DCIT., Circle-1(1), Hyderabad, Hyderabad V. M/s A P Tourism Development Corporation Limited, Hyderabad

ITA 1674/HYD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2583 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: S RAMA RAO
• Keywords: Diversion of income; Commercial expediency; Revised return
• Section: 143(3); 37(1)

Judgement Text

ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS.361/HYD/2015 & 1674/HYD/2014 (ASSESSMENT YEARS: 2009-10 & 2010-11) DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) HYDERABAD VS M/S. A.P. TOURISM DEVELOPMENT CORPORATION LTD HYDERABAD PAN: AADCA 9817 H (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR FOR ASSESSEE : SHRI S. RAMA RAO O R D E R PER SMT. P. MADHAVI DEVI, J.M. BOTH THE APPEALS ARE FILED BY THE REVENUE FOR THE A .YS 2009-10 AND 2010-11 RESPECTIVELY AGAINST THE ORDERS OF THE CIT (A)-I/II, HYDERABAD, DATED 27.01.2015 AND 05.08.201 4 RESPECTIVELY. THE COMMON ISSUE ARISING IN BOTH THE APPEALS IS WHETHER THE LEASE RENTALS WHICH ACCRUED TO THE ASSE SSEE ON MERCANTILE BASIS IS TO BE BROUGHT TO TAX OR IT IS O NLY THE LEASE RENTALS WHICH IS RECEIVED BY THE ASSESSEE DURING TH E RELEVANT FINANCIAL YEARS WHICH IS TO BE BROUGHT TO TAX 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A STATE GOVT. UNDERTAKING, FILED ITS RETURN OF INCOME ON TH E BASIS OF DATE OF HEARING : 29.06.2017 DATE OF PRONOUNCEMENT : 27.09.2017 ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 2 OF 10 PROVISIONAL A/CS AND SUBSEQUENTLY AFTER ITS ACCOUNT S WERE AUDITED BY THE STATUTORY AUDITORS, FILED THE REVISED RETURN OF INCOME. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE STATUTORY AUDITORS HAVE COMMENTED ON SCHEDULE-17 I.E. ACCOUNTING POLICIES AND NOTES ON ACCOUNTS THAT THE PROPERTY BALAYOGI PARYATAK BHAVAN WAS GIVEN O N LEASE TO LAKSHMI GAYATRI HOTELS (P) LTD (LESSEE) AND THE AS SESSEE HAS NOT RECOGNIZED THE LEASE RENTALS ON ACCRUAL BASIS BUT T HAT IT HAS OFFERED THE LEASE AMOUNT ON RECEIPT BASIS. THE AO O BSERVED THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE, ASSESSEE OUGHT TO HAVE OFFERED THE INCOM E ON MERCANTILE SYSTEM OF ACCOUNTING. HE CONSIDERED THE ASSESSEES CONTENTION THAT THE LESSEE HAD DISPUTED THE ACTUAL PLINTH AREA WHICH WAS GIVEN ON LEASE AND THE AREA HANDED OVER T O IT AND ALSO AS TO THE FULFILLMENT OF CERTAIN CONDITIONS OF THE AGREEMENT SUCH AS ERECTION OF LIFT, FAULTY WORKING OF ACS ETC. THE AO OBSERVED THAT THE LESSEE CONTINUED TO REMAIN IN THE PREMISES TILL MARCH 2010 AND THERE WAS NO STAY ON COLLECTION OF RENT BY ANY OF THE COURTS. THEREFORE, HE WAS OF THE OPINION THAT THE ENTIRE LE ASE