DCIT, Dehradun V. M/s. Uttaranchal Jal Vidyut Nigam Ltd., Dehradun

ITA 3181/DEL/2015

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3617 (ITAT-DEHRADUN)
• Duration Of Justice: 6 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 18-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N C UPPADHAY
• Keywords: Depreciation; Bad and doubtful debts; Set aside
• Section: 271(1)(c); 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL DEHRADUN CIRCUIT BENCH: DEHRADUN BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.3804/DEL/2015 (ASSESSMENT YEAR 2011-12) M/S UTTARANCHAL JAL VIDHYUT NIGAM LTD., MAHARANI BAGH, GMS ROAD, DEHRADUN PAN AAACU 6672R VS. DY. CIT CIRCLE-2, DEHRADUN. (APPELLANT) (RESPONDENT) ITA NO.3181/DEL/2015 (ASSESSMENT YEAR 2011-12) DY. CIT, CIRCLE-2, DEHRADUN. VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD., MAHARANI BAGH, G.M.S ROAD, DEHRADUN. PAN AAACU 6672R (APPELLANT) (RESPONDENT) APPELLANT BY DR. RAKESH GUPTA, ADV. SH. SOMIL AGGARWAL, ADV. RESPONDENT BY SH. N.C.UPPADHAY, SR. DR DATE OF HEARING 04.03.2021 DATE OF PRONOUNCEMENT 31.05.2021 2 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. ORDER PER SUDHANSHU SRIVASTAVA, JM: THESE CROSS APPEALS HAVE BEEN FILED AGAINST ORDER DATED 30 TH MARCH 2015 PASSED BY LD COMMISSIONER OF INCOME TAX (APPEALS) DEHRADUN {CIT (A)} IN APPEAL NO. 16/15- 15. ASSESSEE HAS FILED AN APPEAL IN ITA NO. 3804/DEL/2015 CHALLE NGING THE IMPUGNED ORDER ON FOLLOWING GROUNDS: ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS), DEHRADUN HAS ERRED IN LAW, 1. NOT ADJUDICATING THE CLAIM OF THE APPELLANT IN R ESPECT OF IMPROPER OPPORTUNITY PROVIDED TO THE APPELLANT AT T HE TIME OF ASSESSMENT TO PROVE AND JUSTIFY ITS RETURN OF INCOM E. 2. IN CONFIRMING THE ADDITION OF RS 40,66,56,344/- ON ACCOUNT OF CAPACITY CHARGES, DEEMED GENERATION CHARGES AND CAPACITY INDEX INCENTIVES SHOWN AS A DISCLOSURE IN NOTES TO ACCOUNTS ANNEXED WITH THE BALANCE SHEET. 3. NOT ADJUDICATING IN RESPECT OF INITIATION OF PEN ALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT 4. THAT CONTRARY TO FACTS BAD IN LAW AND PERVERSE I N ITS IMPORT AND APPLICATION, THE ORDER MUST BE QUASHED 3 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. 1.1 ON THE OTHER HAND REVENUE HAS FILED AN APPEAL IN ITA NO. 3181/DEL/2015 CHALLENGING THE IMPUGNED ORDE R ON FOLLOWING GROUND: THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALL OWING DEPRECIATION ON ASSETS OF WHICH THE ACTUAL COST BAS PER SECTION 43(1) OF THE I.T. ACT, 1961 WAS NIL 2.0 WE SHALL FIRST TAKE UP FOR CONSIDERATION APPE AL FILED BY THE ASSESSEE. DURING THE COURSE OF HEARING BEFOR E US, THE LD. AR SUBMITTED THAT GROUND NO. 1 OF APPEAL IS GENERAL AS SPECIFIC GRIEVANCE ON MERITS OF THE CASE HAS BEEN RAISED IN FORM OF GROUND NO. 2. AS SUCH GROUND NO. 1 OF THE APPEAL IS DISMIS SED. 2.1 GROUND NO. 3 CHALLENGES ACTION OF INITIATION OF PENALTY. PENALTY PROCEEDINGS ARE ALTOGETHER SEPARAT E HENCE GROUND NO. 3 IS ALSO DISMISSED. 2.2 IN GROUND NO. 2, THE ASSESSEE IS AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER (AO) IN MAKING AN A DDITION TO TOTAL INCOME OF RS 40,66,56,344/-ON ACCOUNT OF CAPACITY C HARGES, DEEMED GENERATION CHARGES AND CAPACITY INDEX INCENT IVES. RELEVANT FACTS IN THIS REGARD ARE THAT IN THE ASSESSMENT ORD ER, THE AO HAS 4 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. OBSERVED THAT THE ASSESSEE IS FOLLOWING MERCANTILE S YSTEM OF ACCOUNTING. AS REGARDS CAPACITY CHARGES, DEEMED GEN ERATION CHARGES AND CAPACITY INDEX INCENTIVES IT IS NOTED B Y THE AO THAT THE ASSESSEE HAS NOT INCLUDED THESE ITEMS IN ITS COMPUT ATION OF TOTAL INCOME AND HAS, THUS, NOT PAID TAX ON IT. WHEN ENQU IRED, IT WAS SUBMITTED BY THE ASSESSEE THAT THIS WAS ON ACCOUNT O F THE FACT THAT THE INCOME HAD NOT ACCRUED ON ACCOUNT OF DISPUTES P ENDING WITH THE PARTIES UPON WHOM THE CLAIM WAS RAISED. IN ORDER TO FACTUALLY ESTABLISH EXISTENCE OF DISPUTE IT WAS SUBMITTED BY T HE ASSESSEE THAT UERC, (TERMS AND CONDITIONS FOR DETERMINATION OF HY DRO GENERATION TARIFF) REGULATION, 2004, REGULATION 20( 2) PROVIDED FOR CAPACITY CHARGES, REGULATION 29(1) PROVIDED FOR CAP ACITY INDEX INCENTIVES AND REGULATION 31(1) PROVIDED FOR DEEMED GENERATION. NATURE OF THESE CHARGES AS EXPLAINED IN THE UERC RE GULATION 2004 WAS SUBMITTED AS UNDER - 1. REGULATION 20(2) CAPACITY CHARGES - EACH BENEFICIARY SHALL PAY THE CAPACITY CHARGES IN PROPORTION TO ITS PERCENTAGE SHARE IN TOTAL SALEABLE CAPACITY OF THE GENERATING STATION. SALEABLE CAPACITY SHALL MEAN TOTAL CAPACIT Y MINUS FREE CAPACITY TO HOME STATE(S) IF ANY. PROVIDED THAT IN CASES WHERE 5 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. SHARE OF SALEABLE CAPACITY, WHICH IS THE COMMITTED OR EARMARKED CAPACITY FOR ANY BENEFICIARY THROUGH AN A GREEMENT OR OTHERWISE, IS NOT AVAILABLE, THE APPORTIONMENT S HALL BE ON THE BASIS OF PROPORTION OF ENERGY SALES TO DIFFERENT BE NEFICIARIES. 