TMI Blog1999 (9) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... oper construction of the agreement between the assessee-company and the M. P. State Electricity Board, the Tribunal was right in holding that the liability in respect of additional fuel surcharge arose only when the assessee received the bills from the M. P. State Electricity Board ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was not entitled to deduction of liability for additional fuel surcharge amounting to Rs. 6,81,770 (Rs. 25,48,045 minus Rs. 18,86,226) in the assessment year 1984-85 ?" Since connected questions are raised in these questions referred by the Tribunal, the short controversy in these questions is whether the liability in respect of additional fuel surcharge arose in the assessment year 1981-82 or 1984-85. We dispose of both the applications by this common order. The assessee is a public limited company. It carried on business as a manufacturer of jute goods and caustic soda, chlorine, etc., at Hazinagar, Naihati, West Bengal, and at Amlai, Shabadol in M. P. respectively. The relevant assessment year is 1981-82 in which the assessee has consumed the electricity and he received a notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge liability is quantified by the Board. Learned counsel for the assessee, Mr. Khaitan, submits that the liability on account of additional fuel surcharge accrued the moment the assessee consumed electricity. The liability of additional fuel surcharge goes by consumption of electricity and the only quantification of liability can be done later. That does not affect the fact of accrual of liability and the liability should be allowed in the year in which the liability accrued. It is not a contingent liability. When the assessee consumed the electricity, only quantification is left. The liability accrued when the assessee consumed electricity in the previous year relevant to the assessment year 1981-82. He placed reliance on the various decisions which make distinction between the accrued liability and the contingent liability. Learned counsel for the Revenue, Mr. Prasad, submits that it is a contingent liability and the contingent liability can be allowed only on the happening of the event. In this case, when the liability is uncertain and yet to be ascertained, that is a contingent liability and that becomes a liability only when the liability is quantified. In 1983, that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability. In the case of CIT v. Swadeshi Mining and Manufacturing Co. Ltd. [1978] 112 ITR 276 (Cal), the company was a sugar mill producing sugar and selling and exporting sugar. The assessee was under an obligation to pay additional price payable by the company for purchase of sugarcane from the growers of sugarcane fixed under clause 3A(1) of the Sugarcane (Control) Order, 1955. The relevant assessment year was 1961-62. A provision was made by the assessee for payment of Rs. 1,40,000 as additional price under the Control Order. The assessee was following the mercantile system. The price was not fixed within the accounting year. The issue before this court was whether the additional liability on account of additional price payable by the assessee under the Control Order should be allowed in the assessment year 1961-62. This court held that the additional price formed part of the price of the sugarcane purchased by the company in the accounting year and the company had already incurred the liability to pay the additional price and hence it could not be said that this liability of the company was inchoate or contingent in the accounting year. Therefore, the liability should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the consumer shall pay to the Board every month charges for electrical energy supplied to the consumer during the preceding month at the Board's tariff applicable to class of service and in force from time to time. Sub-clause (b) of clause 20 of the agreement provides that the tariff is subject to the fuel adjustment. The existence of the fuel adjustment clause which shall be levied only on units consumed shall be in addition to any minimum charges prescribed under the tariff in clause 19 or in minimum or special guarantee referred to in clause 21. Clause 25(a) further provides that the Board will as far as possible within 15 days after the expiration of each calendar month deliver to the consumer a bill of charges stating the number of units supplied to the consumer by the Board in accordance with the reading of the said meters and the amounts payable, The fuel costs, adjustment charges as applicable under the tariff will be calculated and incorporated as a part of the bill on the basis of provisional average fuel costs as may be fixed by the Board from time to time. These charges are subject to final adjustment on the basis of average fuel costs for the period of account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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