AMOUNT, ON ACCRUAL BASIS, IS TO BE BROUGHT TO TAX IN THE RELEV ANT A.YS. THE AO ALSO DISALLOWED CERTAIN OTHER EXPENDITURE CLAIMED B Y THE ASSESSEE ON THE GROUND THAT THESE CLAIMS WERE NOT MADE IN TH E ORIGINAL RETURN OF INCOME. ON APPEAL, THE CIT (A) GRANTED RE LIEF TO THE ASSESSEE IN SO FAR AS THE LEASE RENTAL IS CONCERNED AND ALSO WITH REGARD TO CERTAIN OTHER CLAIM OF EXPENDITURE WHICH WAS MADE ON THE BASIS OF AUDITED BOOKS OF ACCOUNT IN THE REVISE D RETURN OF INCOME. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. FOR THE A.Y 2010-11, VIDE LETTER DATED 19.12.2016, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 3 OF 10 1. WHETHER LEARNED CIT(A) IS CORRECT IN SAYING THAT AO SHOULD TAKE INTO ACCOUNT THE AUDITED ACCOUNT WHICH DETERMINING TAXABLE INCOME WHEREAS SECTION 139(9)(BB) SAYS THAT THE RETURN HAS TO BE ACCOMPANIED BY THE REPORT AS IN SECTION 44AB TOGETHER WITH PROOF OF FURNISHING REPORT. ALSO ACCORDING TO THE DECISION OF HON'BLE APEX COURT IN THE CASE OF GOETZ INDIA LTD (284 ITR 323) WHEREIN IT WAS HELD THAT THE REVISED CLAIMS ARE NOT ALLOWABLE UNLESS SUPPORTED BY REVISED RETURNS OF INCOME FILED WITH DEPARTMENT. 2. SIMILARLY, WHETHER LEARNED CIT (A) IS CORRECT IN DIRECTING AO TO CONSIDER THE CLAIM OF SOME EXPENSES AS PER GROUND NO.4 TO 7 AND 9, BEFORE CIT (A), BASED ON THE AUDITED ACCOUNTS IN VIEW OF ABOVE MENTIONED EXPLANATION AT POINT (1) . 3. WHETHER LEARNED CIT (A) IS CORRECT IN ALLOWING DELAY PAYMENT MADE TO ESI BASED ON HON'BLE APEX COURT DECISION IN THE CASE OF MAHALAKSHMI SUGAR MILLS CO (123 ITR 429) BUT WHEREAS IN THE CASE OF INDIAN ALUMINIUM CO LTD (79 ITR 514) THE HON'BLE APEX COURT HAS HELD THAT A PAYMENT MADE UNDER STATUTORY OBLIGATION BECAUSE OF ASSESSEE DEFAULT COULD NOT CONSTITUTE EXPENDITURE LAID OUT FOR THE PURPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE, AND HENCE NOT ALLOWABLE. 4. BASED ON FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER LEARNED CIT (A) IS CORRECT IN DIRECTING AO NOT TO ADD 'LEASE RENTALS' AS THERE IS A LONG DRAWN LITIGATION BASED ON VARIOUS JUDICIAL PRONOUNCEMENT. BUT, THE HON'BLE APEX COURT IN THE CASE OF MARVIN INDUSTRIES LTD (82 ITR 873) HELD THAT INCOME WILL ACCRUE WHEN IT HAS BECOME DUE TO THE ASSESSEE AND THAT POSTPONEMENT OF PAYMENT DATE DOES NOT AFFECT THE ACCRUAL OF INCOME AND THE FACT THAT SUBSEQUENT NON-RECEIPT OF INCOME DOES NOT THE ACCRUAL OF INCOME. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 4 OF 10 3. AS REGARDS GROUND NO.4, THE LEARNED DR, SUPPORTE D THE ORDERS OF THE AO WHILE THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDERS OF THE CIT (A). WE FIND THAT T HE CIT (A) HAS REPRODUCED THE RELEVANT FACTS IN PARA 7.2 OF HER OR DER. FROM THE ABOVE FACTS, IT IS CLEAR THAT THOUGH THE ASSESSEE H AS RECEIVED THE LEASE RENTALS AS AGREED TO IN THE LEASE AGREEMENT T ILL MARCH, 2008, THE LESSEE HAS REFUSED TO PAY THE LEASE RENTAL THER EAFTER IN ACCORDANCE WITH THE AGREEMENT AND HAS IN FACT ASKED THE ASSESSEE TO ADJUST THE EXCESS LEASE RENTALS PAID BY IT TILL MARCH, 2008 TOWARDS THE OTHER MONTHS. IT IS ALSO NOTICED THAT T HE DISPUTE WAS RAISED AS EARLY AS 17.08.2007 AND THE ISSUE HAD ALS O TRAVELLED TO THE CITY CIVIL COURT AND SUBSEQUENTLY TO THE HON'BL E HIGH COURT OF A.P. 4. THE LEARNED DR HAS PLACED RELIANCE UPON THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASES OF CIT VS . SHIV PRAKASH RAJ & CO. PVT LTD (88 TAXMAN 536) (S.C), STATE BANK OF TRAVANCORE VS. CIT REPORTED IN (1986) 24 TAXMANN 33 7 (S.C) AND ALSO IN THE CASE OF MORVI INDUSTRIES LTD VS. CIT (8 2 ITR 835 (S.C). WE FIND THAT THESE DECISIONS ARE DISTINGUISHABLE ON FACTS FROM THE FACTS OF THE CASE BEFORE US. IN THE CASE OF CIT VS. SHIV PRAKASH RAJ & CO, THE ASSESSEE THEREIN HAD PASSED RESOLUTION TO WAIVE INTEREST AFTER EXPIRY OF ACCOUNTING YEAR IN QUESTION, AND IT WAS IN THESE CIRCUMSTANCES THAT THE HON'BLE SUPREME COURT HELD T HAT, INTEREST HAVING ACCRUED TO THE ASSESSEE, WAS LIABLE TO BE TA XED, NOTWITHSTANDING THE FACT THAT NO ENTRIES HAVE BEEN MADE IN THE ACCOUNTS OF THE ASSESSEE TO THAT EFFECT AND NO INTE REST INCOME WAS ACTUALLY RECEIVED. IN THE CASE OF MORVI INDUSTRIES LTD, THE HON'BLE SUPREME COURT WAS CONSIDERING THE CASE OF AN ASSESS EE WHERE THE ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 5 OF 10 ASSESSEE COMPANY BEING MANAGING AGENT OF ITS SUBSID IARY COMPANY, MAINTAINED ITS ACCOUNTS ON MERCANTILE SYST EM AND RELINQUISHED CERTAIN AMOUNTS REPRESENTING FIXED MON THLY SUM ALLOWANCES AND COMMISSION ON SALE PAYABLE TO MANAGE D COMPANY, IN VIEW OF HEAVY FINANCIAL LOSSES SUFFERED BY THE MANAGED COMPANY AND THE HON'BLE SUPREME COURT HELD THAT THE AMOUNTS OF COMMISSION WERE RELINQUISHED AFTER THEY HAD BECOME DUE BUT BEFORE THEY WERE PAYABLE IN TERMS OF THE MANAGING AGENCIES AGREEMENT AND SINCE THE AMOUNTS OF INCOME FOR YEARS IN QUESTION WERE GIVEN UP UNILATERALLY BY THE ASSESSEE AFTER THEY HAD ACCRUED TO IT, THE ASSESSEE COMPANY COULD NOT ESCAP E THE LIABILITY OF TAX LIABILITY FOR THOSE AMOUNTS AND SINCE THERE WAS NOTHING TO SHOW THAT THE AMOUNTS WERE RELINQUISHED ON THE BASI S OF COMMERCIAL EXPEDIENCY OR FOR ADVANCING ASSESSEES B USINESS INTEREST, IT WAS HELD THAT THE ASSESSEE WAS NOT ENT ITLED TO CLAIM DEDUCTION OF THE SAID AMOUNT AS BUSINESS EXPENDITUR E U/S 10(2)(XV) OF THE 1922 ACT. 5. IN THE CASE OF STATE BANK OF TRAVANCORE (CITED S UPRA), WE FIND THAT THE HON'BLE APEX COURT HAS LAID DOWN T HE FOLLOWING PRINCIPLES FOR RECOGNITION OF INCOME: (1) IT IS THE INCOME WHICH HAS REALLY ACCRUED OR AR ISEN TO THE ASSESSEE THAT IS TAXABLE. WHETHER THE INCOME HAS REALLY ACCRUED OR ARISEN TO THE ASSESSEE MUST B E JUDGED IN THE LIGHT OF THE REALITY OF THE SITUATION . (2) THE CONCEPT OF REAL INCOME WOULD APPLY WHERE TH ERE HAS BEEN A SURRENDER OF INCOME WHICH IN THEORY MAY HAVE ACCRUED BUT IN THE REALITY OF THE SITUATION NO INCOME HAD RESULTED BECAUSE THE INCOME DID NOT REAL LY ACCRUE. ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 6 OF 10 (3) WHERE A DEBT HAS BECOME BAD, DEDUCTION IN COMPLIANCE WITH THE PROVISIONS OF THE ACT SHOULD BE CLAIMED AND ALLOWED. (4) WHERE THE ACT APPLIES, THE CONCEPT OF REAL INCO ME SHOULD NOT BE SO READ AS TO DEFEAT THE PROVISIONS O F THE ACT. (5) IF THERE IS ANY DIVERSION OF INCOME AT SOURCE U NDER ANY STATUTE OR BY OVERRIDING TITLE, THEN THERE IS N O INCOME TO THE ASSESSEE. (6) THE CONDUCT OF THE PARTIES IN TREATING THE INCOME I N A PARTICULAR MANNER IS MATERIAL EVIDENCE OF THE FAC T WHETHER INCOME HAS ACCRUED OR NOT. (7) MERE IMPROBABILITY OF RECOVERY, WHERE THE CONDU CT OF THE ASSESSEE IS UNEQUIVOCAL, CANNOT BE TREATED AS EVIDENCE OF THE FACT THAT INCOME HAS NOT RESULTED O R ACCRUED TO THE ASSESSEE. AFTER DEBITING THE DEBTOR' S ACCOUNT AND NOT REVERSING THAT ENTRY, BUT TAKING TH E INTEREST MERELY IN SUSPENSE ACCOUNT, CANNOT BE SUCH EVIDENCE TO SHOW THAT NO REAL INCOME HAS ACCRUED TO THE ASSESSEE OR HAS BEEN TREATED AS SUCH BY THE ASSESSEE. (8) THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICA BLE IN JUDGING WHETHER THERE HAS BEEN INCOME OR NOT, BUT I N EVERY CASE IT MUST BE APPLIED WITH CARE AND WITHIN WELL- RECOGNISED LIMITS, AND MUST NOT BE CALLED IN AID TO DEFEAT THE FUNDAMENTAL PRINCIPLES OF LAW OF INCOME- TAX AS DEVELOPED. 6. WE FIND THAT IN THE CASE ON HAND, IT WAS NOT A UNILATERAL ACTION OF THE ASSESSEE OF RELINQUISHING ITS RIGHT TO RECEIVE THE LEASE RENTALS. IN FACT, IT WAS ON ACCOU NT OF A DISPUTE RAISED BY THE PAYER AS EARLY AS 17.8.2007 AND THE D ISPUTE ALSO HAD TRAVELLED UP TO THE COURTS. THE HON'BLE SUPREME COURT IN THE CASE OF GODHRA ELECTRICITY CO. LTD VS. CIT REPORTED IN (1997) 225 ITR 0746 AFTER CONSIDERING THE PRINCIPLES OF REAL I NCOME THEORY LAID DOWN IN THE CASE OF STATE BANK OF TRAVANCORE ( CITED SUPRA) HAS HELD AS UNDER: ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 7 OF 10 7. IF THE MATTER IS EXAMINED IN THE LIGHT OF THE AFORE MENTIONED PRINCIPLES LAID DOWN BY THIS COURT, IT MUST BE HELD THAT EVEN THOUGH THE ASSESSEE-COMPANY WAS FOLLOWING THE MERCA NTILE SYSTEM OF ACCOUNTING AND HAD MADE ENTRIES IN THE BO OKS REGARDING ENHANCED CHARGES FOR THE SUPPLY MADE TO T HE CONSUMERS, NO REAL INCOME HAD ACCRUED TO THE ASSESS EE- COMPANY IN RESPECT OF THOSE ENHANCED CHARGES IN VIE W OF THE FACT THAT SOON AFTER THE ASSESSEE-COMPANY DECIDED T O ENHANCE THE RATES IN 1963 REPRESENTATIVE SUITS (CIVIL SUIT NOS. 152 OF 1963 AND 50 OF 1964) WERE FILED BY THE CONSUMERS WH ICH WERE DECREED BY THE TRIAL COURT AND WHICH DECREE WAS AFF IRMED BY THE APPELLATE COURT AND THE LEARNED SINGLE JUDGE OF THE HIGH COURT AND IT IS ONLY ON 3-12-1968 THAT THE LETTERS PATENT APPEALS FILED BY THE ASSESSEE-COMPANY WERE ALLOWED BY THE DIVISION BENCH OF THE HIGH COURT AND THE SAID SUITS WERE DISMISSED. BUT APPEALS WERE FILED AGAINST THE SAID JUDGMENT BY THE CONSUMERS IN THIS COURT AND THE SAME WERE DISMI SSED BY THE JUDGMENT OF THIS COURT DATED 26-2-1969. SHORTLY THEREAFTER, ON 19-3-1969, THE UNDER SECRETARY TO THE GOVERNMENT OF GUJARAT WROTE A LETTER ADVISING THE ASSESSEE-COMPAN Y TO MAINTAIN THE STATUS QUO FOR THE RATES TO THE CONSUM ERS FOR AT LEAST SIX MONTHS AND THE CHIEF ELECTRICAL INSPECTOR WAS DIRECTED TO GO THROUGH THE ACCOUNTS OF THE ASSESSEE -COMPANY FROM YEAR TO YEAR AND TO REPORT TO THE GOVERNMENT A BOUT THE ACTUAL POSITION ABOUT THE REASONABLE RETURNS EARNED BY THE ASSESSEE-COMPANY. ON 16-5-1969 ANOTHER REPRESENTIVE SUIT (SUIT NO. 118 OF 1969) WAS FILED BY THE CONSUMERS W HEREIN INTERIM INJUNCTION WAS GRANTED BY THE COURT AND WHI CH WAS FINALLY DECREED IN FAVOUR OF THE CONSUMERS ON 23-6- 1974. IT WOULD THUS APPEAR THAT AFTER THE DECISION WAS TAKEN BY THE ASSESSEE-COMPANY TO ENHANCE THE CHARGES IT WAS NOT ABLE TO REALISE THE ENHANCED CHARGES ON ACCOUNT OF PENDENCY OF THE EARLIER REPRESENTATIVE SUITS OF THE CONSUMERS FOLLO WED BY THE LETTER OF THE UNDER SECRETARY TO THE GOVERNMENT OF GUJARAT AND THE SUBSEQUENT SUIT OF THE CONSUMERS AND DURING THE PENDENCY OF THE SUBSEQUENT SUIT THE MANAGE- MENT OF THE UNDE RTAKING OF THE ASSESSEE-COMPANY WAS TAKEN OVER BY THE GOVERNME NT OF GUJARAT UNDER THE DEFENCE OF INDIA RULES, AND THE U NDERTAKING WAS SUBSEQUENTLY TRANSFERRED TO THE GUJARAT STATE ELECTRICITY BOARD. IT IS NO DOUBT TRUE THAT THE LETTER ADDRESSED BY TH E UNDER SECRETARY TO THE GOVERNMENT OF GUJARAT TO THE ASSES SEE- COMPANY HAD NO LEGALLY BINDING EFFECT BUT ONE HAS T O LOOK AT THINGS FROM PRACTICAL POINT OF VIEW. [SEE: R.B. JOD HA MAL KUTHIALA'S CASE (SUPRA)]. THE ASSESSEE-COMPANY, BEI NG A LICENSEE, COULD NOT IGNORE THE DIRECTION OF THE STA TE GOVERNMENT WHICH WAS COUCHED IN THE FORM OF AN ADVI CE, ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 8 OF 10 WHEREBY THE ASSESSEE- COMPANY WAS ASKED TO MAINTAIN THE STATUS QUOIOR AT LEAST SIX MONTHS AND NOT TO TA KE STEPS TO RECOVER THE DUES TOWARDS ENHANCED CHARGES FROM THE CONSUMERS DURING THIS PERIOD. BEFORE THE EXPIRY OF THE PERIOD OF SIX MONTHS THE SUBSEQUENT SUIT HAD BEEN FILED BY THE CONSUMERS AND DURING THE PENDENCY OF THE SAID SUIT THE UNDERTAKING OF THE ASSESSEE-COMPANY WAS TAKEN OVER BY THE GOVERNMENT OF GUJARAT UNDER THE DEFENCE OF INDIA RU LES, AND SUBSEQUENTLY IT WAS TRANSFERRED TO THE GUJARAT STATE ELECTRICITY BOARD AND, AS A RESULT, THE ASSES SEE-COMPANY WAS NOT IN A POSITION TO TAKE STEPS TO RECOVER THE ENHANCED CHARGES. 8. THE HIGH COURT HAS OBSERVED THAT THE SUBSEQUENT SUIT THAT WAS FILED ON 16-5-1969 RELATED TO RECOVERY OF ENHAN CED CHARGES FOR THE PERIOD SUBSEQUENT TO 31-3-1969 AND NOT PRIOR THERETO. WE HAVE, HOWEVER, PERUSED THE JUDGMENT OF THE JOINT JUDGE (JUNIOR DIVISION), GODHRA DATED 20-6-1974 IN THE SAID SUIT WHICH WAS ANNEXED AS ANNEXURE 'D' TO THE STATE MENT OF THE CASE. THE SAID JUDGMENT DOES NOT SHOW THAT THE SUIT WAS CONFINED TO THE PERIOD SUBSEQUENT TO 31-3-1969. ON THE OTHER HAND, IT SHOWS THAT THE PLAINTIFFS IN THAT SUIT WER E CHALLENGING THE ENHANCEMENT IN CHARGES MADE IN 1963 HAD SOUGHT A DECLARATION THAT THE ASSESSEE-COMPANY WAS NOT ENTIT LED TO RECOVER MORE THAN 31 PAISE PER UNIT FOR LIGHTS AND FANS AND 20 PAISE PER UNIT FOR MOTIVE POWER AND THE TRIAL COURT , WHILE DECREEING THE SAID SUIT HAD GIVEN A DECLARATION IN THESE TERMS. THE SAID DECLARATION IS NOT CONFINED TO THE PERIOD SUBSEQUENT TO 31-3-1969. 9. THE QUESTION WHETHER THERE WAS REAL ACCRUAL OF I NCOME TO THE ASSESSEE- COMPANY IN RESPECT OF THE ENHANCED CH ARGES FOR SUPPLY OF ELECTRICITY HAS TO BE CONSIDERED BY TAKIN G THE PROBABILITY OR IMPROBABILITY OF REALISATION IN A RE ALISTIC MANNER. IF THE MATTER IS CONSIDERED IN THIS LIGHT, IT IS NOT POSSIBLE TO HOLD THAT THERE WAS REAL ACCRUAL OF INC OME TO THE ASSESSEE-COMPANY IN RESPECT OF THE ENHANCED CHARGES FOR SUPPLY OF ELECTRICITY WHICH WERE ADDED BY THE ITO W HILE PASSING THE ASSESSMENT ORDERS IN RESPECT OF THE ASS ESSMENT YEARS UNDER CONSIDERATION. THE AAC WAS RIGHT IN DEL ETING 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 E NTRIES WERE MADE REPRESENTED ONLY HYPOTHETICAL INCOME AND THE IMPUGNED AMOUNTS AS BROUGHT TO TAX BY THE ITO DID N OT REPRESENT THE INCOME WHICH HAD REALLY ACCRUED TO TH E ASSESSEE- COMPANY DURING THE RELEVANT PREVIOUS YEARS. THE HIG H COURT, IN OUR OPINION, WAS IN ERROR IN UPSETTING THE SAID VIEW OF THE TRIBUNAL. ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 9 OF 10 7. THE DECISIONS RELIED UPON BY THE LEARNED CIT (A) AT PARA 4.5 OF HER ORDER, ALSO CLEARLY ESTABLISH THAT WHERE THERE IS A DISPUTE, THE INCOME WOULD ACCRUE AND WOULD NOT CRYS TALLIZE TILL THE DISPUTE IS SETTLED AND THEREFORE, THE SAME CANNOT B E BROUGHT TO TAX EVEN UNDER MERCANTILE SYSTEM OF ACCOUNTING. IN OUR OPINION, THE DECISIONS RELIED UPON BY THE LEARNED CIT (A) AR E CLEARLY APPLICABLE TO THE FACTS OF THE CASE BEFORE US. IN V IEW OF THE SAME, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) ON THIS ISSUE AND THE REVENUES GROUND OF APPEAL NO.4 FOR T HE A.Y 2010- 11 AND THE ONLY GROUND OF APPEAL FOR THE A.Y 2009-10 ARE REJECTED. 8. AS REGARDS THE GROUNDS 1 TO 3 FOR THE A.Y 2010-11 ARE CONCERNED, WE FIND THEY ARE AGAINST THE ORDER OF TH E CIT (A) IN DELETING THE DISALLOWANCE OF THE INTEREST PAID BY T HE ASSESSEE ON LATE DEPOSIT OF EPF & ESI PAYMENTS. THE CIT (A) HAS HELD THAT THESE ARE COMPENSATORY IN NATURE AND THEREFORE, ALL OWABLE U/S 37(1) OF THE ACT. 9. THE LEARNED DR SUBMITTED THAT THE INTEREST IS PE NAL IN NATURE AND THEREFORE, IS NOT TO BE ALLOWED U/S 37(1 ) OF THE ACT. HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF PRAKASH COTON MILLS (P) LTD VS. CIT REPORTED IN (1993) 67 TAXMANN 546 (S.C) IN SUPPORT OF HIS CONTE NTIONS. 10. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED RELIANCE UPON THE ORDER OF THE CIT (A) . ITA NOS 361 OF 2015 AND 1674 OF 2014 APTDC LTD HYDERABAD. PAGE 10 OF 10 11. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE INTEREST IS PAID BY THE ASSESSEE FOR LATE PAYMENT OF PF & ESI TO THE GOVT. A/C AND THEREFORE, IS ONLY COMPENSATORY IN NATURE AND ATTAINS THE NATURE OF TH E PAYMENT ON WHICH THE INTEREST IS PAID. IN FACT, THE HON'BLE SU PREME COURT IN THE CASE OF PRAKASH COTTON MILLS (P) LTD (CITED SUP RA) HAS CLEARLY HELD THAT NO DISALLOWANCE U/S 37(1) CAN BE MADE WIT HOUT EXAMINING THE SCHEME OF PROVISIONS OF THE RELEVANT STATUTE. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE O RDER OF THE CIT (A) ON THIS ISSUE ALSO. 12. IN THE RESULT, REVENUES APPEALS FOR THE A.Y 201 0-11 AND 2009-10 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 27 TH SEPTEMBER, 2017. VINODAN/SPS COPY TO: 1 DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) 7 TH FLOOR, B BLOCK, I.T. TOWERS, A.C. GUARDS, MASAB TANK, HYDERABAD 2 M/S. A.P.TOURISM DEVELOPMENT CORPORATION LTD, H.N O.3.5.891 TOURISM HOUSE, HYDERGUDA, HIMAYATNAGAR, HYDERABAD 5 00029 3 CIT (A)-II HYDERABAD 4 CIT I HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER