The ACIT, Circle-2(1)(2), Ahmedabad V. Maharashtra Eastern Grid Power Transmission Co. Ltd., Ahmedabad

ITA 2142/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0601 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-03-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 27-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH A R S
• Keywords: Depreciation; Competent authority; Tax effect; Condonation of delay; Revenue expenditure
• Section: 115JB; 113; 13; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./I.T.A. NO. 2142/AHD/2017 ( / ASSESSMENT YEAR : 2014-15) THE ACIT CIRCLE-2(1)(2) AHMEDABAD / VS. MAHARASHTRA EASTERN GRID POWER TRANSMISSION CO.LTD. ADANI HOUSE NR.MITHAKHALI SIX ROADS NAVRANGPURA AHMEDABAD ./ ./PAN/GIR NO. : AAGCM 3620D ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIDHYUT TRIVEDI, SR.DR / RESPONDENT BY : SHRI VARTIK CHOKSHI & SHRI BIREN SHAH, ARS /DATE OF HEARING 11/03/2020 / DATE OF PRONOUNCEMENT 13 / 0 3 /20 20 / O R D E R PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)2, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- 2/521/DC.CIR.2(1)(2)/2016-17 DATED 04/07/2017 ARIS ING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 2 - REFERRED TO AS 'THE ACT') DATED 30/12/2016 RELEVANT TO ASSESSMENT YEAR (AY) 2014-15. 2. THE REVENUE HAS RAISED THE FOLLOWING SOLITARY GR OUND OF APPEAL:- 1. THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING THE FAC T THAT SINCE THE ASSESSEE HAS FOLLOWED THE MERCANTILE SYSTEM OF ACCO UNTING, THE RECEIPT SHOULD HAVE BEEN INCLUDED DURING THE YEAR U NDER CONSIDERATION. 2.1. THE REVENUE HAS ALSO RAISED THE REVISED FOLL OWING GROUND OF APPEAL: 1. WHETHER THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.3,47,00,000/- MADE ON ACCOUNT OF ALL EGED SUPPRESSION OF REVENUE WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND MATERIAL BROUGHT ON RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 29 /11/2014 DECLARING LOSS AT (-) RS.126,42,81,675/-. INITIALLY, THE RETURN W AS PROCESSED U/S.143(1) OF THE ACT, BUT THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICE AND SEEKING REPLY OF THE ASSESSEE, ORDER OF ASSESSMENT U/S.143(3) OF THE ACT WAS PASSED ON 30/12/2016 THEREBY MAKING ADD ITIONS ON ACCOUNT OF SUPPRESSION OF REVENUE. 4. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREF ERRED APPEAL BEFORE LD.CIT(A), WHO AFTER CONSIDERING THE CASE OF BOTH T HE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND ADDITIONS MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF REVENUE WAS DELETED. ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 3 - 5. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW T HE REVENUE IS IN APPEAL BEFORE US ON THE GROUND(S) MENTIONED HEREINABOVE. 6. AT THE OUTSET, IT WAS POINTED OUT THAT IN THE AP PEAL FILED BY THE REVENUE IS BARRED BY LIMITATION AND IN THIS RESPECT SEPARATE ADJUDICATION FOR SEEKING CONDONATION OF DELAY HAS BEEN FILED BY THE REVENUE. AS PER THE CONTENTS OF THE SAID APPLICATION, IT WAS SUBMITTED THAT THE PR.COMMISSIONER OF INCOME TAX-2, AHMEDABAD WAS HOLDING THE ADDITIONAL CHARGE OF PR.CIT-I, PR.CIT-V & VI, AHMEDABAD AND ALSO THAT OF CIT(EXEMP TION) DURING THE MONTH OF SEPTEMBER-2017. ACCORDING TO THE REVENUE, THER E WAS TREMENDOUS TIME BARRING JUDICIAL WORKLOAD IN EACH OF THESE CHARGES, WHICH REQUIRED THOROUGH AND DILIGENT STUDY AND BECAUSE OF THE WORK PRESSURE THE PRESENT APPEAL COULD NOT FILE WITHIN LIMITATION AND THUS THERE WAS DELAY OF 10 DAYS FOR FILING THE APPEAL. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES FOR BO TH THE PARTIES. WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD. I N THE INSTANT CASE, WE FIND THAT REASON MENTIONED IN THE APPLICATION ARE SUFFIC IENT CAUSE AND, THEREFORE, KEEPING THE PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT PRONOUNCED IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST.KATIJI & ORS. REPORTED AS 62 CTR 23 (S.C.) :: 1987 AIR 1353 (SC), THE DELAY IS HEREB Y CONDONED AND APPEAL IS ADMITTED FOR HEARING. ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 4 - 6. THE SOLITARY GROUND RAISED BY THE REVENUE RELATE S TO CHALLENGING THE ORDER OF CIT(A) IN DELETING THE ADDITIONS MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF REVENUE BY THE ASSESSEE. 7. THE LD.DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND THE RELEVANT EXTRACT OF THE ASSESSMENT ORDER ARE CONTAI NED IN PARA-2.1 OF LD.CIT(A)S ORDER WHICH IS REPRODUCED BELOW:- 2.1. ASSESSING OFFICER'S FINDINGS :- THE RELEVANT EXTRACTS FROM THE ASSESSMENT ORDER ARE REPRODUCED HERE UNDER:- '3. ADDITION ON A/C OF SUPPRESSION OF REVENUE 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE NOTE NO. 19 TO THE BALANCE SHEET FURNISHED BY THE A SSESSEE IT IS SEEN THAT THE ASSESSEE HAS SHOWN UNBILLED RECEIVABLE OF RS. 50,24 ,00,000/- UNDER THE HEAD OF 'OTHER CURRENT ASSETS. FURTHER, ON PERUSAL OF N OTE NO. 30(I) OF THE AUDITED FINANCIAL STATEMENTS IT IS SEEN THAT THE ASSESSEE H AS STATED AS UNDER: ' REVENUE FROM TRANSMISSION LINE ARE ACCOUNTED FOR' ON THE BASIS OF SUBMISSION OF MULTI YEAR TARIFF ORDER WITH THE MAHA RASHTRA ELECTRICITY REGULATORY COMMISSION FOR THE YEAR ENDED 2013-14 AN D INCLUDES UNBILLED REVENUES ACCRUED UPTO THE END OF THE ACCOU NTING YEAR. 3.2 HENCE, VIDE ORDER SHEET ENTRY DATED 09.11.2016, THE ASSESSEE WAS REQUESTED TO FURNISH THE DETAILS OF BILL RAISED AND COPY OF FIRST BILL. IN RESPONSE, THE ASSESSEE FILED A REPLY ON 28.11.2016 RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER: 'IN THIS REGARD WE SUBMIT THAT DURING THE YEAR UNDE R CONSIDERATION THE ASSESSEE COMPANY HAS BOOKED THE ACCRUED INCOME FROM TRANSMISSION LINES OF RS.50.24 CRORES. THE REVENUE IS BASED ON VARIOUS PARAMETERS AND FOR WHICH THE ASSESSEE COMPA NY HAS ALSO FILED THE PETITION FOR APPROVAL OF AGGREGATE REVENU E REQUIREMENT AND ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 5 - DETERMINATION OF MULTI YEAR TARIFF FOR THE SECOND C ONTROL PERIOD TO MAHARASHTRA ELECTRICITY REGULATORY COMMISSION (MERC ). KINDLY FIND ATTACHED HEREWITH COPY OF PETITION WITH AUTHORITIES FOR APPROVAL. ON PERUSAL OF PAGE NO.88 OF THE SAID PETITION FILED YO UR GOODSELF WILL FIND THE PROJECTIONS OF REVENUE FOR THREE CONSECUTIVE YE ARS I.E. FOR F.Y. 2013-14, F.Y.2014-15 AND F. Y. 2015-16. THE PROJECT ION IS BASED ON VARIOUS PARAMETERS AND FOR F. Y.2013-14 AND THE REV ENUE IS BOOKED ACCORDINGLY TO RS. 50.24 CRORES. IN NUTSHELL, THE ASSESSEE HAS COMPLETED VARIOUS TRA NSMISSION FINES ON 23.02.20J4 FOR WHICH THE DETAILS IS SUBMITTED HEREI N BELOW IN POINT NO.5 AND THE REVENUE OF RS.50.24 CRORES IS MADE ON PROJECTION OF REVENUE OF THE SAID LINES WHICH REQUIRED THE APPROV AL BY THE MAHARASHTRA ELECTRICITY REGULATORY COMMISSION. THE BILLS ARE RAISED ONLY IN NEXT YEAR I.E. FROM F. Y. 2014-15 AFTER THE APPROVAL OF THE COMMISSION IS RECEIVED. 3.3 ON PERUSAL OF PAGE 88 OF THE PETITION FOR APPRO VAL OF AGGREGATE REVENUE REQUIREMENT AND DETERMINATION OF MULTI YEAR TARIFF (MYT) FOR THE SECOND CONTROL PERIOD FROM F.Y. 2015-16 BEFORE THE MAHARAS HTRA ELECTRICITY REGULATOR} COMMISSION (MERC) IT IS SEEN THAT THE NE T AGGREGATE REVENUE REQUIREMENT FOR THE F.Y. 2013-14 IS OF RS. 61.60 CR ORES. THE RELEVANT PORTION OF THE PAGE 88 IS REPRODUCED AS UNDER: S.XO PARTICULARS FY 13 - 14 FY 14 - 15 FY 15 - 16 5 OTHER EXPENSES 0.50 0.75 1.00 6 INCOME TAX EXPENSE 2.84 34.32 73.36 7 CONTRIBUTION TO CONTINGENCY RESERVES 11.36 13.97 29.74 8 TOTAL REVENUE EXPENDITURE 50.88 482.78 984.75 9 RETURN ON EQUITY CAPITAL 10.71 129.41 276.61 10 AGGREGATE REVENUE REQUIREMENT 61.60 612.19 1,261.36 11 LESS: NON - TARIFF INCOME - 0.50 1.61 12 LESS: INCOME FROM OTHER BUSINESS - - 13 NET AGGREGATE REVENUE REQUIREMENT 61.60 611.69 1,259.74 ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 6 - 3.4 HENCE, VIDE ORDER SHEET ENTRY DATED 14.12.2016, THE ASSESSEE WAS REQUESTED TO SHOW CAUSE AS TO WHY THE UNBILLED REVE NUE SHOULD NOT BE TAKEN TO RS. 61.60 CRORES AS FOR WHICH THE BILL IS TO BE RAISED. THE ASSESSEE WAS ALSO REQUESTED TO EXPLAIN WHY REVENUE TO BE RECOGNI ZED IN THE YEAR UNDER CONSIDERATION WHEN FIRST BILL IS RAISED ON 01.09.20 14 AS PER ORDER OF MERC. IN RESPONSE THE ASSESSEE FURNISHED A REPLY ON 12.12.20 16, RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER: 'IN THIS REGARD, WE WISH TO REITERATE THAT THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF SETTING UP, OPERATION AND MAINTENAN CE OF POWER TRANSMISSION LINES. IN THE YEAR UNDER CONSIDERATION, THE ASSESSE E COMPANY HAS EARNED INCOME FROM TRANSMITTING POWER BY OPERATING AND MAI NTAINING TRANSMISSION LINES IN THE STATE OF MAHARASHTRA. IT IS TO BE NOTE D THAT THE TARIFF CHARGED BY THE ASSESSEE COMPANY FOR TRANSMITTING POWER THROUGH ITS TRANSMISSION LINES IS REGULATED BY MAHARASHTRA ELECTRICITY REGULATORY COM MISSION (HEREIN AFTER REFERRED TO AS 'MERC'). AS PER REGULATION 16,18 & P ART G OF MAHARASHTRA ELECTRICITY REGULATORY COMMISSION (MULTI YEAR TARIF F) REGULATION, 2011, THE ASSESSEE COMPANY BEING TRANSMISSION LICENSEE WAS RE QUIRED TO SUBMIT MULTI YEAR TARIFF (HEREIN AFTER REFERRED TO AS 'MYT') PET ITION FOR THE SECOND CONTROL PERIOD I.E. F.Y.2013-14 TO F.Y. 2015-16. ACCORDINGLY, THE ASSESSEE COMPANY SUBMITTED THE MYT PETITION FOR THE SECOND CONTROL PERIOD I.E. F.Y.2013-14 TO F.Y.2015- 16 TO MERC ON 5 TH MARCH, 2014. I.E. BEFORE APPROVAL OF THE FINANCIAL STATEMENTS BY THE BOARD OF DIRECTORS. THE ASSESSEE COMPANY ALSO SUBMITTED REVI SED MYT PETITION ALONG WITH ANNEXURES AND DATA FORMATS CONSIDERING THE DAT A GAPS POINTED OUT BY THE MERC. KINDLY FIND ATTACHED HEREWITH THE MYT PET ITION SUBMITTED BY THE ASSESSES COMPANY. (ANNEXURE-1). ON PERUSAL OF PAGE NO 88 OF THE MYT PETITION YOUR GOOD SELF WOULD FIND THAT THE ASSESSE E COMPANY HAD WORKED OUT AGGREGATE REVENUE REQUIREMENT (ARR) CLAIM FOR T HE YEAR UNDER CONSIDERATION AT RS 61.60 CRORES, HOWEVER, WHILE RE COGNIZING REVENUE IN THE BOOKS OF ACCOUNT AS PER PREVALENT MYT REGULATION, T HE ASSESSEE COMPANY RECOGNIZED REVENUE OF RS 50.24 CRORES ONLY AS THIS BEING 1ST YEAR OF REVENUE RECOGNITION SUBJECT TO APPROVAL OF MERC, IF CONSERV ATIVELY DID NOT CONSIDER REVENUE CONTRIBUTION TO CONTINGENCY RESERVE OF RS 1 1.36 CROWS. THUS RECOGNIZED, NET INCOME OF RS 50.24 CRORES (61.60 CR ORES- 11.36 CRORES). THIS FACT IS EVIDENT ON PERUSAL OF PAGE NO 88 MYT PETITI ON SUBMITTED VIDE ANNEXURE-1 OF THIS SUBMISSION. PURSUANT TO SUBMISSION OF MYT PETITION FOR THE SECO ND CONTROL PERIOD I.E. F.Y.2013-14 TO F.Y.2015-16 BY THE ASSESSEE COMPANY, MERC ISSUED ORDER ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 7 - DATED 8TH AUGUST, 2014 APPROVING AGGREGATE REVENUE REQUIREMENT (ARR) CLAIM OF RX 53.71 CRORES FOR THE F.Y.2013-14 AS AGA INST RS 50.24 CRORES RECOGNIZED AS REVENUE IN THE P&L ACCOUNT IN THE YEA R UNDER CONSIDERATION. KINDLY FIND ATTACHED HEREWITH COPY OF ORDER DATED 8 TH AUGUST. 2014 OF MERC. (ANNEXURE-2) IT IS WORTHWHILE TO NOTE THAT POST DETERMINATION OF ARR VIDE ORDER DATED 8 TH AUGUST, 2014, THE MERC SUO-MOTU MADE AMENDMENT TO A RR OF ALL TRANSMISSION LICENSEE AND ISSUED FINAL ORDER ON 14T H AUGUST. 2014, THE COPY OF WHICH IS ATTACHED HEREWITH VIDE ANNEXURE-3. WE W OULD LIKE TO DRAW YOUR GOOD SELFS ATTENTION TO PAGE NO 10 OF THE SAID ORDE R WHEREIN THE MERC HAS FINALLY DETERMINED ARR OF F.Y.2013-14 AT RS 53.71 C RORES AS AGAINST RS 50.24 CRORES RECOGNIZED IN THE P&L ACCOUNT OF THE Y EAR UNDER CONSIDERATION. IN VIEW OF ABOVE, IT IS SUBMITTED THAT THOUGH THE A SSESSEE COMPANY HAS RECOGNIZED RS 50.24 CRORES AS UNBILLED REVENUE IN T HE P&L ACCOUNT OF THE YEAR UNDER CONSIDERATION IN TERMS OF MERC REGULATIO NS, ITS CLAIM HAS BEEN ALLOWED BY THE MERC, AN ELECTRICITY REGULATOR IN TH E STATE OF MAHARASHTRA. FURTHER, IT IS TO BE NOTED THAT AS PER PARA 40 OF M ERCS ORDER DATED I4LH AUGUST, 2014, THE ARR APPROVED BY MERC I.E. RS 53.7 1 CRORES CAN BE COLLECTED BY THE ASSESSEE COMPANY BY ISSUING MONTHL Y INVOICES ON STALE TRANSMISSION UTILITY (STU) I.E. MAHARASHTRA STATE E LECTRICITY TRANSMISSION CO LTD (HEREIN AFTER REFERRED TO AS 'MSETCL '). IN VIEW OF ABOVE, WE SUBMIT THAT THE ASSESSEE COMPA NY HAS RIGHTLY RECOGNIZED UNBILLED REVENUE OF RS 50.24 CRORES BEIN G INCOME FROM TRANSMITTING POWER THROUGH ITS TRANSMISSION LINES I N TERMS OF THE PREVALENT MYT REGULATION WHICH HAS BEEN DULY APPROVED BY MERC, AN ELECTRICITY REGULATOR IN THE STATE OF MAHARASHTRA. WE AR E SUBMITTING HEREWITH INVOICES ISSUED FOR THE ARR APPROVED FAR F.Y.2013-1 4 & F.Y.2014-15 BY MERC FOR YOUR GOOD SELF'S READY REFERENCE. (ANNEXUR E-4) ACCORDINGLY, WE SUBMIT THAT THE UNBILLED REVENUE OF RS 50.24 CRORES RECOGNIZED IN THE YEAR UNDER CONSIDERATION WAS BILL ED BY THE ASSESSEE COMPANY TO MSETCL AS PER THE ORDER OF MERC, AN ELEC TRICITY REGULATOR IN THE SLATE OF MAHARASHTRA. HENCE, WE SUBMIT THAT THE ASS ESSEE COMPANY HAS CORRECTLY RECOGNIZED REVENUE OF RS 50.24 CRORES IN THE YEAR UNDER CONSIDERATION BY FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING AND HAVING REGARD TO MERC MYT REGULATION. FURTHER, WE WISH TO SUBMIT THAT THE ASSESSEE COMPANY HAS BEEN CONSISTENTLY FOLLOWING TH E ABOVE MENTIONED METHOD OF REVENUE RECOGNITION YEAR ON YEAR BASIS. ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 8 - 3.5 FURTHER, THE ASSESSEE FURNISHED ANOTHER REPLY O N 15.12.2016, RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER: '1.1 IN CONTINUATION TO OUR SUBMISSION DATED 12TH D ECEMBER, 2016 EXPLAINING IN DETAIL THE BASIS OF REVENUE OF RS 50. 24 CRORES RECOGNIZED IN THE YEAR UNDER CONSIDERATION, YOUR GOOD SELF HAS SOUGHT FURTHER EXPLANATION AS TO WHETHER MYT PETITION FILED WITH MERC SUBMITTED TO Y OUR GOODSELF VIDE ABOVE REFERRED SUBMISSION IS AN ORIGINAL MYT PETITION OR REVISED MYT PETITION. 1.2 IN THIS REGARD, WE WOULD LIKE TO CLARIFY THAT T HE MYT PETITION FURNISHED TO YOUR GOOD-SELF VIDE ANNEXURE-L OF OUR REPLY DATED 1 2TH DECEMBER, 2016 IS AN ORIGINAL VERSION OF MYT PETITION FILED WITH MERC. F URTHER, WE WOULD LIKE TO CLARIFY THAT THE DATA GAPS POINTED OUT BY MERC IN T HE ORIGINAL VERSION OF MYT PETITION WERE FURNISHED THROUGH VARIOUS SUBMISSIONS AND HENCE, THIS WAS THE ONLY VERSION OF MYT PETITION SUBMITTED TO MERC BY T HE ASSESSEE COMPANY. 2.1 FURTHER, ON PERUSAL OF MYT PETITION SUBMITTED T O MERC AND ORDERS OF MERC DATED 8TH AUGUST, 2014 AND 14TH AUGUST, 2014, YOUR GOOD SELF HAS RAISED A QUERY AS TO WHY INCOME OF THE YEAR UNDER C ONSIDERATION SHOULD NOT BE CONSIDERED AS RS 61.60 CRORES AS CLAIMED IN THE MYT PETITION FILED WITH MERC AS AGAINST INCOME OF RS 50.24 CRORES AS RECOGN IZED IN THE P&L ACCOUNT OF THE YEAR UNDER CONSIDERATION. 2.2 AT THE OUTSET, WE WISH TO REITERATE THAT MERC H AS VIDE ORDER DATED 8TH AUGUST, 2014 APPROVED AGGREGATE REVENUE REQUIREMENT (ARR) CLAIM OF THE ASSESSEE COMPANY AT RS 53.71 CRORES FOR THE F.Y.201 3-14 AS AGAINST RS 61.10 CRORES AS CLAIMED IN THE MYT PETITION FILED B Y THE ASSESSEE COMPANY. THE COPY OF THE SAID ORDER OF MERC IS ALREADY PLACE D ON RECORD. ALSO WE WOULD LIKE TO DRAW YOUR GOOD SELF'S ATTENTION TO PA GE NO 10 OF THE MERC'S ORDER DATED 14 TH AUGUST, 2014 WHEREIN THE MERC HAS FINALLY DETERMIN ED ARR OF F.Y.2013-14 AT RS 53.71 CRORES AS AGAINST RS 61. 10 CRORES AS CLAIMED IN THE MYT PETITION FILED BY THE ASSESSEE COMPANY. 2.3 IN VIEW OF ABOVE, WE SUBMIT THAT THE CLAIM OF A RR OF RS 61.10 CRORES MADE IN THE MYT PETITION BY THE ASSESSEE COMPANY WA S RESTRICTED TO RS 53.71 CRORES BY THE MERC VIDE FINAL ARR DETERMINATI ON ORDER DATED 14TH AUGUST, 2014. ACCORDINGLY, WE HUMBLY SUBMIT THAT YO UR GOOD SELF S PROPOSAL TO CONSIDER ARR OF THE YEAR UNDER CONSIDERATION AS RS 61.10 CRORES AS AGAINST RS 53.71 CRORES AS APPROVED BY THE MERC IS NOT TENABLE AS IT AMOUNTS TO TAXING INCOME WHICH THE ASSESSEE COMPANY IS NOT GOING TO RECEIVE AT ALL AS PER MERC ORDER DATED 14TH AUGUST, 2014. ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 9 - 2.4 FURTHER, WE WISH TO POINT OUT THAT IN CASE YOUR GOOD SELF INTENDS TO ADD RS 3.47 CRORES (RS 53.71 CRORES- RS 50.24 CRORES) B EING DIFFERENCE OF ARR AS PER MERC ORDER AND AS RECOGNIZED IN THE P&L ACCOUNT TO THE TOTAL INCOME OF THE ASSESSEE COMPANY OF THE YEAR UNDER CONSIDERATIO N, IT WOULD BE TAX NEUTRAL AND FUTILE EXERCISE AS THE ASSESSEE COMPANY HAS OFFERED FOR TAX RS 3.47 CRORES IN THE IMMEDIATELY SUCCEEDING ASSESSMEN T YEAR I.E. A.Y.20I5-I6 IN VIEW OF PARA 40 OF THE MERC ORDER DATED 14TH AUG UST, 2014 AND HENCE, WHILE ASSESSING INCOME OF THE IMMEDIATELY SUCCEEDIN G YEAR, THE SAID INCOME OF RS 3.47 CRORES WOULD BE REQUIRED TO BE REDUCED. THE COPY OF INVOICES RAISED BY THE ASSESSEE COMPANY IN COMPLIANCE WITH O RDER OF MERC RECOGNIZING THE REVENUE OF RS 53.71 CRORES ARE ALRE ADY PLACED ON RECORD VIDE ANNEXURE-4 OF OUR SUBMISSION DATED 12TH DECEMBER, 2 016. ALSO WE REQUEST YOUR GOOD SELF NOT TO DISTURB THE ACCOUNTING POLICY ON REVENUE RECOGNITION FOLLOWED BY THE ASSESSEE COMPANY AS APART FROM IT B EING TAX/REVENUE NEUTRAL EXERCISE IT WOULD LEAD TO ADJUSTMENT OF INCOME FOR TAX PURPOSE IN SUBSEQUENT YEARS. ALSO IT IS WORTHWHILE TO NOTE THAT THE ASSES SEE COMPANY HAS BEEN PAYING MAT YEAR ON YEAR BASIS AS ITS INCOME UNDER N ORMAL PROVISIONS OF TAX IS ELIGIBLE FOR TAX HOLIDAY U/S 80-IA OF THE IT ACT . ACCORDINGLY, WE SUBMIT THAT SUCH ADJUSTMENT TO TAXABLE INCOME UNDER NORMAL PROV ISIONS WOULD BE TAX NEUTRAL AS THE MAT LIABILITY OF EACH YEAR WOULD NOT BE AFFECTED.' 3.6 THE CONTENTION OF THE ASSESSEE IS CONSIDERED BU T NOT FOUND TO BE ACCEPTABLE. THE ASSESSEE HAS SHOWN UNBILLED REVENUE AT RS. 50.24 CRORES WHEREAS IT HAD APPLIED FOR NET AGGREGATE REVENUE OF RS. 61.60 CRORES BEFORE THE MRKC FOR THE F.Y. 2013-14. SO THE ASSESSEE SHOU LD HAVE SHOWN THE UNBILLED REVENUE AT RS, 61.60 CRORES DURING THE F.Y . 2013-14 AND ON PASSING OF ORDER BY THE MRIX THE ASSESSEE SHOULD HAVE ADJUS TED ITS REVENUE ACCORDINGLY. FURTHER, IT IS GATHERED FROM THE PAGE NO. 62 & 63 OF THE ORDER OF THE MAHARASHTRA ELECTRICITY REGULATOR) COMMISSION ( MERC) DATED 08.08.2014 THAT THE COMMISSION HAS CONSIDERED AGGREGATE REVENU E REQUIREMENT OF RS. 53.71 CRORES IN THE CASE OF THE ASSESSEE AS AGAINST THE PETITION OF RS. 61.60 CRORES. THE RELEVANT PORTION OF PAGES 62 & 63 OF TH E SAID ORDER IS REPRODUCED AS UNDER : SR. NO. PARTICULARS FY 2013 - 14 FY 20 14 - 15 FY 2015 - 16 1 OPERATION & MAINTENANCE EXPENSES (INCLUDING LEASE RENTALS) 4.71 51.48 99.20 ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 10 - 2 DEPRECIATION EXPENSES 11.75 142.22 300.16 3 INTEREST ON LONG - TERM LOAN CAPITAL 17.68 216.18 424.98 4 INTEREST ON WORKING CAPITAL AND ON 0.98 11.51 23.98 5 OTHER EXPENSES 0.00 0.00 0.00 6 INCOME TAX 2.75 30.17 70.35 7 CONTRIBUTION TO CONTINGENCY RESERVES 5.49 6.76 14.33 8 TOTAL REVENUE EXPENDITURE 43.36 458.32 933.00 9 RETURN ON EQUITY CAPITAL 10.36 113.75 265.29 10 AGGREGATE REVENUE REQUIREMENT 53.71 572.07 1198.28 11 LESS: NON TARIFF INCOME 0.00 0.24 0.78 12 NET AGGREGATE REVENUE 53.71 571.83 1197.50 37 FROM THE ABOVE SAID ORDER OF THE MERC IT IS CLEA R THAT THE COMMISSION CONSIDERED THE REVENUE OF RS. 53.71 CRORES AND THE ASSESSEE HAS SHOWN REVENUE AT RS. 50.24 CRORES. FURTHER, THE ASSESSEE IS MAINTAINING ITS BOOKS OF ACCOUNT ON MERCANTILE BASIS. AS PER MERCANTILE SYST EM ANY AMOUNT DUE OR ACCRUED AND DEEMED TO ACCRUED IS TO BE OFFERED TO T AX. ON BASIS OF MERCANTILE SYSTEM THE ASSESSEE HAS OFFERED REVENUE OF RS.50.24 CRORES IN ITS PROFIT & LOSS ACCOUNT. HENCE, THE ASSESSEE HAS SUPP RESSED ITS PROFIT BY RS. 3.47 CRORES WHICH THE ASSESSEE SHOULD HAVE SHOWN IN THE RETURN OF INCOME. AGAINST THE CLAIM OF RS. 61.60 CRORES AS THE COMMIS SION HAS CONSIDERED THE REVENUE AT RS. 53.71 CRORES ONLY. ACCORDINGLY, THE DIFFERENCE OF RS. 3.47 CRORES WHICH HAS NOT BEEN SHOWN BY THE ASSESSEE IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE.' 8. ON THE OTHER HAND, LD.AR RELIED UPON THE ORDER P ASSED BY THE CIT(A) AND REITERATED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE THE CIT(A) WHICH ARE CONTAINED IN PARA-2.2 OF THE ORDER OF THE LD.CIT(A) AND THE SAME IS REPRODUCED BELOW:- 2.2. APPELLANT'S SUBMISSION :- THE RELEVANT EXTRACTS FROM THE SUBMISSION OF THE APPELLANT IS REPRODUCED HERE UNDER:- ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 11 - '1. THE ONLY ADDITION WHICH IS THE SUBJECT MATTER O F THIS APPEAL IS A SUM OF RS.3,47,00,000 ADDED BY THE ASSESSING OFFICER ON TH E GROUND OF SO-CALLED SUPPRESSION OF REVENUE AS PER PARA-5 OF THE ASSESSM ENT ORDER. THE RELEVANT FACTS LEADING TO THIS ADDITION ARE THAT THE APPELLA NT-COMPANY IS ENGAGED IN THE BUSINESS OF ESTABLISHING, COMMISSIONING, SETTIN G UP, OPERATING AND MAINTAINING ELECTRIC-POWER TRANSMISSION SYSTEM/NETW ORK/POWER SYSTEMS/ GENERATING STATIONS IN THE STATE OF MAHARASHTRA. TH E TARIFF CHARGED BY THE APPELLANT-COMPANY FOR TRANSMITTING POWER THROUGH IT S TRANSMISSION LINE IS REGULATED BY MAHARASHTRA ELECTRICITY REGULATORY COM MISSION (MERC). DURING THE YEAR THE APPELLANT-COMPANY HAS SHOWN A SUM OF R S.50,24,00,000 AS INCOME BY WAY OF UNBILLED RECEIVABLE UNDER THE HEAD 'OTHER CURRENT ASSETS'. AS PER THE REGULATIONS OF MERC, THE APPELLANT-COMPA NY WAS REQUIRED TO SUBMIT MULTI YEAR TARIFF (MYT) PETITION FOR THE SEC OND CONTROL PERIOD BEING FINANCIAL YEARS 2013-14 TO 2015-16. ACCORDINGLY, TH E APPELLANT-COMPANY SUBMITTED MYT PETITION TO MERC ON 5 TH MARCH, 2014. AT PAGE-88 OF THIS PETITION THE APPELLANT-COMPANY WORKED OUT AGGREGATE REVENUE REQUIREMENT (ARR) CLAIM FOR THE YEAR UNDER APPEAL AT A SUM OF R S.61.60 CRORES. THIS WAS PENDING FOR FINAL VERIFICATION AND APPROVAL OF MERC AND, THEREFORE, WHILE RECOGNIZING REVENUE IN THE BOOKS OF ACCOUNT AS PER PREVALENT MYT REGULATION THE APPELLANT-COMPANY EXCLUDED THE SUM OF RS.11.36 CRORES BEING CONTRIBUTION TO CONTINGENCY RESERVE FROM THE TOTAL CLAIM OF RS.61.60 CRORES WITH THE RESULT THAT, AS MENTIONED ABOVE, REVENUE O F RS.50.24 ONLY WAS RECOGNIZED WHILE FILING THE RETURN OF INCOME AND TH E SAME WAS INCLUDED IN THE TOTAL INCOME. ULTIMATELY MERC ISSUED ORDER DATE D 8.8.2014 APPROVING AGGREGATE REVENUE REQUIREMENT (ARR) CLAIM OF RS.53. 71 CRORES AS AGAINST RS.50.24 CRORES RECOGNIZED BY THE APPELLANT-COMPANY . THE DIFFERENCE OF RS.3.47 CRORES WAS OFFERED FOR TAXATION WHILE FILIN G THE RETURN OF INCOME WITH THE SUBSEQUENT ASSESSMENT YEAR 2015-16. 2. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER CALLED UPON THE APPELLANT-COMPANY TO EXPLAIN WHY TH E AFORESAID DIFFERENCE OF RS.3.47 CRORES BE NOT ADDED DURING THE PRESENT YEAR . THE APPELLANT-COMPANY FILED DETAILED REPLIES DATED 12.12.2016 AND 15.12.2 016 WHEREIN THE FACTUAL POSITION WAS FULLY EXPLAINED AND IT WAS SUBMITTED T HAT THE PROPOSED ADDITION SHOULD NOT BE MADE ON THE FOLLOWING GROUNDS:- (I) UNTIL THE PETITION OF THE APPELLANT-COMPANY IS FINALLY VERIFIED AND APPROVED BY MERC THE INCOME DOES NOT ACCRUE FOR THE PURPOSES OF THE INCOME-TAX ACT. ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 12 - (II) IN ANY CASE, THE PROPOSED ADDITION IS NOT REQU IRED AS THE SAME IS REVENUE NEUTRAL FOR THE REASON THAT THE SAID DIFFER ENCE HAS ALREADY BEEN ADDED BY THE APPELLANT-COMPANY WHILE FILING TH E RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015-16 AND THUS THE RE IS NO LOSS TO THE REVENUE. (III) THE APPELLANT-COMPANY IS HAVING HUGE LOSSES W HICH IS APPARENT FROM THE RETURNS OF INCOME FILED AND THE ASSESSMENT S MADE AND FOR THIS REASON TAX IS CHARGED UNDER THE PROVISIONS OF MAT. 3. WITH REGARD TO THE RELEVANT FACTUAL POSITION PER TAINING TO THE ADDITION MADE BY THE ASSESSING OFFICER VIS-A-VIS THE LEGAL M ERITS OF THE APPELLANT'S CLAIM, IT WOULD BE APPROPRIATE TO REPRODUCE BELOW T HE RELEVANT PARTS OF THE APPELLANT'S SUBMISSIONS DATED 12.12.2016 AND 15.12. 2016 FILED BEFORE THE ASSESSING OFFICER. (1) SUBMISSIONS DATED 12.12.2016: 'IN THIS REGARD, WE WISH TO REITERATE THAT THE ASSE SSEE COMPANY IS ENGAGED IN THE BUSINESS OF SELLING UP, OPERATION AND MAINTENAN CE OF POWER TRANSMISSION LINES. IN THE YEAR UNDER CONSIDERATION, THE ASSESSE E COMPANY HAS EARNED INCOME FROM TRANSMITTING POWER BY OPERATING AND MAI NTAINING TRANSMISSION LINES IN THE STATE OF MAHARASHTRA. IT IS TO BE NOTE D THAT THE TARIFF CHARGED BY THE ASSESSEE COMPANY FOR TRANSMITTING POWER THROUGH ITS TRANSMISSION LINES IS REGULATED BY MAHARASHTRA ELECTRICITY REGULATORY COM MISSION (HEREIN AFTER REFERRED TO AS 'MERC'). AS PER REGULATION 16, 18 & PART G OF MAHARASHTRA ELECTRICITY REGULATORY COMMISSION (MULTI YEAR TARIF F) REGULATION, 2011, THE ASSESSEE COMPANY BEING TRANSMISSION LICENSEE WAS RE QUIRED TO SUBMIT MULTI YEAR TARIFF (HEREIN AFTER REFERRED TO AS 'MYT') PET ITION FOR THE SECOND CONTROL PERIOD I.E. F. Y.2013-14 TO F. Y.2015-16. ACCORDINGLY, THE ASSESSEE COMPANY SUBMITTED THE MYT PETITION FOR THE SECOND CONTROL PERIOD I.E. F.Y.2013-14 TO F.Y.2015- J6 TO MERC ON 5 TH MARCH. 2014. I.E. BEFORE APPROVAL OF THE FINANCIAL STATEME NTS BY THE BOARD OF DIRECTORS. THE ASSESSEE COMPANY ALSO SUBMITTED REVI SED MYT PETITION ALONG WITH ANNEXURES AND DATA FORMATS CONSIDERING THE DAT A GAPS POINTED OUT BY THE MERC. KINDLY FIND ATTACHED HEREWITH THE MYT PET ITION SUBMITTED BY THE ASSESSEE COMPANY. (ANNEXURE-1). ON PERUSAL OF PAGE NO 88 OF THE MYT PETITION YOUR GOOD SELF WOULD FIND THAT THE ASSESSE E COMPANY HAD WORKED OUT AGGREGATE REVENUE REQUIREMENT (ARR) CLAIM FOR T HE YEAR UNDER CONSIDERATION AT RS 61.60 CRORES. HOWEVER, WHILE RE COGNIZING REVENUE IN THE ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 13 - BOOKS OF ACCOUNT AS PER PREVALENT MYT REGULATION, T HE ASSESSEE COMPANY RECOGNIZED REVENUE OF RS 50.24 CRORES ONLY AS THIS BEING 1 ST YEAR OF REVENUE RECOGNITION SUBJECT TO APPROVAL OF MERC, IT CONSERV ATIVELY DID NOT CONSIDER REVENUE CONTRIBUTION TO CONTINGENCY RESERVE OF RS 1 1.36 CRORES. THUS RECOGNIZED, NET INCOME OF RS 50.24 CRORES (61.60 CR ORES- 11.36 CRORES). THIS FACT IS EVIDENT ON PERUSAL OF PAGE NO 88 MYT PETITI ON SUBMITTED VIDE ANNEXURE-1 OF THIS SUBMISSION. PURSUANT TO SUBMISSION OF MYT PETITION FOR THE SECO ND CONTROL PERIOD I.E. F.Y.2013-14 TO F.Y.2015-16 BY THE ASSESSEE COMPANY, MERC ISSUED ORDER DATED 8 TH AUGUST, 2014 APPROVING AGGREGATE REVENUE REQUIREME NT (ARR) CLAIM OF RS 53.71 CRORES FOR THE F.Y.2013-14 AS AGA INST RS 50.24 CRORES RECOGNIZED AS REVENUE IN THE P&L ACCOUNT IN THE YEA R UNDER CONSIDERATION. KINDLY FIND ATTACHED HEREWITH COPY OF ORDER DATED 8 TH AUGUST, 2014 OF MERC. (ANNEXURE-2). IT IS WORTHWHILE TO NOTE THAT POST DETERMINATION OF ARR VIDE ORDER DATED 8 TH AUGUST, 2014, THE MERC SUO-MOTU MADE AMENDMENT TO A RR OF ALL TRANSMISSION LICENSEE AND ISSUED FINAL ORDER ON 14 TH AUGUST, 2014, THE COPY OF WHICH IS ATTACHED HEREWITH VIDE ANNEXURE-3. WE WOU LD LIKE TO DRAW YOUR GOOD SELF'S ATTENTION TO PAGE NO 10 OF THE SAID ORD ER WHEREIN THE MERC HAS FINALLY DETERMINED ARR OF F.Y.2013-14 AT RS 53.71 C RORES AS AGAINST RS 50.24 CRORES RECOGNIZED IN THE P&L ACCOUNT OF THE Y EAR UNDER CONSIDERATION. IN VIEW OF ABOVE, IT IS SUBMITTED THAT THOUGH THE A SSESSEE COMPANY HAS RECOGNIZED RS 50.24 CRORES AS UNBILLED REVENUE IN T HE P&L ACCOUNT OF THE YEAR UNDER CONSIDERATION IN TERMS OF MERC REGULATIO NS, ITS CLAIM HAS BEEN ALLOWED BY THE MERC, AN ELECTRICITY REGULATOR IN TH E STATE OF MAHARASHTRA. FURTHER, IT IS TO BE NOTED THAT AS PER PARA 40 OF M ERC'S ORDER DATED 14 TH AUGUST, 2014, THE ARR APPROVED BY MERC I.E. RS 53.7 1 CRORES CAN HE COLLECTED BY THE ASSESSEE COMPANY BY ISSUING MONTHL Y INVOICES ON STATE TRANSMISSION UTILITY (STU) I.E. MAHARASHTRA STATE E LECTRICITY TRANSMISSION CO LTD (HEREIN AFTER REFERRED TO AS 'MSETCL'). IN VIEW OF ABOVE, WE SUBMIT THAT THE ASSESSEE COMPA NY HAS RIGHTLY RECOGNIZED UNBILLED REVENUE OF RS 50.24 CRORES BEIN G INCOME FROM TRANSMITTING POWER THROUGH ITS TRANSMISSION LINES I N TERMS OF THE PREVALENT MYT REGULATION WHICH HAS BEEN DULY APPROVED BY MERC , AN ELECTRICITY REGULATOR IN THE STATE OF MAHARASHTRA. WE ARE SUBMI TTING HEREWITH INVOICES ISSUED FOR THE ARR APPROVED FOR F.Y.2013-14 & F.Y.2 014-15 BY MERC FOR YOUR GOOD SELF'S READY-REFERENCE. (ANNEXURE-4). ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 14 - ACCORDINGLY, WE SUBMIT THAT THE UNBILLED REVENUE OF RS 50.24 CRORES RECOGNIZED IN THE YEAR UNDER CONSIDERATION WAS BILL ED BY THE ASSESSEE COMPANY TO MSETCL AS PER THE ORDER OF MERC, AN ELEC TRICITY REGULATOR IN THE STATE OF MAHARASHTRA. HENCE, WE SUBMIT THAT THE ASS ESSEE COMPANY HAS CORRECTLY RECOGNIZED REVENUE OF RS 50.24 CRORES IN THE YEAR UNDER CONSIDERATION BY FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING AND HAVING REGARD TO MERC MYT REGULATION. FURTHER, WE WISH TO SUBMIT THAT THE ASSESSEE COMPANY HAS BEEN CONSISTENTLY FOLLOWING TH E ABOVE MENTIONED METHOD OF REVENUE RECOGNITION YEAR ON YEAR BASIS. ' (EMPHASIS SUPPLIED) (2) SUBMISSIONS DATED 15.12.2016: '2.4 FURTHER, WE WISH TO POINT OUT THAT IN CASE YOU R GOOD SELF INTENDS TO ADD RS 3.47 CRORES (RS 53.71 CRORES- RS 50.24 CRORES) B EING DIFFERENCE OF ARR AS PER MERC ORDER AND AS RECOGNIZED IN THE P&L ACCOUNT TO THE TOTAL INCOME OF THE ASSESSEE COMPANY OF THE YEAR UNDER CONSIDERATIO N, IT WOULD BE TAX NEUTRAL AND FUTILE EXERCISE AS THE ASSESSEE COMPANY HAS OFFERED FOR TAX RS 3.47 CRORES IN THE IMMEDIATELY SUCCEEDING ASSESSMEN T YEAR I.E. A.Y.2015-16 IN VIEW OF PARA 40 OF THE MERC ORDER DATED 14 TH AUGUST, 2014 AND HENCE, WHILE ASSESSING INCOME OF THE IMMEDIATELY SUCCEEDIN G YEAR, THE SAID INCOME OF RS.3.47 CRORES WOULD BE REQUIRED TO BE REDUCED. THE COPY OF INVOICES RAISED BY THE ASSESSEE COMPANY IN COMPLIANCE WITH O RDER OF MGRC RECOGNIZING THE REVENUE OF RS 53.71 CRORES ARE ALRE ADY PLACED ON RECORD VIDE ANNEXURE-4 OF OUR SUBMISSION DATED 12 TH DECEMBER, 2016. ALSO WE REQUEST YOUR GOOD SELF NOT TO DISTURB THE ACCOUNTING POLICY ON REVENUE RECOGNITION FOLLOWED BY THE ASSESSEE COMPANY AS APART FROM IT B EING TAX/REVENUE NEUTRAL EXERCISE IT WOULD LEAD TO ADJUSTMENT OF INCOME FOR TAX PURPOSE IN SUBSEQUENT YEARS. ALSO IT IS WORTHWHILE TO NOTE THAT THE ASSES SEE COMPANY HAS BEEN PAVING MAT YEAR ON YEAR BASIS AS ITS INCOME UNDER N ORMAL PROVISIONS OF TAX IS ELIGIBLE FOR TAX HOLIDAY U/S 80-IA OF THE IT ACT . ACCORDINGLY, WE SUBMIT THAT SUCH ADJUSTMENT TO TAXABLE INCOME UNDER NORMAL PROV ISIONS WOULD BE TAX NEUTRAL AS THE MAT LIABILITY OF EACH YEAR WOULD NOT BE AFFECTED.' (EMPHASIS SUPPLIED) 4. FROM THE FACTUAL POSITION EXPLAINED ABOVE IN THE LETTERS FILED BY THE APPELLANT-COMPANY BEFORE THE ASSESSING OFFICER, IT MAY KINDLY BE APPRECIATED THAT THE APPELLANT-COMPANY HAD FILED PETITION TO ME RC FOR THE SECOND CONTROL PERIOD FOR FINANCIAL YEARS 2013-14 TO 2015-16 AND A S PER PAGE 88 OF THIS PETITION, IN RESPECT OF THE FINANCIAL YEAR 2013-14 RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, NET AGGREGATE REVENUE REQUIREMEN T WAS CALCULATED AT ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 15 - RS.61.60 CRORES WHICH INCLUDED CONTRIBUTION TO CONT INGENCY RESERVE AMOUNTING TO RS. 11.36 CRORES (KINDLY REFER TO PARA 3.3 OF THE ASSESSMENT ORDER). AS EXPLAINED ABOVE, WHILE RECOGNIZING REVEN UE IN RESPECT OF THE PRESENT YEAR THE AFORESAID CONTRIBUTION TO CONTINGE NCY RESERVE WAS EXCLUDED FROM THE TOTAL SUM OF RS.61.60 CRORES WITH THE RESU LT THAT NET INCOME OF RS.50.24 CRORES WAS RECOGNIZED PENDING THE FINAL VE RIFICATION AND APPROVAL FROM MERC. EVENTUALLY, MERC ISSUED ITS ORDER DATED 8.8.2014 WHEREIN THE AGGREGATE REVENUE REQUIREMENT CLAIM WAS FINALLY DET ERMINED AT RS.53.71 CRORES AS AGAINST THE REVENUE OF RS.50.24 CRORES RE COGNIZED BY THE APPELLANT- COMPANY FOR THE PRESENT YEAR. FIRST OF ALL, IT IS S TRONGLY CONTENDED THAT NO DEFINITE INCOME ACCRUED TO THE APPELLANT-COMPANY TI LL AN ORDER IS PASSED BY THE MERC ON THE PETITION FILED BY IT AND SUCH ORDER WAS PASSED IN THE MONTH OF AUGUST 2014 WHICH IS AFTER THE CLOSE OF THE ACCO UNTING YEAR FOR THE ASSESSMENT YEAR UNDER APPEAL. THE REVENUE RECOGNITI ON ESTIMATED BY THE APPELLANT-COMPANY AT RS.50.24 CRORES WAS NEARER TO THE ULTIMATE ACCEPTANCE BY MERC OF A SUM OF RS.53.71 CRORES. THE DIFFERENCE OF RS.3.47 CRORES WAS ADDED TO THE TOTAL INCOME BY THE APPELLANT-COMPANY WHILE FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015-16. THE AFORESA ID FACTS SHOW THAT THE EVENT ON THE BASIS OF WHICH THE INCOME FINALLY ACCR UED TO THE APPELLANT- COMPANY TOOK PLACE IN THE F.Y. 2014-15 RELEVANT TO THE ASSESSMENT YEAR 2015-16 AND THUS THE DIFFERENCE WAS RIGHTLY OFFERED FOR TAX BY THE APPELLANT- COMPANY IN THE SUBSEQUENT ASSESSMENT YEAR. AS A MAT TER OF FACT, INSOFAR AS THE APPELLANT-COMPANY IS CONCERNED, THE RIGHT TO RE CEIVE THE INCOME DID NOT ACCRUE DURING THE PREVIOUS YEAR RELEVANT TO THE ASS ESSMENT YEAR UNDER APPEAL. THE APPELLANT-COMPANY COULD NOT HAVE ANTICI PATED THE ORDER TO BE PASSED BY MERC AND, THEREFORE, THE AMOUNT REPRESENT ING CONTRIBUTION TO CONTINGENCY RESERVE WAS EXCLUDED FROM THE REVENUE R ECOGNITION. THE LEGAL POSITION ON THIS ISSUE IS ABSOLUTELY CLEAR. THE SCO PE OF TOTAL INCOME IS DEFINED U/S.5(1) OF THE I.T. ACT, RELEVANT PART OF WHICH IS REPRODUCED BELOW FOR READY REFERENCE:- '5. (1) SUBJECT TO THE PROVISIONS OF THIS ACT, THE TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A RESIDENT INCLUDE S ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH (A) IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON ; OR ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE TO HIM IN INDIA DURING SUCH YEAR; O R ACCRUES OR ARISES TO HIM OUTSIDE INDIA DURING SUCH YEAR: ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 16 - PROVIDED THAT, IN THE CASE OF A PERSON NOT ORDINARI LY RESIDENT IN INDIA WITHIN THE MEANING OF SUB-SECTION (6) OF SECTION 6, THE INCOME WHICH ACCRUES OR ARISES TO HIM OUTSIDE INDIA SHALL NOT BE SO INCLUDED UNLESS IT IS DERIVED FROM A BUSINESS CONTROLLED IN OR A PR OFESSION SET UP IN INDIA.' 5. FROM THE ABOVE, IT MAY KINDLY BE SEEN THAT THE T OTAL INCOME WHICH CAN BE BROUGHT TO THE CHARGE OF TAX UNDER THE INCOME-TAX A CT MUST HAVE BEEN EITHER (A) RECEIVED OR (B) ACCRUED. IT HAS BEEN HEL D BY VARIOUS JUDICIAL FORUMS THAT INCOME ACCRUES ONLY WHEN THE RIGHT TO RECEIVE SUCH INCOME MATERIALIZES OR CREATED. KIND REFERENCE IS INVITED TO THE FOLLOW ING CASES: - (1) CIT VS. P & C CONSTRUCTIONS (P) LTD., 318 ITR 113 (MAD.) FOR READY REFERENCE, THE HEAD-NOTE OF THIS CASE IS REPRODUCED BELOW:- 'THE ASSESSEE ENTERED INTO A CONTRACT ACCORDING TO WHICH THE ASSESSEE COULD NOT RECEIVE THE RETENTION MONEY RETA INED BY THE CONTRACTEE FOR THE PURPOSE OF THE SUCCESSFUL COMPLE TION OF THE CONTRACT. THE ASSESSING OFFICER PASSED AN ASSESSMEN T ORDER MAKING ADDITIONS WITH RESPECT TO THE RETENTION MONEY AND A DDITIONAL SECURITY DEPOSIT TO THE ACCOUNT OF THE ASSESSEE. THE COMMISS IONER (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE TRIBUNAL CONFIRMED THE ORDER OF THE COMMISSIONER (APPEALS). ON APPEAL: HELD, DISMISSING THE APPEAL, THAT WHEN THE ASSESSEE HAD NO RIGHT TO RECEIVE THE MONEY BY VIRTUE OF THE CONTRACT BETWEEN THE PARTIES AND THE ASSESSEE ALSO HAD NO RIGHT TO ENFORCE PAYMENT, THE RIGHT TO RECEIVE PAYMENT OF THE REMAINING 10 PER CENT, OF TH E VALUE OF THE JOB HAD NOT ACCRUED. THE AMOUNT OF ADDITIONAL SECURITY DEPOSIT COULD BE REPAID BY THE CONCERNED DEPARTMENT ONLY AFTER THE T OTAL COMPLETION OF THE CONTRACT. THEREFORE, THE DEPARTMENT COULD NO T INCLUDE THE AMOUNT FOR THE ASSESSMENT YEAR WHEN ACTUALLY (HIS A MOUNT HAD NOT BEEN PAID TO THE ASSESSEE.' (EMPHASIS SUPPLIED) (2) FGP VS. CIT, 326 ITR 444 (BOM.) THE HEADNOTE OF THIS CASE IS REPRODUCED BELOW FOR R EADY REFERENCE;- ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 17 - 'THE REAL INCOME OF THE ASSESSEE CAN BE ASSESSED AN D THE TEST BEFORE THE INCOME CAN BE TAXED IS WHETHER THERE IS REAL AC CRUAL OF INCOME. ACCORDING TO A ROYALTY AGREEMENT ENTERED INTO BETWE EN THE ASSESSEE- COMPANY AND ANOTHER COMPANY, U, CERTAIN AMOUNTS WER E DUE TO THE ASSESSEE-COMPANY FROM U. THE ASSESSEE-COMPANY HAD N OT RECEIVED ANY AMOUNT AS THE COMPANY U HAD DENIED THAT ANY AMO UNT WAS DUE AND PAYABLE BY IT TO THE ASSESSEE-COMPANY AND ARBIT RATION PROCEEDINGS WERE PENDING. THE COMMISSIONER (APPEALS ) HELD THAT NO REAL INCOME HAD ACCRUED IN FAVOUR OF THE ASSESSEE I N THE ASSESSMENT YEAR. THE TRIBUNAL HELD THAT ONCE THE ASSESSEE ADOP TED THE MERCANTILE SYSTEM OF ACCOUNTING, THE INCOME OF THE ASSESSEE WOULD BE TAXABLE IN THE ASSESSMENT YEAR DESPITE THE AMOUN T NOT BEING RECEIVED IN THE ASSESSMENT YEAR. ON APPEAL: HELD, ALLOWING THE APPEAL, THAT THERE WAS NO REAL A CCRUAL OF INCOME. THERE WAS DISPUTE BETWEEN THE PARTIES WHICH WAS PEN DING IN ARBITRATION, DURING THE ASSESSMENT YEAR. THE INCOME RECEIVED BY THE ASSESSEE WOULD BE LIABLE TO BE ASSESSED ONLY AFTER THE PASSING OF AN AWARD.' (EMPHASIS SUPPLIED) (3) CIT VS. SRIYANSH KNITTERS P. LTD., 336 IT R 235 (P&H) IN THIS CASE QUESTION NO.1 REFERRED TO THE HON'BLE HIGH COURT WAS AS UNDER:- '(I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE DUTY DRAWBACK ACCRUES IN THE YEAR IN WHICH THE RATE IS FIXED BY THE COMPETENT AUTHORITY, AFTER VERIFICATION OF THE CLAI M OF THE ASSESSEE TO BE IN ORDER AND THE AMOUNT IS QUANTIFIED AND NOT IN THE YEAR OF EXPORT EVEN IF THE ASSESSEE KEEPS ITS ACCOUNTS ON THE MERC ANTILE BASIS?' THE AFORESAID QUESTION WAS ANSWERED BY THE HON'BLE HIGH COURT AT PAGE 236 OF THE REPORT IN THE FOLLOWING MANNER:- 'AS REGARDS QUESTION (I), THE VIEW TAKEN BY THE TRI BUNAL CANNOT BE HELD TO BE ERRONEOUS. THE TRIBUNAL, AFTER EXAMINING THE SCHEME FOR EXPORT INCENTIVE, FOUND THAT BEFORE QUANTIFICATION BASED ON VERIFICATION, NO INCOME COULD BE HELD TO HAVE ACCRU ED TO THE ASSESSEE. ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 18 - THERE IS NOTHING TO DISPUTE THIS FACTUAL ASPECT. IN SUCH A SITUATION, THE TRIBUNAL RIGHTLY HELD THAT NO INCOME ACCRUED TILL T HE CLAIM OF THE ASSESSEE WAS QUANTIFIED AND VERIFIED. WE, THUS, DO NOT FIND IT NECESSARY TO GIVE DIRECTION TO THE TRIBUNAL TO REFE R THE SAID QUESTION FOR OPINION OF THIS COURT.' (4) AMARSHIV CONSTRUCTION P. LTD. VS. DCIT, 36 7 ITR 659 (GUJ.) THE RELEVANT PARTS OF THE HEADNOTE ARE REPRODUCED B ELOW FOR READY REFERENCE:- 'MERE RECEIPT OF INCOME IS NOT THE SOLE TEST OF CHA RGEABILITY. RECEIPT OF INCOME REFERS TO THE FIRST OCCASION WHEN THE REC IPIENT GETS THE MONEY UNDER HIS OWN CONTROL. THE WORDS 'ACCRUE' AND ARISES' DO NOT MEAN ACTUAL RECEIPT OF PROFITS OR GAINS. BOTH THESE WORDS ARE USED IN CONTRADISTINCTION TO THE WORD 'RECEIVE' AND INCLUDE A RIGHT TO RECEIVE. THUS, IF AN ASSESSEE ACQUIRES A RIGHT TO RECEIVE TH E INCOME, THE INCOME CAN BE SAID TO ACCRUE TO HIM THOUGH IT MAY B E RECEIVED LATER ON. .. . .. .. .. .. HELD, THAT A PERUSAL OF THE CONTRACTS SHOWED THAT I N SO FAR AS THE ASSESSEE'S RIGHT TO RECEIVE THE AMOUNT WAS CONCERNE D, THERE HAD BEEN NO CHANGE BY VIRTUE OF THE AMENDMENT IN THE GE NERAL CONDITIONS CONTAINED IN THE CONTRACT. BOTH BEFORE OR AFTER AME NDMENT, THE RIGHT TO RECEIVE THE AMOUNT WAS SUBJECT TO THE VITAL COND ITIONS OF RECOVERIES AND ADJUSTMENTS AGAINST THE DUES FOUND DUE TO S, CO MPLETION OF THE DEFECTS LIABILITY PERIOD AND CERTIFICATION BY THE E NGINEER-IN-CHARGE THAT NO LIABILITY ATTACHED TO THE CONTRACTOR. THE CHARAC TER OF THE AMOUNT DID NOT CHANGE. IT STILL RETAINED THE CHARACTER OF RETENTION MONEY. ITS TEMPORARY RELEASE TO THE ASSESSEE ON FURNISHING THE BANK GUARANTEE COULD NOT BE EQUATED WITH THE RIGHT TO RECEIVE SUCH AMOUNT AND RESULTANTLY WITH ACCRUAL OF INCOME BECAUSE THE DOMI NANT CONTROL OVER THE AMOUNT STILL REMAINED WITH S. THE AMOUNT RETAIN ED DID NOT ACCRUE TO THE ASSESSEE.' (EMPHASIS SUPPLIED) 6. IN THE LIGHT OF THE JUDGEMENTS CITED ABOVE VI S-A-VIS THE FACTS OF THE APPELLANT'S CASE IT IS SUBMITTED THAT THE INCOME DI D NOT ACCRUE DURING THE PRESENT YEAR AND, THEREFORE, THE ASSESSING OFFICER WAS WHOLLY UNJUSTIFIED IN MAKING ADDITION OF RS.3.47 CRORES. ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 19 - 7. IT MAY ALSO BE APPRECIATED THAT THE ENTIRE EXERC ISE OF MAKING THIS ADDITION IS TOTALLY FUTILE FOR THE REASON THAT THE SAME IS T AX NEUTRAL. EVEN AFTER MAKING THE ADDITION THE ASSESSED TOTAL LOSS STANDS AT RS. 122,95,81,680. FOR THE SUBSEQUENT ASSESSMENT YEAR THE DIFFERENCE OF RS.3.4 7 CRORES HAS ALREADY BEEN ADDED BY THE APPELLANT-COMPANY ITSELF TO THE T OTAL INCOME WHILE FILING THE RETURN OF INCOME. FOR THE ASSESSMENT YEAR 2015- 16 ALSO THERE IS NO POSITIVE INCOME AND TAX IMPACT IS NIL. 8. IT MAY KINDLY BE FURTHER APPRECIATED THAT SINCE THE TOTAL INCOME IS HUGE LOSS, TAX HAS BEEN CHARGED UNDER THE MAT PROVISIONS OF SECTION 115JB AND FOR THAT REASON ALSO THE ADDITION MADE BY THE ASSES SING OFFICER DURING THE PRESENT ASSESSMENT YEAR IS AN EXERCISE IN FUTILITY. 9. IT IS, THEREFORE, REITERATED THAT THE RELEVANT I NCOME DID NOT ACCRUE TO THE APPELLANT-COMPANY DURING THE PRESENT YEAR AND ACCOR DINGLY IT IS PRAYED THAT THE IMPUGNED ADDITION OF RS.3.47 CRORES MAY KINDLY BE DELETED.' 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES FOR BO TH THE PARTIES. WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD, JU DGEMENT CITED AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. BEF ORE WE DECIDE THIS ISSUE ON MERITS, IT IS NECESSARY TO ANALYSIS AND EVALUATE TH E ORDERS PASSED BY THE LD.CIT(A) WHILE DEALING WITH THIS GROUND. THE LD.C IT(A) HAS DEALT WITH THIS ISSUE IN QUESTION IN PARA-2 OF HIS ORDER, HOWEVER, THE OPERATIVE PORTION CONTAINED IN PARA-2.3 OF HIS ORDER IS REPRODUCED HE REUNDER: 2.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE AO HAS MADE ADDI TION OF RS.3,47,00,000/- ON THE GROUND THAT APPELLANT HAS SUPPRESSED REVENUE FROM TRANSMISSION LINES. THE BRIEF FACTS OF THE CASE ARE THAT APPELL ANT IS ENGAGED IN THE BUSINESS OF SETTING UP, OPERATION AND MAINTENANCE O F POWER TRANSMISSION LINES AND DURING THE YEAR UNDER CONSIDERATION, IT H AS EARNED INCOME FROM TRANSMISSION LINES IN STATE OF MAHARASHTRA. IT IS OBSERVED THAT TARIFF CHARGED BY APPELLANT COMPANY FOR TRANSMITTING POWER THROUGH ITS TRANSMISSION LINES IS REGULATED BY MAHARASHTRA ELECTRICITY REGULATORY COM MISSION (MERC) AND AS PER THEIR REGULATIONS, APPELLANT COMPANY IS REQUIRE D TO FILE MULTI-YEAR TARIFF ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 20 - (MYT) PLAN WITH SUCH AUTHORITY. THE AO HAS REFERRE D TO MYT PETITION FOR SECOND CONTROL PERIOD I.E. FINANCIAL YEAR 2013-14 T O 2015-16 FILED WITH MERC ON 5 TH MARCHD, 2014 WHEREIN AT PAGE NO.88, APPELLANT COMP ANY HAD WORKED OUT AGGREGATE REVENUE REQUIREMENT (ARR) CLAIM FOR C URRENT YEAR AT RS.61.60 CRORES WHEREAS APPELLANT HAS SHOWN INCOME OF RS.50. 24 CRORES IN PROFIT & LOSS ACCOUNT. THE APPELLANTS EXPLANATION TO AO IS REPRODUCED AT PAGE 4 TO 7 OF ASSESSMENT ORDER WHEREIN APPELLANT HAS MAIN LY CONTENDED THAT WHILE RECOGNISING THE INCOME IN CURRENT YEAR, IT HAS NOT CONSIDERED REVENUE CONTRIBUTION TO CONTINGENCY RESERVE FOR RS.11.36 CR ORES ON THE GROUND THAT FINAL VERIFICATION AND APPROVAL FROM MERC WAS PENDI NG. THE APPELLANT HAS ALSO SUBMITTED BEFORE AO THAT MERC HAS FINALLY ISSU ED ORDER ON 8 TH AUGUST, 29014 WHEREIN AGGREGATE REVENUE REQUIREMENT WAS DET ERMINED AT RS.53.71 CRORES AND, AS SUCH ORDER WAS RECEIVED IN SUBSEQUEN T A.Y., APPELLANT HAS SHOWN DIFFERENTIAL INCOME OF RS.3.47 CRORES IN A.Y. 2014-15. HOWEVER, AO HAS OBSERVED THAT APPELLANT IS MAINTAINING BOOKS OF ACCOUNT ON MERCANTILE BASIS AND AS MERC HAS ISSUED FINAL ORDER CONSIDERIN G REVENUE AT RS.53.71 CRORES AS AGAINST REVENUE OF RS.50.24 CRORES SHOWN BY APPELLANT IN CURRENT YEAR, DIFFERENTIAL AMOUNT OF RS.3.47 CRORE IS SUPPR ESSED PROFIT OF APPELLANT AND SAME IS ADDED TO THE TOTAL INCOME. 10. AFTER HAVING GONE THROUGH THE ORDERS OF AUTHORI TIES BELOW AND AFTER HEARING THE PARTIES AT LENGTH, WE FIND THAT INITIAL LY THE ADDITION OF RS.3,47,00,000/- WERE MADE BY THE ASSESSING OFFICER SOLELY ON THE GROUND THAT ASSESSEE HAS SUPPRESSED REVENUE FROM TRANSMISS ION LINES. SINCE THE ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS OF SET TING UP, OPERATION AND MAINTENANCE OF POWER TRANSMISSION LINES AND IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED INCOME FROM TRANSMISSION LI NES IN THE STATE OF MAHARASHTRA. THE TARIFF CHARGED BY THE ASSESSEE-CO MPANY FOR TRANSMITTING POWER THROUGH ITS TRANSMISSION LINES IS REGULATED B Y MAHARASHTRA ELECTRICITY REGULATORY COMMISSION (MERC). AS PER THE REGULATIO NS OF MERC, THE ASSESSEE-COMPANY WAS REQUIRED TO FILE MULTI YEAR TA RIFF (MYT) PLAN WITH SUCH AUTHORITIES. THE ASSESSEE-COMPANY WHILE FILING TH EIR PETITION BEFORE MERC ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 21 - HAD FILED FOR THE FINANCIAL YEARS 2013-14 TO 2015-1 6, WHEREIN ASSESSEE- COMPANY HAD WORKED OUT AGGREGATE REVENUE REQUIREME NT (ARR) FOR THE CURRENT YEAR AT RS.61.60 CRORES BUT HAS SHOWN INCOM E OF RS.50.24 CRORES IN THE PROFIT & LOSS ACCOUNT. THE ASSESSEE HAD CLEARL Y FILED THE EXPLANATION BEFORE THE ASSESSING OFFICER WHICH IS CONTAINED AT PAGE NOS.4 TO 7 OF THE ASSESSMENT ORDER, WHEREIN IT HAS SPECIFICALLY BEEN MENTIONED THAT WHILE RECOGNISING THE INCOME IN THE CURRENT YEAR, THE ASS ESSEE HAD NOT CONSIDERED REVENUE CONTRIBUTION TO CONTINGENCY RESERVE FOR RS. 11.36 CRORES ON THE GROUND THAT FINAL VERIFICATION AND APPROVAL FROM ME RC WAS PENDING. AS PRE RECORDS, THE MERC HAD FINALLY ISSUED ORDER ON 08/08 /2014, WHEREIN AGGREGATE REVENUE REQUIREMENT WAS DETERMINED AT RS. 53.71 CRORES AND, SINCE SUCH ORDER WAS RECEIVED IN THE SUBSEQUENT ASS ESSMENT YEAR, THEREFORE ASSESSEE HAS SHOWN DIFFERENTIAL INCOME OF RS.3.47 C RORES IN AY 2014-15. IGNORING THE ABOVE FACTS, ASSESSING OFFICER HAS OBS ERVED THAT ASSESSEE IS MAINTAINING BOOKS OF ACCOUNT ON MERCANTILE BASIS AN D SINCE MERC HAS ISSUED FINAL ORDER CONSIDERING REVENUE AT RS.53.71 CRORES AS AGAINST REVENUE OF RS.50.24 SHOWN BY THE ASSESSEE IN THE CURRENT YEAR, THEREFORE DIFFERENTIAL AMOUNT OF RS.3.47 CRORES WAS CONSIDERED BY THE ASSE SSING OFFICER AS SUPPRESSED PROFIT AND THUS WAS ADDED TO THE TOTAL I NCOME OF THE ASSESSEE. 11. WE HAVE METICULOUSLY CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND THE EXPLANATION OF THE ASSESSEE THAT THERE IS N O SUPPRESSED PROFIT OF RS.3.47 CRORES AS THE ASSESSEE HAS RECOGNISED REVEN UE OF RS.50.24 CRORES IN CURRENT YEAR SUBJECT TO APPROVAL OF MERC AND WHILE RECOGNISING SUCH INCOME, THE ASSESSEE HAD NOT CONSIDERED REVENUE CONTRIBUTIO N TO CONTINGENCY RESERVE ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 22 - FOR RS.11.36 CRORES. AS PER ASSESSEE, UNTIL PETITI ON IS FINALLY VERIFIED AND APPROVED BY MERC, INCOME DOES NOT ACCRUE TO THE ASS ESSEE. WE HAVE ALSO OBSERVED THAT ON 08/08/2014, THE CLAIM OF THE ASSES SEE WAS APPROVED BY MERC FOR RS.53.71 CRORES FOR THE CURRENT ASSESSMENT YEAR AS AGAINST RS.50.24 CRORES RECOGNISED BY THE ASSESSEE IN P&L A /C. THE MERC SUMO MOTO MADE AMENDMENT TO ARR OF ALL TRANSMISSION LICENSE ES AND ISSUED FINAL ORDER ON 14/08/2014 WHEREIN FINAL INCOME WAS DETERM INED AT RS.53.71 CORRES. 11.1. AFTER HAVING GONE THROUGH THE DETAILS AND EVI DENCES PLACED ON RECORD, WE FIND THAT MERC HAS ISSUED ORDER ON 08/08/2014 FO R THE CURRENT ASSESSMENT YEAR WHICH GOES TO PROVE THAT THE CONTEN TION OF THE ASSESSEE THAT THERE WAS NO CERTAINTY REGARDING APPROVAL OF E NTIRE CLAIM AND EVEN RIGHT TO RECEIVE SUCH INCOME WAS NOT MATERIALS IN THE CUR RENT ASSESSMENT YEAR. THEREAFTER, EVEN MERC HAS MADE SUO MOTO AMENDMENT OF ALL TRANSMISSION LICENCEES AND ISSUED FINAL ORDER ON 14/08/2014, WHE REIN ARR OF ASSESSEE WAS FINALLY DETERMINED AT RS.53.71 CRORES FOR AY 2013-1 4, I.E. THE YEAR UNDER CONSIDERATION. THUS, WE OBSERVE THAT RECOGNISED RE VENUE OF 50.24 CRORES IN CURRENT YEAR AS AGAINST COST OF RS.53.71 CRORES APP ROVED BY MERC AND IN THIS WAY, THERE WAS NO INCOME ACCRUED TO THE ASSESSEE-CO MPANY TILL THE ORDER WAS SPECIFICALLY PASSED BY MERC PETITION FILED BY A SSESSEE. THE ORDER OF MERC PASSED FOR THE YEAR UNDER CONSIDERATION, THERE FORE THE CLAIM OF ARR MADE BY ASSESSEE WAS FINALLY ACCEPTED BY MERC FOR S UBSEQUENT ASSESSMENT YEAR AS THERE WAS NO REASONABLE CERTAINTY FOR RECEI PT OF INCOME AS PER ARR SUBMITTED BY THE ASSESSEE. THEREFORE, IN SUCH CIR CUMSTANCES, THE LD.CIT(A) ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 23 - HAS RIGHTLY HELD THE SAID ADDITIONS BY HOLDING THAT IN SUBSEQUENT AY 2015-16 (COPY OF THE ASSESSMENT ORDER HAS ALREADY BEEN PLAC ED ON RECORD), THE ASSESSEE HAS SHOWN LOSS OF RS.242.68 CRORES AS PER NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT U/S.11JB OF THE ACT AT RS.204.1 1CRORES. THE ASSESSING OFFICER HAS NOT MADE ANY ADJUSTMENT OF RS.3.47 CORR ES WHILE COMPUTING BOOK PROFIT IN THE CASE OF ASSESSEE WHICH ALSO SUPPORTS THE CONTENTION OF ASSESSEE THAT ENTIRE EXERCISE OF TAXING INCOME OF RS.3.47 CO RES IN CURRENT YEAR AS AGAINST INCOME SHOWN BY ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR IS TAX NEUTRAL. WHILE REACHING TO THE SAID CONCLUSION, WE ALSO FIND SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. EXCEL INDUSTRIES LIMITED REPORTED AT 358 ITR 295, WHEREIN THE HONBL E SUPREME COURT HAD HELD THE REAL QUESTION CONCERNING US IS THE YEAR IN WHI CH THE ASSESSEE IS REQUIRED TO PAY TAX. THERE IS NO DISPUTE THAT IN T HE SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFITS UNDER THE ADVANCE LICENCE AND THE DUTY ENTITLEMENT PASS BOOK AND PAID TAX THEREON. THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEP RIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEAR. THER EFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. THERE WAS, THEREFORE, NO NEED FOR THE REVENUE TO CO NTINUE WITH THIS LITIGATION WHEN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITL ESS (ON MERITS) BUT ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC C OFFERS. 11.2. EVEN BEFORE US, NO NEW FACTS OR CIRCUMSTANC ES HAVE BEEN PLACED ON RECORD IN ORDER TO CONTROVERT THE FINDINGS OF THE L D.CIT(A) WHILE DECIDING THE ITA NO.2142/AHD/2017 ACIT VS. MAHARASHTRA EASTERN GRID POWER TRANSMISS ION CO.LTD. ASST.YEAR 2014-15 - 24 - SAID CASE. THEREFORE, WE FIND NO REASON TO INTERFE RE INTO OR TO DEVIATE FROM SUCH FINDINGS OF THE AUTHORITIES BELOW AND WE UPHOL D THE FINDINGS OF THE LD.CIT(A) AND REJECT THE GROUND RAISED BY THE REVEN UE. 13. IN THE RESULT, REVENUES APPEAL STANDS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 13 - 03 - 2020 AT AHMEDABAD SD/- SD/- ( AMARJIT SINGH) ( SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/ 03 /2020 # . . , . $ . ./ T.C. NAIR, SR. PS !' #' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. %&' ( / CONCERNED CIT 4. ( ( ) / THE CIT(A)-2, AHMEDABAD 5. )* + $$&' , &' , % / DR, ITAT, AHMEDABAD 6. + ./ / GUARD FILE. / BY ORDER, ) $ //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..11.3.20 (DICTATION-PAD 20- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..12.3.20 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.3.20 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.3.20 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER