recorded interest income on such loans in its books of account. For the assessment year 2001-02 and the subsequent years, assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration and supply of electricity to consumers in Godhra area. The electricity company enhanced the rates of supply but such enhanced rates could not be actually recovered due to litigation and its subsequent take-over by the Government. The assessee was following mercantile system of accounting, and while computing its income it deducted certain sums from its total income in respect of sale of electrical energy on the ground that the said amount was not actually recovered by it from consumers due to litigation. The Revenue sought to tax such amount on the ground that such amount actually accrued to the assessee and the assessee had a legal right to recover such dues. As per the Revenue, assessee-company was following mercantile system of accounting and thus the income accrued to the assessee. The Hon'ble Supreme Court observed that under the Act income chargeable to tax is the income that is received or is deemed to be received in India in the previous year relevant to the year for which the assessment is made or the income that accrues or arises or is deemed to accrue or arise in India during such year. The computation of such income is to be made in accordance with the method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter is considered in this light, it is not possible to hold that there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity which were added by the Income-tax Officer while passing the assessment orders in respect of the assessment years under consideration. The Appellate Asstt. Commissioner was right in deleting the said addition made by the ITO and the Tribunal had rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned as brought to tax by the ITO 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." 11. On the basis of the aforesaid judgment of Hon'ble Supreme Court, it is clear that even the mercantile system of accounting, does not envisage a hypothetical accrual of income, but what is to be seen is whether income can be said to have really accrued to the assessee. In examining whether any income had accrued in a given situation, it is nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. The Assessing Officer accordingly disallowed the expenditure incurred in respect of residential colony of staff and non-business expenditure. 4.2 The CIT(A) granted relief to the assessee following its earlier order for the assessment years 2003-04, 2004-05 and 2005-06. 4.3 Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 4.4 The Ld. Departmental Representative placed reliance on the order of the Assessing Officer. 4.5 The Ld. Authorized Representative for the assessee placed reliance on the order of the CIT(A) and also relied upon the recent decision of the Pune Bench of the Tribunal in assessee's own case vide ITA No.751/PN/2008 relating to assessment year 2002-03 and ors., order dated 10.03.2016 wherein the Tribunal decided the identical issue in favour of the assessee. 4.6 We notice that the identical issue has been decided in favour of the assessee by the Pune Bench of the Tribunal in assessee's own case vide ITA No.751/PN/2008 relating to assessment year 2002-03 and ors., order dated 10.03.2016. The relevant para of the order of the Tribunal dated 10.03.2016 (supra) is reproduced hereunder for reference :- "17. We have heard the rival content ..... X X X X Extracts X X X X X X X X Extracts X X X X
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