2. REGULATION 29(1) - INCENTIVE - INCENTIVE SHALL BE PAYABLE IN CASE OF ALL THE GENE RATING STATIONS, INCLUDING IN CASE OF NEW GENERATING STATI ONS IN THE FIRST YEAR OF OPERATION, WHEN THE CAPACITY INDEED (CI) EX CEEDS 90% FOR PURELY RUN-OF-RIVER POWER GENERATING STATIONS A ND 85% FOR RUN OF RIVER POWER STATION WITH POUNDAGE OR STORAGE TYPE POWER GENERATING STATIONS AND INCENTIVE SHALL ACCRUE UP T O A MAXIMUM CAPACITY INDEX OF 100%. 3. REGULATION 31(1)-DEEMED GENERATION - IN CASE OF REDUCED GENERATION DUE TO THE REASONS B EYOND THE CONTROL OF GENERATING COMPANY SUCH AS ON ACCOUNT OF NON- AVAILABILITY OF TRANSMISSION LINES FOR SUPPLY OF AN Y BENEFICIARY OR ON RECEIPT OF BACKING DOWN INSTRUCTIONS FROM THE ST ATE LOAD DISPATCH CENTER RESULTING IN SPILLAGE OF WATER, THE ENERGY CHARGES ON ACCOUNT OF SUCH SPILL AMONG THE AFFECTED BENEFICIARIES SHALL BE IN PROPORTION TO THEIR SHARE S N SALEABLE CAPACITY OF THE STATION. PROVIDED THAT IN CASE WHER E SHARE OF SALEABLE CAPACITY, WHICH IS THE COMMITTED OR EARMAR KED CAPACITY FOR ANY BENEFICIARY THROUGH AN AGREEMENT O R OTHERWISE, 6 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. IS NOT AVAILABLE, THE APPORTIONMENT SHALL BE ON THE BASIS OF PROPORTION OF ENERGY SALES TO DIFFERENT BENEFICIARI ES. 2.3 IT WAS SUBMITTED BEFORE THE AO THAT IN ACCORDA NCE WITH THESE PROVISIONS, BILLS HAVE BEEN RAISED BY THE ASSESSEE ON ACCOUNT OF CAPACITY CHARGES (CC), CAPACITY INDEX IN CENTIVE (CII) AND DEEMED GENERATION CHARGES (DG) ON UTTARAKHAND POWER CORPORATION (UPCL). HOWEVER, THE UPCL HAS FAILED AND NEGLECTED TO MAKE PAYMENT OF THE SUBJECT CHARGES PURSUANT TO THE BILL S OF ENERGY CONSUMPTION FOR THE MONTH OF JULY, 2005 ONWARDS AND UNILATERALLY MADE DEDUCTION VIDE THEIR LETTER NO.71/ UPCL/ CGM ( COMM)/ UVJNL/ GC DATED 20.9.2005 FOR THE PAYMENTS MADE EAR LIER. IT ALSO FAILED AND NEGLECTED TO PAY THESE CHARGES FOR ALL S UBSEQUENT BILLS. IN ITS LETTER NO.1142/UPCL/ CGM (COMM.)/ P-3 DATED 17. 5.2005, THE UPCL RAISED THE FOLLOWING OBJECTIONS THE COMPONENT OF CAPACITY CHARGES, CI CHARGES AND DEEMED GENERATION FOR THE 9 LARGE/MEDIUM HEPS ARE BEING CHARGED ARBITRARY WITHOUT ANY LEGAL SANCTITY OF THESE CALCULATION AND CHARGES. 2.4 IT WAS FURTHER SUBMITTED BEFORE THE AO THAT DISPUTE AND FAILURE TO MAKE PAYMENT WAS CONTINUING. UPCL HAD EXPRESSED 7 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. VIDE THEIR LETTER NO.1102/UPCL/DF/22 DATED 28.9.200 5 OF THEIR INABILITY TO PAY THE SUBJECT CHARGES UNLESS THE SAM E WERE CLARIFIED BY THE COMMISSION. ACCORDINGLY, A SERIES OF MEETING S TOOK PLACE BETWEEN THE SENIOR OFFICIALS OF BOTH ORGANIZATIONS. FINALLY, UPCL ADMITTED TO THE APPLICABILITY OF CAPACITY CHARGES B UT STATED THAT THE METHODOLOGY FOR THE COMPUTATION OF CAPACITY CHARGES WAS NOT SPECIFIED IN THE REGULATIONS, 2004 ISSUED BY THE CO MMISSION. THEREFORE, THE ASSESSEE APPROACHED THE REGULATORY C OMMISSION FOR CLARIFICATION THROUGH PETITION NO.41/2005. THE REQU ISITE CLARIFICATION WERE AWARDED BY THE COMMISSION ON 21.1.2006, WHEREIN I T WAS CLARIFIED THAT THE ABOVE DISPUTED CHARGES WERE DETE RMINABLE AND PAYABLE IN LINE WITH UERC REGULATION, 2004 BUT THE M ODE AND PERIODICITY OF SUCH PAYMENTS / ADJUSTMENTS BEING A COMMERCIAL ISSUE NEEDED TO BE MUTUALLY DECIDED BETWEEN BOTH TH E CORPORATIONS. FOLLOWING THIS JUDGMENT, THE ASSESSEE AGAIN RAISED ITS DEMAND FOR THE ABOVE-MENTIONED CHARGES VIDE ITS LET TER DATED 23.1.2006. CONSEQUENTLY, A SERIES OF MEETINGS WERE HELD BETWEEN REPRESENTATIVES OF UPCL AND THE ASSESSEE. IN THE ME ETING DATED 4.3.2006, BETWEEN THE REPRESENTATIVES OF UPCL AND U JVNL, THE 8 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. MODE AND PERIODICITY OF THE CC AND CII WERE DECIDED BUT UPCL STILL REFUSED TO MAKE PAYMENT OF THE ABOVE CHARGES ON THE GROUNDS THAT THE TARIFF ORDER DATED 16.12.2004 BEING SUB JUDICE , THE BILLING BY THE ASSESSEE OF THE ABOVE STATED CHARGES AND PAYMENT WOU LD HAVE TO AWAIT THE FINAL DECISION OF THE COURT/APPELLATE TRIB UNAL. 2.5 THE ASSESSEE AGAIN APPROACHED THE COMMISSION TO RESOLVE THE ISSUE AND THE COMMISSION DIRECTED TO CO NSTITUTE A GROUP COMPRISING OF OFFICERS OF BOTH THE ORGANIZATIONS TO LOOK INTO THE MATTER AND RECOMMEND TO THE COORDINATION FORUM OF T HE UERC, THE PROCEDURE AND METHODOLOGY TO BE FOLLOWED FOR THE CA LCULATION AND VERIFICATION OF CII, DG AND CC AS PER COMMISSIONS REGULATIONS. HOWEVER, UPCL DID NOT SIGN THE MINUTES OF THE MEETI NG OF THE GROUP ON THE GROUNDS THAT THE SAME HAD NOT BEEN ISSUED BY THE DIRECTOR (F) UPCL. IT ALSO DID NOT ABIDE BY THE DIRECTIVES O F THE COMMISSION DATED 15.12.2009 AND 20.12.2009 TO SIGN THE MINUTES OF THE MEETING. SUBSEQUENTLY, IN THEIR RESPECTIVE BOARD ME ETINGS, THE UPCL AND THE ASSESSEE DECIDED TO TAKE NECESSARY STE PS TO EXPEDITE THE VERIFICATION OF CAPACITY INDICES OF ALL LHPS FO R F.Y.2004-05 TO F.Y.2012-13. SUBSEQUENTLY, ON THE BASIS OF VERIFIED DATA, REVISED 9 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. BILLS FOR CC AND CII WERE RAISED BY THE ASSESSEE IN SUPRESSION OF BILLS RAISED EARLIER. HOWEVER, DESPITE BEING A PART Y TO THE VERIFICATION, UPCL HAD NOT CONSIDERED THESE DUES TI LL DATE. IN VIEW OF THE ABOVE EVENTS IT WAS SUBMITTED THAT THE ASSESSEE WAS APPROACHING UERC U/S 23(1) UNDER CHAPTER 3 OF SETTL EMENT OF DISPUTE OF CONDUCT OF BUSINESS REGULATION, 2004 REA D WITH SECTION 86(1) OF THE ELECTRICITY ACT, 2003 FOR ADJUDICATION IN THIS REGARD. HENCE THE ISSUE WAS STILL IN DISPUTE. 2.6 THE AO, HOWEVER, WAS UNIMPRESSED. IN HIS ORDER OF ASSESSMENT, IT WAS HELD BY THE AO THAT IN BOOKS OF A CCOUNTS, THE ASSESSEE HAS ITSELF RECOGNIZED CAPACITY CHARGES, DE EMED GENERATION CHARGES AND CAPACITY INDEX INCENTIVES AS ITS INCOME AND MOREOVER THAT THE ASSESSEE WAS FIGHTING FOR GETTING THESE SUM S RECOVERED AS DUES FROM UPCL. SINCE THE ASSESSEE WAS FOLLOWING A M ERCANTILE SYSTEM OF ACCOUNTING IT WAS HELD THAT INCOME HAD ACC RUED TO THE ASSESSEE. THE AMOUNT OF RS.40,66,56,344/- WAS ADDED TO THE INCOME FOR THE INSTANT ASSESSMENT YEAR. 10 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. 2.7 BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY. THE LD CIT (A) U PHELD THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: THE ISSUE OF CAPACITY CHARGES, DEEMED GENERATION C HARGES AND CAPACITY INDEX INCENTIVE HAS ALSO BEEN CONSIDERED E ARLIER BY THE LD. CIT(A)-1 IN APPEAL NO.328/CIT(A)-1/DDN/2011-12 DATED 30.03.2012 AND AFTER CONSIDERING THE SAME, THE CIT( A) HAS HELD THAT THE SAME HAD ACCRUED TO THE ASSESSEE AND WERE THEREFORE, CHARGEABLE TO TAX IN ITS HANDS. THE RELEVANT EXTRAC T OF THE ORDER OF THE LD. CIT (A) IS REPRODUCED BELOW. 2.2 ACCORDING TO THE ASSESSEE, THE REQUISITE CONDI TIONS FOR COLLECTION OF THESE CHARGES FROM UPCL EXISTED DURIN G THE PREVIOUS YEAR, AND, HENCE IT RAISED ITS CLAIM ON THE LATTER. THE LATTER DID NOT DENY ITS LIABILITY TO PAY THESE CHARGES BUT STI LL IT REFUSED TO PAY THE SAME, AS ACCORDING TO THE LATTER, THE METHO DOLOGY FOR DETERMINING THE SAME AS WELL AS ITS CALCULATION REQ UIRED APPROVAL FROM THE UERC. IN VIEW OF THE CONFUSION, THE MATTER WAS TAKEN UP WITH THE UERC BY THE ASSESSEE. A MEETING OF THE COORDINATION FORUM WAS HELD ON 29.07.2008. THE MEETING WAS CHAIR ED BY CHAIRMAN, UERC AND ATTENDED, AMONG OTHERS, BY THE M D, UJVNL AS WELL AS THE MD, UPCL. THE ISSUE OF THESE CHARGES WAS DISCUSSED AND A GROUP, WITH REPRESENTATION FROM BOT H UJVNL AND UPCL WAS CONSTITUTED TO DISCUSS THE MATTER AND RECOMMEND THE APPROPRIATE WAY TO DEAL WITH IT. THE GROUP CONS TITUTED BY THE 11 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. UERC HELD ITS MEETING ON 18.08.2008 AND THE FOLLOWI NG RECOMMENDATION WAS MADE: 1. THE METHOD OF COMPUTATION OF CAPACITY INDEXED INCE NTIVE, CAPACITY CHARGES AND DEEMED GENERATION AS ADOPTED B Y UJVNL IN THE BILLS RAISED ON ACCOUNT OF SAID CHARGES ARE IN ACCORDANCE TO THE REGULATIONS HENCE BE ACCEPTED TO THE UCPL. 2. AS REGARDS VERIFICATION OF CAPACITY INDEX IT IS RECOMMENDED THAT THE DATA PERTAINING TO CAPACITY IN DEX PROVIDED BY UJVNL W.E.F., 1.4.04 BE ACCEPTED BY UPC L SINCE THE DATA CANNOT BE VERIFIED EITHER BY UPCL OR SLDC RETR OSPECTIVELY THE UPCL FAILED TO SIGN THE MINUTES OF THE MEETING. A DEADLINE WAS SET BY THE UERC WITH THE RIDER THAT, IF THE UPC L FAILED TO SIGN THE MINUTES BY THAT DATE, THE MINUTES WOULD BE DEEMED TO BE FINAL. EVEN THAT DEADLINE PASSED WITHOUT UPCL SI GNING THE MINUTES IN THE MATTER. 2.3 EVEN THOUGH UPCL FAILED TO SIGN THE MINUTES THE EMPOWERED GROUP CONSTITUTED BY THE UERC APPROVED OF THE ASSESSEES CLAIM AND SO DID THE UERC. AS NOTED ABOV E, THE BUSINESS OF GENERATION AND SALE OF ELECTRICITY IS R EGULATED BY LAW. EVEN THOUGH IT IS A BUSINESS ENTERPRISE, THE TARIFF OF ELECTRICITY IS LAID DOWN BY THE ELECTRICITY REGULATORY COMMISSION WHICH IS A STATUTORY BODY. THE TARIFF THUS LAID DOWN MAY NOT B E CALLED A STATUTORY LEVY LIKE TAX, CESS, DUTY ETC. BUT IT IS ALSO BUT A PRICE DISCOVERED IN FREE MARKET OR SETTLED BILATERALLY BY THE PARTIES TO 12 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. THE TRANSACTION. IN SO FAR AS THE TARIFF IS A PART OF THE REGULATORY REGIME, THE PARTIES TO THE TRANSACTION HAVE LITTLE FEEWAY. HENCE, IF THE UPCL PURCHASED ELECTRICITY FROM THE ASSESSEE, I T WAS BOUND TO PAY THE CHARGES LAID DOWN BY THE UERC. IT DID NO T DENY THE LIABILITY. IT HAD ONLY RAISED QUESTIONS ABOUT THE P ROCEDURE AND METHODOLOGY TO BE ADOPTED FOR CALCULATION/VERIFICAT ION OF THESE CHARGES. THE CONCERNS OF UPCL WERE CONSIDERED AND A DDRESSED BY THE UERC AND THE ASSESSEES CLAIM WAS FOUND TO B E IN ORDER. IT IS TRUE THAT THE PARLEYS CONTINUED WELL AFTER TH E END OF THE PREVIOUS YEAR UNDER CONSIDERATION. BUT THE FACT REM AINS THAT THE UERC HAD APPROVED OF THE ASSESSEES CLAIM IN PRINCI PLE AS EARLY AS 20.01.2006 AND THE ASSESSEE HAD RAISED ITS DEMAN D IN LINE WITH THE UERC CLARIFICATION. UPCL IS ALSO A CORPORA TION OWNED BY THE STATE GOVERNMENT JUST AS THE ASSESSEE IS. IN FA CT, BOTH THESE CORPORATIONS OPERATE UNDER THE SAME MINISTRY. THAT BEING SO, IT CANNOT BE SAID THAT THE ACCRUAL OF THE AMOUNT IN QU ESTION WAS IN DOUBT OR ITS RECOVERY WAS UNCERTAIN. 2.4 IN THIS CONNECTION, UPCL WAS ASKED TO CLARIFY W HAT ACCOUNTING TREATMENT IT HAD GIVEN TO THE AMOUNT IN QUESTION. IT REPLIED THAT IT HAD NOT RECOGNIZED THE LIABILITY IN ITS ACCOUNTS AND HAD NOT CLAIMED DEDUCTION FOR THE SAME IN ITS COMPU TATION OF TOTAL INCOME FOR INCOME TAX PURPOSES. THUS, IT IS SITUATI ON WHERE THE PAYER HAS NOT CLAIMED DEDUCTION FOR EXPENDITURE AND THE PAYEE HAS NOT RECOGNIZED THE REVENUE. GIVEN THAT FACTUAL POSITION, THE 13 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. FOLLOWING ARGUMENTS COULD BE RAISED IN SUPPORT OF T HE ASSESSEES CASE; I. BY APPLYING THE PRINCIPLE OF REAL INCOME, THE ASSES SEE SHOULD NOT BE CHARGED WITH TAX IN RESPECT OF THE AM OUNTS IN QUESTION. AS AND WHEN THE ASSESSEE WOULD RECOGNIZE THE REVENUE, IT WOULD ALSO OFFER THE INCOME, INCLUDING THAT OF THE PAST YEARS, TO TAX. WHILE THIS WILL HEDGE THE ASSESSEE A GAINST UNNECESSARY TAX LIABILITY, THE REVENUE ALSO WOULD N OT STAND TO THOSE. II. IF THE INCOME IS CHARGED IN THE ASSESSEES HANDS, CORRESPONDING DEDUCTION SHOULD ALSO BE ALLOWED IN T HE HANDS OF THE UPCL. WHILE THE AO HAS CHARGED THE INCOME IN TH IS CASE, HE HAS NOT ALLOWED DEDUCTION IN THE CASE OF UPCL. 2.5 IN THIS CASE, AS DISCUSSED ABOVE, THE INCOME HA D ACCRUED TO THE ASSESSEE. ACCORDING TO THE PRINCIPLES OF MER CANTILE SYSTEM OF ACCOUNTING, AN INCOME HAS TO BE RECOGNIZED IF IT HAS ACCRUED. THE PRINCIPLE OF REAL INCOME SUGGESTS THAT EVEN A N INCOME WHICH HAS ACCRUED NEED NOT BE RECOGNIZED AS SUCH IF ITS R ECOVERY IS DOUBTFUL. THAT PRINCIPLE DOES NOT APPLY TO THE FACT S OF THIS CASE AS UPCL DID NOT DISPUTE THE OBLIGATION TO PAY THE C HARGES. IT RAISED THE ISSUE OF THE PROCEDURE AND METHODOLOGY F OR CALCULATION OF THE AMOUNT. IT IS SETTLED LAW THAT RECOGNITION O F A RECEIVABLE AS REVENUE OR OF A LIABILITY AS EXPENDITURE NEED NOT B E POSTPONED SIMPLY BECAUSE ITS EXACT QUANTIFICATION IS NOT POSS IBLE. ACCORDING 14 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. TO THE MERCANTILE SYSTEM OF ACCOUNTING, THE AMOUNT NEEDS TO BE ESTIMATED TO THE BEST JUDGEMENT OF THE ASSESSEE AND GIVEN EFFECT TO IN THE ACCOUNTS. THAT IS NECESSARY FOR ASCERTAIN ING THE CORRECT PROFIT OF THE BUSINESS. IF THE AMOUNT, WHEN IT IS Q UANTIFIED FINALLY, VARIES WITH THE ESTIMATE MADE EARLIER, APPROPRIATE ADJUSTMENTS IN THE ACCOUNTS ARE TO BE MADE IN ORDER TO FACTOR I N SUCH VARIATION. HENCE, THERE WAS NO JUSTIFICATION FOR NO T RECOGNIZING THE REVENUE IN QUESTION. NEEDLESS TO SAY, IF THE ASSESS EE FAILED TO RECOVER THE SAID AMOUNT IN FUTURE, IT WOULD BE FREE TO WRITE THE SAME OFF AS BAD DEBT. INCOME TAX LAW WOULD ALLOW DE DUCTION FOR THE SAME AS AND WHEN SUCH AN EVENTUALITY AROSE. THU S, BY BOOKING THE AMOUNT AS REVENUE AND TREATING IT AS IN COME, THE ASSESSEE WOULD NOT INCUR AN IRREPARABLE TAX LOSS. A S FAR AS THE CASE OF UPCL IS CONCERNED IT COULD ALSO, CORRESPOND INGLY, RECOGNIZE THE LIABILITY (EVEN THOUGH IT MAY HAVE IT S CONCERNS ABOUT THE PROCEDURE AND METHODOLOGY OF CALCULATION) AND, IN CASE IT DID NOT HAVE TO PAY THE SAME, IT COULD WRITE BAC K THE AMOUNT AND OFFER THE SAME AS INCOME U/S 41 OF THE I.T. ACT . 2.6 AS REGARDS THE OTHER LOGIC, IT IS TRUE THAT THE ASSESSEES INCOME WOULD CONSTITUTE CORRESPONDING EXPENDITURE I N THE HANDS OF UPCL. IT IS ALSO TRUE THAT, WHILE THE ASSESSEE H AS NOT SHOWN THE INCOME, UPCL HAS ALSO NOT BOOKED THE EXPENDITUR E IN ITS ACCOUNTS. BUT, ACCOUNTING AND ASSESSMENT OF INCOME HAS TO BE GUIDED BY THE ACCOUNTING PRINCIPLES AND LEGAL PROVI SIONS; NOT BY RECIPROCITY. IT IS STRANGE THAT ASSESSEES CLAIM WA S AS PER THE 15 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. UERC NORMS AND YET IT FAILED TO ACCOUNT FOR THE REV ENUE. IT IS EQUALLY STRANGE THAT THE UPCL DID NOT DISPUTE THE O BLIGATION TO PAY AND YET IT FAILED TO PROVIDE FOR THE ESTIMATED LIABILITY IN ITS ACCOUNTS. THE ISSUE IN THIS CASE HAS TO BE DECIDED ON THE BASIS OF THE FACTS AND LAW AND, WHILE DOING THAT, THE FACT T HAT UPCL DID NOT RECOGNIZE THE LIABILITY IN ITS ACCOUNTS IS NOT A MATERIAL CONSIDERATION. 2.7 ON CONSIDERATION OF THE TOTALITY OF FACTS AND C IRCUMSTANCES OF THE CASE, IT IS HELD THAT THE INCOME BY WAY OF C APACITY CHARGES, CAPACITY INDEX INCENTIVE AND DEEMED GE NERATION CHARGES HAD ACCRUED TO THE ASSESSEE AND HAD TO BE RECOGNIZED AS REVENUE BY IT. SINCE THAT WAS NOT DONE BY THE AS SESSEE, THE AO WAS CORRECT IN BRINGING THE AMOUNT TO TAX. THE A DDITION IS CONFIRMED. DURING SUBMISSIONS BEFORE THE UNDERSIGNED THE ASSES SEE WAS ASKED TO FURNISH COPIES OF THE PETITION FILED BY IT ON 25.3.2014 WITH THE UERC AND A COPY OF THE REPLY FILED BY M/S UPCL IN RESPONSE TO THE SAID PETITION. ACCORDINGLY, THE SAM E WERE FILED. THEY HAVE BEEN PERUSED AND WHAT EMERGES FROM READIN G OF THESE PETITIONS IS THAT THERE IS NO DISPUTE WITH RE GARD TO THE LIABILITY OF M/S UPCL FOR PAYMENT OF CAPACITY CHARG ES, CAPACITY INDEX INCENTIVE AND DEEMED GENERATION CHARGED TO TH E ASSESSEE. THIS HAS BEEN LAID DOWN BY THE UERC IN ITS LETTER NO.724/UERC/MISC.APP./41/2005 DATED 20.1.2006 WHICH HAS CLARIFIED THAT THE ABOVE DISPUTE CHARGES ARE DETERM INABLE AND 16 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. PAYABLE IN LINE WITH UERC REGULATION 2004. IT WAS A LSO OBSERVED FROM THE SUBMISSIONS FILED BY THE UPCL THAT THE UPC L HAS NOT CONTESTED ITS LIABILITY TO PAY THE SAID CHARGES. IT HAS ONLY QUESTIONED THE QUANTUM OF THE CHARGES THAT HAVE BEE N LEVIED BY THE ASSESSEE ON THE GROUNDS THAT THE DATA FOR MISDE CLARATION FOR THE PERIOD 2004-5 TO 2012-13 HAD NOT BEEN PROVIDED TO IT TO ENABLE IT TO CHECK THE BILLS PROPERLY. I HAD ALSO A SKED THE ASSESSEE TO FURNISH A NOTE ON THE IMPACT OF MISDECL ARATION ON CAPACITY CHARGES. IT IS SEEN FROM THE SAID NOT THAT WHILE MISDECLARATION MAY VARY THE TOTAL AMOUNT OF CAPACIT Y CHARGES, IT WOULD NOT REFUTE THE LIABILITY TO PAY THE SAME. IN THE CIRCUMSTANCES, WHEN THE AMOUNT IS PAYABLE TO THE AS SESSEE AS PER THE STATUTORY REGULATION AND WHEN THE DEBTOR HA S NOT DISPUTED THE LIABILITY TO MAKE THE PAYMENT, IT CANN OT BE SAID THAT THE INCOME HAD NOT ACCRUED TO THE ASSESSEE. THE ONL Y ISSUE FOR RESOLUTION IS THE ISSUE OF DETERMINATION OF QUANTUM . AS MY LD. PREDECESSOR HAS POINTED OUT RECOGNITION OF A RECEIV ABLE AS REVENUE OR OF A LIABILITY AS EXPENDITURE NEED NOT B E POSTPONED SIMPLY BECAUSE ITS EXACT QUANTIFICATION IS NOT POSS IBLE BUT ACCORDING TO THE MERCANTILE SYSTEM OF ACCOUNTING, T HE AMOUNT NEEDS TO BE ESTIMATED TO BE BEST JUDGMENT OF THE AS SESSEE AND GIVE EFFECT TO IN THE ACCOUNTS. IF THE AMOUNT, WHEN IT IS QUANTIFIED FINALLY VARIES WITH THE ESTIMATE MADE EARLIER, APPR OPRIATE ADJUSTMENTS IN THE ACCOUNTS ARE TO BE MADE TO FACTO R IN SUCH VARIATION. HENCE, THAT CANNOT BE A JUSTIFICATION FO R NOT RECOGNIZING 17 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. THE REVENUE IN QUESTION, ESPECIALLY IN VIEW OF THE FACT THAT IF THE ASSESSEE FAILED TO RECOVERED THE SAID AMOUNT IN FUT URE IT WOULD BE FREE TO WRITE THE SAME OFF AS BAD DEBTS AND INCO ME TAX LAW WOULD ALLOW DEDUCTION FOR THE SAME AS AND WHEN SUCH EVENTUALITY AROSE. IT IS SEEN THAT THIS EXERCISE OF ASCERTAINMENT OF CC AND CII TO THE MUTUAL SATISFACTION OF BOTH PARTI ES HAS BEEN CONDUCTED. THIS COULD HAVE FORMED THE BASIS OF JUST JUDGMENT ESTIMATION OF INCOME FROM SUCH SOURCES AND ATLEAST THOSE TWO CHARGES COULD HAVE BEEN OFFERED AS INCOME ON THE BA SIS OF SUCH JOINT VERIFICATION. SUBSEQUENTLY IF THE FINALLY DET ERMINED FIGURES VARIED ON ACCOUNT OF MISDECLARATION, THE CESS CLAIM COULD HAVE BEEN WRITTEN AS BAD DEBT. IN THE CIRCUMSTANCES, IT IS HELD THAT THE PLEA OF THE ASSESSEE THAT IT HAD FOLLOWED THE PRINC IPLES OF AS9 AND DECLARED THE AMOUNT IN THE BALANCE SHEET TO THE NOTES ON ACCOUNT BUT NOT IN THE P&L A/C BECAUSE THE RECEIPT WAS UNCERTAIN IS UNACCEPTABLE AND IT IS THEREFORE, REJE CTED. THE ADDITION MADE IN THIS REGARD, IS THEREFORE, SUSTAIN ED. 3.0 BEING AGGRIEVED, THE ASSESSEE IS NOW IN APPEA L BEFORE US. IN THIS REGARD IT WAS SUBMITTED BY THE LD AR THAT WITH REGARD TO ADDITION OF CC, DG AND CII, THE SAID AMOU NT HAD BEEN SHOWN AS DISCLOSURE IN THE BALANCE SHEET, BEING THE AMOUNT CLAIMABLE BY THE ASSESSEE FROM UPCL WHICH HAD NOT BE EN ACKNOWLEDGED BUT DISPUTED BY THE UPCL SINCE INCEPTIO N AND THE 18 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. MATTER HAD BEEN REFERRED TO THE REGULATORY AUTHORIT Y FOR SETTLEMENT. SINCE THE METHODOLOGY IS YET TO BE DETERMINED AND T HERE WERE SEVERAL TECHNICAL ASPECTS WHICH WERE YET TO BE FINAL IZED DUE TO LACK OF CLARITY IN THE REGULATIONS, THE DETERMINATION OF AMOUNT ON ACCOUNT OF CAPACITY CHARGES, DEEMED GENERATION CHAR GES AND CAPACITY INDEX CHARGES COULD NOT BE QUANTIFIED. ALL THESE MATTERS HAVE BEEN DISPUTED BY UPCL WHO HAVE ULTIMATELY TO AC CEPT AND MAKE PAYMENT TO THE ASSESSEE. THE LD. AR HAS ALSO P LACED ON RECORD COPIES OF ASSESSMENT ORDERS PASSED BY THE AO FOR AYS 2007- 08 TO 2009-10. IT IS ALSO SUBMITTED THAT WHEN THE DI SPUTE WAS FINALLY SETTLED, THE ASSESSEE HAS OFFERED THE INCOM E TO TAX IN AY 2016-17. FURTHER, THE LD. AR HAS RELIED UPON THE FO LLOWING JUDICIAL PRONOUNCEMENTS: I. UCO BANK VS. CIT ITR 889 (SC) II. CIT VS. SHOORJIVALLAHDAS AND CO.46 ITR 144 (SC) III. GODHRA ELECTRICITY CO. LTD. VS. CIT 225 ITR 746 (SC ) IV. HONBLE DELHI HIGH COURTS CONSOLIDATED DECISION DA TED 29.11.2010 IN THE CASE OF CIT VS. VASISTHCHAYVYAPAR LTD. AND OTHERS 19 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. V. E.D. SASSOON & CO. LTD. &ORS. VS. CIT (1954) 26 ITR 27 (SC) VI. CIT VS. ASHOKBHAICHIMANBHAI (1965) 56 ITR 42 (SC), VII. CIT VS. NADIA ELECTRIC SUPPLY CO. LTD. (1971) 80 IT R 650(BOM) VIII. POONA ELECTRIC SUPPLY CO. LTD. VS. CIT (1965) 57 IT R 521 (SC) IX. CIT VS. EICHTER LTD. (2010) 320 ITR 410 (DELHI) 4.0 ON THE OTHER HAND, THE LD DR HAS SUPPORTED THE ADDITION MADE BY THE AO. IT WAS SUBMITTED BY HI M THAT THE LD. CIT (A) HAS DISCUSSED THE ISSUE IN DETAIL AND HAS R IGHTLY UPHELD THE ADDITION. 5.0 WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE MATERIAL AVAILABLE ON RECORD. IN THE FINANC IAL STATEMENTS CAPACITY CHARGES, DEEMED GENERATION CHARGES AND CAP ACITY INDEX INCENTIVE HAVE BEEN SHOWN AS A DISCLOSURE IN THE BA LANCE SHEET AS AN AMOUNT CLAIMABLE BY THE ASSESSEE FROM UPCL WHICH HAS NOT BEEN ACKNOWLEDGED BUT DISPUTED BY THE UPCL SINCE INC EPTION AND THE MATTER HAS BEEN REFERRED TO THE REGULATORY AUTH ORITY FOR 20 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. SETTLEMENT FROM TIME TO TIME. FACTS ON RECORD DEMON STRATE THAT SINCE THE METHODOLOGY WAS TO BE DETERMINED AND THERE WERE SEVERAL TECHNICAL ASPECTS WHICH WERE TO BE FINALIZED, DUE TO LACK OF CLARITY IN THE REGULATIONS, THE DETERMINATION OF AMOUNT ON ACC OUNT OF CAPACITY CHARGES, DEEMED GENERATION CHARGES AND CAPACITY IND EX INCENTIVES COULD NOT BE QUANTIFIED. THE ISSUE WAS DISPUTED BY U PCL. UERC IS A REGULATORY AUTHORITY WHICH FIXES THE TARIFF ON ANN UAL BASIS IN ACCORDANCE WITH THE TERMS & CONDITIONS FOR DETERMINA TION OF HYDRO GENERATION TARIFF, REGULATION 2004. THE METHOD OF C ALCULATION OF THESE CHARGES WAS NOT CLEAR AND AS SUCH THIS MATTER BECAME THE SUBJECT MATTER OF DISPUTE. THE ASSESSEE FILED A PET ITION BEFORE THE UERC ON 25 TH MARCH 2014 DUE TO PROLONGED DISPUTE BETWEEN UPCL AND UJVNL AND HAD ALSO SOUGHT NECESSARY DIRECTIONS FROM THE UERC ON THE APPLICABILITY AND PAYABILITY OF CAPACIT Y CHARGES, DEEMED GENERATION CHARGES AND CAPACITY INDEX INCENT IVE. WE FIND MERIT IN SUBMISSIONS MADE BY THE LD AR THAT SINCE T HE BASIS, MODALITY AND THE AMOUNT ON WHICH THE CAPACITY CHARGE S, DEEMED GENERATION CHARGES AND CAPACITY INDEX INCENTIVES WER E TO BE DETERMINED/ QUANTIFIED, IT WAS DIFFICULT FOR THE ASS ESSEE TO ASCERTAIN 21 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. THE CORRECT AND ACTUAL AMOUNT OF CHARGES RECOVERABL E FROM UPCL. WE ARE, THEREFORE, UNABLE TO SUSTAIN THE ADDITION M ADE BY THE AO. SUPPOR MAY ALSO BE DRAWN FROM THE HONBLE APEX COURT S JUDGMENT IN CASE OF GODHRA ELECTRICITY CO. LTD. V. CIT REPOR TED IN 225 ITR 746 (SC) WHEREIN THE HONBLE APEX COURT EXAMINED THE CAS H SYSTEM AND THE MERCANTILE SYSTEM OF ACCOUNTING IN THE CONTEXT OF HYPOTHETICAL INCOME. IT WAS HELD THAT THE COMPUTATION OF INCOME I S MADE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY E MPLOYED BY THE ASSESSEE. IT MAY BE EITHER THE CASH SYSTEM WHER E ENTRIES ARE MADE ON THE BASIS OF ACTUAL RECEIPTS AND ACTUAL OUT GOINGS OR DISBURSEMENTS; OR IT MAY BE THE MERCANTILE SYSTEM WH ERE ENTRIES ARE MADE ON ACCRUAL BASIS, THAT IS TO SAY, ACCRUAL OF THE RIGHT TO RECEIVE PAYMENT AND THE ACCRUAL OF THE LIABILITY TO DISBURSE OR PAY. HOWEVER, IN BOTH CASES UNLESS THERE IS REAL INCOME, THERE CANNOT BE ANY INCOME-TAX. CONSIDERING THE FACTS BEFORE IT, TH E HONBLE APEX COURT HELD THAT ALTHOUGH THE ASSESSEE-COMPANY WAS F OLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND HAD MADE ENTRIE S IN THE BOOKS REGARDING ENHANCED CHARGES FOR THE SUPPLY OF ELECTR ICITY MADE TO ITS CONSUMERS, NO REAL INCOME HAD ACCRUED TO THE ASSESS EE-COMPANY IN 22 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. RESPECT OF THOSE ENHANCED CHARGES IN VIEW OF THE FAC T THAT SOON AFTER THE ASSESSEE-COMPANY DECIDED TO ENHANCE THE RATE, R EPRESENTATIVE SUITS WERE FILED BY THE CONSUMERS WHICH WERE DECREED BY THE COURT AND ULTIMATELY, AFTER VARIOUS PROCEEDINGS WHICH TOOK PLACE, THE ASSESSEE-COMPANY WAS NOT ABLE TO REALISE THE ENHANCE D CHARGES. THE COURT HELD THAT NO REAL INCOME HAD ACCRUED TO T HE ASSESSEE- COMPANY AND, HENCE, THE ENTRIES IN RESPECT OF ENHAN CED CHARGES DID NOT REFLECT THE REAL INCOME OF THE ASSESSEE AND COU LD NOT BE BROUGHT TO TAX BY THE REVENUE. 5.1 THE LD AR HAS ALSO PLACED ON RECORD THE FACT THAT ON 27 TH APRIL, 2015, UERC HAS FINALLY SETTLED THE PETITION DATED 25 TH MARCH, 2014 REGARDING THE DISPUTE BETWEEN UPCL AND THE ASSESSEE ON THE APPLICABILITY AND PAY ABILITY OF CA PACITY CHARGES, DEEMED GENERATION CHARGES AND CAPACITY INDEX INCENT IVE AND UERC HAS GIVEN DIRECTION TO UPCL TO CONSIDER AND PAY THE REVISED VERIFIED CAPACITY CHARGES, DEEMED GENERATION CHARGES AND CAP ACITY INDEX INCENTIVE BY SLDC, UPCL AND UJVNL IN 18 EQUAL MONTH LY INSTALLMENTS. ON THE BASIS OF VERIFIED DATA, YEAR WI SE BILLS FOR CC, CII HAS BEEN RAISED IN SUPPRESSION OF BILLS RAISED EARLIER AND DETAIL 23 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. OF BILLS RAISED BEFORE AND AFTER VERIFICATION FOR T HE PERIOD FROM FY 2004-05 TO FY 2012-13 IS AS UNDER: FINANCIAL YEAR TOTAL CAPACITY CHARGES & CAPACITY IN DEX INCENTIVE OLD BILL REVISED BILL 2004-05 227,232,641 15,42,96,401 2005-06 66,705,707 4,57,18,570 2006-07 115,138,682 9,02,41,357 2007-08 99,150,697 8,24,69,988 2008-09 359,035,896 6,70,28,088 2009-10 633,606,018 28,83,27,802 2010-11 406,656,344 9,27,10,039 2011-12 441,513,425 7,44,41,381 2012-13 496,965,529 12,68,59,505 TOTAL 2,846,004,939 102,20,93,131 5.2 THE LD AR HAS ALSO BROUGHT ON RECORD THE FAC T THAT THE ASSESSEE HAS STARTED RECEIVING THE DISPUTE D AMOUNTS FROM UPCL IN MONTHLY INSTALLMENTS W.E.F, AUGUST, 2015 AND THAT THE 24 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. ASSESSEE HAS VOLUNTARILY AGREED TO DISCLOSE THE ENT IRE AMOUNT OF CAPACITY CHARGES, DEEMED GENERATION CHARGES AND CAP ACITY INDEX INCENTIVE CHARGES DURING THE FY 2015-16 RELEVANT TO AY 2016-17. THIS FACT IS ALSO VERIFIABLE FROM THE ORDERS OF ASS ESSMENT DATED 17 TH MARCH 2016 PASSED BY THE AO IN CASE OF THE ASSESSEE FOR AY 2007- 08 U/S 254/143(3) OF THE INCOME TAX ACT, 1961 WHEREI N HE HAS TAKEN NOTE OF SUBSEQUENT DEVELOPMENTS AND HAS ACCEP TED THE CLAIM MADE BY THE ASSESSEE BY OBSERVING AS UNDER: 7.5 THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED C AREFULLY AND THE MATTER OF MATTER OF CAPACITY CHARGES, DEEME D GENERATION CHARGES AND CAPACITY INDEX INCENTIVES HA S NOW BEEN FINALLY DECIDED BY THE UERC AND THE DISPUTE BETWEEN UPCL AND UJVNL STANDS SETTLED. THE AMOUNT OF CAPACITY CHARGE S, DEEMED GENERATION CHARGES AND CAPACITY INDEX INCENTIVES HA VE BEEN DETERMINED AFTER THE DIRECTION OF THE HONBLE UERC VIDE ITS ORDER DATED 27.04.2015 BY OBSERVING THAT:- THE RESPONDENT (UPCL) SHALL PAY TO PETITION (I.E., UJVNL) THE ARREAR IN 18 EQUAL MONTHLY INSTALMENTS FROM AUGUST, 2015 ONWARD ON ACCOUNT OF (A) TARIFF REVISION (B) CAPACITY CHARGES AND CAPACITY INDEX INCENTIVE 25 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. (C) INCOME TAX 7.6 THE ASSESSEE HAS PRODUCED THE COPY OF THE HONB LE UERC ORDER DATED 27.04.2015 ALONGWITH ITS REVISED YEAR W ISE INCOME OF CAPACITY CHARGE, DEEMED GENERATION CHARGE AND CA PACITY INDEX INCENTIVE DULY AGREED BY UPCL AND UJVNL. A CO PY OF THE AGREED RECONCILIATION STATEMENT BETWEEN UPCL AND UJ VNL IS ALSO FURNISHED ALONGWITH THE COPY OF BANK STATEMENT IN WHICH THE ABOVE AMOUNT OF INSTALLMENT HAVE BEEN RECEIVED BY THE UJVNL, IN SUPPORT OF ITS CLAIM, A WRITTEN EXPLANATI ONS HAVE BEEN SUBMITTED BY THE ASSESSEE ON THE ISSUE OF CAPACITY CHARGES, CAPACITY INDEX INCENTIVE AND DEEMED GENERATION CHAR GES IS GIVEN AS MENTIONED IN THE BODY OF THE ORDER. THE AS SESSEE HAS AGREED TO OFFER THE INCOME EARNED FOR THE PERIOD FR OM F.Y.2004- 05 TO F.Y.2012-13 UNDER THE HEAD CAPACITY CHARGES, DEEMED GENERATION CHARGE AND CAPACITY INDEX INCENTIVE TO B E TAXED IN F.Y.2015-16 I.E., ON RECEIPT BASIS AND HAS ALSO PAI D TWO INSTALLMENTS OF ADVANCE TAX AFTER INCLUDING THE CAP ACITY CHARGES IN THE INCOME OF THE COMPANY FOR F.Y.2015-16. HENCE NO ADDITION HAS BEEN MADE ON THIS ACCOUNT DURING THE Y EAR UNDER CONSIDERATION. 5.3 SIMILAR FINDINGS HAVE BEEN GIVEN BY THE AO IN ORDERS FOR ASSESSMENT DATED 21 ST MARCH 2016 AND 17 TH MARCH 2016 PASSED U/S 254/143(3) FOR AYS 2008-09 AND 2009-10.O NCE THE CORRECT AMOUNT OF INCOME HAS ALREADY BEEN OFFERED T O TAX IN AY 26 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. 2016-17, WE FIND NO MERIT IN THE ADDITION MADE BY T HE AO IN THE PRESENT ORDER OF ASSESSMENT. WE, THEREFORE, ALLOW G ROUND NO. 2 OF THE APPEAL AND DIRECT THE AO TO DELETE THE ADDITION MADE OF RS 40,66,56,344/-. 6.0 WE NOW TAKE UP FOR CONSIDERATION THE APPEAL F ILED BY THE REVENUE. THE GROUNDS RAISED BY THE DEPARTMENT A RE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALL OWING DEPRECIATION ON ASSETS OF WHICH THE ACTUAL COST AS PER SECTION 43(1) OF THE I.T. ACT, 1961 WAS NIL. 2. THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE AO RESTORED . 6.1 SOLE ISSUE IN DISPUTE IS DISALLOWANCE OF DEPRE CIATION. BOTH THE LOWER AUTHORITIES NOTE THAT THIS A LEGACY ISSUE IN CASE OF THE ASSESSEE. THIS ISSUE HAS RECENTLY BEEN DECIDED BY US IN CASE OF ASSESSEE ITSELF VIDE ORDER DATED 31/05/2021 PASSED IN ITA NO. 5124/DEL/2015 FOR AY 2004-05. FINDINGS GIVEN IN ITA NO. 5124/DEL/2015 WILL, THEREFORE, APPLY MUTATIS MUTANDIS TO THE PRESENT APPEAL. WE, THEREFORE, FIND NO MERIT IN THE APPEAL FILED BY THE TAX DEPARTMENT. 27 ITA NOS3804 & 3181 /DEL/2015 DCIT VS. M/S UTTARANCHAL JAL VIDYUT NIGAM LTD. 7.0 IN THE FINAL RESULT, THE APPEAL OF THE AS SESSEE STANDS ALLOWED AND THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON 31/05/2021. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 31/05/2021 *DRAGON* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI (DEHRADUN CIRCUIT BENCH, DEHRADUN)