DCIT 1(2), MUMBAI V. MAHARASHTRA STATE ELCTRICITY BOARD, MUMBAI

ITA 3559/MUM/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9882 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINHA
• Keywords: Business income; Rule of consistency; Relationship of principal and agent; Tax effect
• Section: 43B; 143(3); 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G. S. PANNU , AM & SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO. 3559/MUM/2013 ( / ASSESSMENT YEAR: 2006 - 07 ) DCIT 1 (2) R. NO. 535 , 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020. / VS. MAHARASHTRA STATE ELECTRICITY BOARD, 6 TH FLOOR, PRAKASH GANGA PLOT NO. C - 19, E BLOCK, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI - 4000 51 & CROSS OBJECTION N O . 160/MUM/2014 ( / ASSESSMENT YEAR: 2006 - 07 ) MSEB HOLDING COMPANY LTD. ( ON BEHALF OF MAHARASHTRA STATE ELECTRICITY BOARD) HONGKONG BANK BLDG, MAHATMA GANDHI RD. FORT, MUMBAI - 400001 / VS. DCIT 1(2) R. NO. 535, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020. ./ ./ PAN/GIR NO. A A ACM7507P / APPELLANT BY : SHRI H. N. SINHA , DR / RESPONDENTBY : SHRI NIRAJ SHETH, AR / DATE OF HEARING : 06/03 /2018 / DATE OF PRONOUNCEMENT : 07/03/2018 2 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, / O R D E R PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER : THE PRESENT A PPE AL AS WELL AS CROSS OBJECTION FILED BY THE REVENUE AS WELL AS ASSESSEE ARE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) 2, MUMBAI DATED 01.02.13 FOR AY 2006 - 07 . 2. SINCE ALL THE ISSUES INVOLVED IN THE APPEAL AS WELL AS CROSS OBJECTION ARE COMMON, THEREFORE, THEY HAVE BEEN CLUBBED , HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. I TA NO. 3559/MUM/2013 (AY 20 06 - 07 ) 3 . FIRST OF ALL WE TAKE UP REVENUE S APPEAL IN ITA NO. 3 559/MUM/2013 FOR ASSESSMENT YEAR 2006 - 07 AS LEAD CASE . THE GROUND S OF APPEAL ARE MENTIONED HEREIN BELOW: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING 3 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, THE FACTS O F THE CASE IN THE LIGHT OF JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY CO. LTD. 262 ITR 97 (GUJ.)' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF INCOME OF RS. 101.01 CRORES ACCRUED TO THE ASSESSEE ON ACCOUNT OF SUPPLEMENTARY BILLS ISSUED TO THE CUSTOMERS WITHOUT APPRECIATING THAT AS PER THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE ASSESSEE WAS LIABLE TO OFFER SUCH INCOME FOR TAX.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. BY MERELY QUOTING SEVERAL JUDICIAL DECISIONS, WITHOUT GIVING ANY FINDING AS TO THE FACTS OF THE ASSESSEE'S CASE TO JUSTIFY THE AP PLICABILITY OF THE RATIO OF THE SAID JUDGMENTS. 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING ........ (A) THAT THE ASSESSEE HAS ADMITTED THAT INCOME OF RS. 27 LAKHS HAD ACCRUED TO IT BUT NOT ACC OUNTED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND 4 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, (B) IN SETTING ASIDE THIS ISSUE TO THE A.O. WITHOUT ANY FINDING AND DIRECTION AS TO ITS TAXABILITY WHICH IS NOT PERMITTED IN SECTION 251(1)(A) OF THE ACT.' 5. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW AND WITHOUT PREJUDICE TO THE REVENUE'S STAND THAT THE ADDITION OF THE ENTIRE AMOUNT OF RS. 101.01 CRORES OUGHT TO HAVE BEEN SUSTAINED BY THE LD. CIT(A), THE LD. CIT(A) ERRED IN NOT UPHOLDING THE ADDITION ON ACCOUNT OF SUPPLEMENTARY BILL S TO THE EXTENT OF RS. 27 LAKHS.' THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR WITHDRAW THE AFORESAID GROUND OF APPEAL. 4 . AS PER TH E FACTS OF THE PRESENT CASE, THE ASSESSEE COMPANY IS ENGAGED IN GENERATION, TRANSMISSION AND DISTRIBUTION OF ELECTRICITY IN THE STAT E OF MAHARASHTRA. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD CARRIED ON ITS BUSINESS ACTIVITIES FROM 01.04.2005 UPTO 05.06.2005. WITH EFFECT FROM 0 6.06.2005 ONWARDS, THE ASSESSEE COMPANY WAS TRIFURCATED INTO THREE FOLLOWING COMPANIES, AS PER THE NOTIFICATION NO. REFORM 5 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, 1005/CR 9061/ (1) NRG - 5 DATED 41H JUNE, 2005, MENTIONED AS FOLLOWS: I) M/S MAHARASHTRA STATE ELECTRICITY TRANSMISSION CO. LTD. (MSETCL), II) M/S MAHARASHTRA STATE POWER GENERATION CO. LTD. (MSPGCL), III) M/S MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. THE ASSESSEE COMPANY HAS E - FILED ITS RETURN OF INCOME ON 27.11.2006 DECLARING TOTAL INCOME OF RS.NIL. THE ORIGINAL ASSESSMENT ORDER U/S 143(3) OF THE INCOME - TAX ACT WAS PASSED ON 30.12.2008 DETERMINING THE TOTAL INCOME AT RS.NIL. ON VERIFICATION OF RECORDS, THE A O HAD NOTICED THAT THE ASSESSEE COMPANY'S INCOME HAD ESCAPED TO TAX ON THE FOLLOWING COUNTS: - A) AS PER BALANCE SHEET AS ON 31.3.2006 UNDER THE HEAD CURRENT LIABILITIES (SCHEDULE 28) THE ELECTRICITY DUTY AND OTHE R LEVIED PAYABLE TO GOVERNMENT HAS BEEN INCREASED FROM RS. 33117.95 LAKH AT THE BEGINNING OF THE FINANCIAL YEAR TO RS. 46775.39 LAKH AND AT THE END OF THE FINANCIAL YEAR 2005 - 06 SHOWING NET ADDITION OF RS. 13657.44 LAKHS. THE COMPANY HAD 6 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, COLLECTED ELECTRIC ITY DUTY FROM CUSTOMERS BUT NOT DEPOSITED THE SAID AMOUNT TO GOVERNMENT ACCOUNT. OMISSION RESULTED IN ESCAPEMENT OF INCOME TO THE TUNE OF RS. 1367.44 LAKHS FROM ASSESSMENT. B) IT IS SEEN FROM NOTE 32 TO BALANCE SHEET THAT MSEB HAD ISSUED SUPPLEMENTARY BIL LS TO 4529 CONSUMERS OVER A PERIOD UP TO 05.06.2005 FOR THEFT OF ENERGY AMOUNTING TO RS. 101.01 CRORE WHICH ARE NOT ACCOUNTED IN BOOKS, AS THE SAME ARE DISPUTED BY THE CONSUMERS W.EF. 05.06.2005, MSEB WAS SPLIT INTO THREE COMPANIES AND THEREFORE THE RETURN FILED BY THE ASSESSEE IN THE CURRENT YEAR WAS THE LAST RETURN IN THE NAME OF MSEB. IN THE MERCANTILE SYSTEM OF ACCOUNTING ALL REVENUES BILLED TO CUSTOMERS NEED TO BE OFFERED TO TAX. ACCORDINGLY, AMOUNT BILLED THROUGH SUPPLEMENTARY BILLS ALSO NEED TO BE AC COUNTED IN BOOKS, OMISSION OF NON ACCOUNTING OF SUPPLEMENTARY BILLS IN THE BOOKS RESULTED IN THE UNDER ASSESSMENT OF INCOME TO THE EXTENT OF 101.01 CRORE INVOLVING NOTIONAL TAX EFFECT OF RS. 33,99,99,660/ - . C) INCOME DETERMINED FOR A.Y. 2006 - 07 AMOUNTING TO RS. 838.65 CRORE WAS SET OFF AGAINST BROUGHT FORWARD LOSS. THE 7 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, BALANCE BROUGHT FORWARD LOSS WAS ALLOWED TO BE CARRIED FORWARD. HOWEVER LOSS ALLOWED TO BE CARRIED FORWARD WAS NOT QUANTIFIED IN THE ASSESSMENT ORDER. A TABLE FOR A. Y. 2001 - 01, 2001 - 02, 200 2 - 03, 2003 - 04, 2004 - 05, 2005 - 06 WILL REVEAL THAT THERE WAS AN IRREGULAR SET OFF OF RS. 838,65,23,129/ - INVOLVING SHORT LEVY OF TAX OF RS. 282,29,04,662/ - . ACCORDINGLY, THE AO ISSUED AND SERVED A NOTICE U/S 148 OF THE INCOME - TAX ACT ON THE ASSESSEE COMPANY AFTER OBTAINING NECESSARY APPROVAL FROM THE COMMISSIONER OF INCOME - TAX - 1, MUMBAI AND PROVIDED THE REASONS FOR REOPENING TO THE ASSESSEE COMPANY. THE AO HAD MADE ADDITION OF RS.1,36,37,43,810/ - ON ACCOUNT OF NON - DEPOSIT OF ELECTRICITY DUES FORM THE CONSUM ERS TO THE GOVERNMENT AND ANOTHER ADDITION OF RS.1,01,01,00,000/ - ON ACCOUNT OF NON - ACCOUNTING SUPPLEMENTARY BILLS ISSUED TO THE CONSUMERS. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CAS E OF BOTH THE PARTIES HAD PARTLY ALL OWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITIONS MADE BY AO BY APPLYING THE PROVISIONS OF 8 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, SECTION 43B OF THE I.T. ACT AND ALSO DELETED THE DISALLOWANCE OF RS. 101.01 CRORES BEING SUPPLEMENTARY BILLS ISSUED TO TH E CONSUMERS. AGGRIEVED BY THE O RDER OF LD. CIT(A), BOTH I.E. REVENUE AS WELL AS THE ASSESSEE HAVE FILED THE IR APPEAL AS WELL AS CROSS OBJECTIONS BEFORE US. HOWEVER AT PRESENT WE ARE DEALING WITH THE APPEAL FILED BY THE REVENUE ON THE GROUND S MENTIONED HEREIN ABOVE . GROUND NO. 1 5 . THIS GROU ND RAISED BY THE REVENUE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY AO ON ACCOUNT ELECTRICITY DUTY BY APPLYING THE PROVISIONS OF SECTION 43B OF THE I.T. ACT. 6 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. 9 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD . CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUND RAISED BY THE REVENUE IN PARA NO. 4 OF ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. C IT(A) IS CONTAINED IN PARA NO. 4.3 TO 4.3.2 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 4.3. I HAVE G ONE THROUGH THE ISSUE. IT IS SEEN THAT ELECTRICITY DUTY IS PAYABLE BY THE CONSUMER TO THE GOVERNMENT. THE APPELLANT IS LIABLE TO COLLECT IT FROM THE CUSTOMERS AND THE APPELLANT HAS TO REMIT THE SAME TO THE GOVERNMENT. THE HON'BLE KERALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD - VS - DCIT [(2011) 196 TAXMAN 1 (KER) HAS HELD THAT SECTION 43B OF THE INCOME - TAX ACT IS NOT APPLICABLE TO ELECTRICITY BOARDS THAT ARE LIABLE TO COLLECT THE ELECTRICITY DUTY FROM THE CUSTOMERS AND TO REMIT TO THE GOVER NMENT. THE HON'BLE KERALA HIGH COURT IN PARA 27 OF THE ORDER HAS HELD AS FOLLOWS: 'ON A PLAIN READING OF SECTION 43B WE ARE OF THE OPINION THAT THE ONLY CLAUSE IF AT ALL IS RELEVANT IN THE CONTEXT OF THE FACTS OF THE APPELLANT'S CASE IN CLAUSE (A) WHICH DEALS WITH 'ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, UNDER ANY 10 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, LAW FOR THE TIME BEING IN FORCE'. IN OUR OPINION, THE WORDS, 'BY WAY OF TAX' ARE RELEVANT AS THEY ARE INDICATIVE OF THE NATURE OF LIABILITY. THE LIABILITY TO PAY AND THE CORRESPONDING AUTHORITY OF THE STATE TO COLLECT THE TAX (FLOWING FROM A STATUTE) IS ESSENTIAL LY IN THE REALM OF THE RIGHT OF THE SOVEREIGN. WHEREAS THE OBLIGATION OF THE AGENT TO ACCOUNT FOR AND PAY THE AMOUNTS COLLECTED BY HIM ON BEHALF OF THE PRINCIPAL IS PURELY FIDUCIARY. THE NATURE OF THE OBLIGATION, IN OUR OPINION, CONTINUOUS TO BE FIDUCIARY EVEN IN A CASE WHEREIN THE RELATIONSHIP OF THE PRINCIPAL AND AGENT IS CREATED BY A STATUTE. WE ARE OF THE OPINION THAT, WHEN SECTI9N 4313(A) SPEAKS OF THE SUM PAYABLE BY WAY OF TAX, ETC, THE SAID PROVISION IS DEALING WITH THE AMOUNTS PAYABLE TO THE SOVEREI GN QUA SOVEREIGN, BUT NOT THE AMOUNTS PAYABLE TO SOVEREIGN QUA PRINCIPAL. WE ARE THEREFORE OF THE OPINION THAT SECTION 43B CANNOT BE INVOKED IN MAKING THE ASSESSMENT OF THE LIABILITY OF THE APPELLANT UNDER THE INCOME - TAX ACT WITH REGARD TO THE AMOUNTS COLL ECTED BY THE APPELLANT PURSUANT TO THE OBLIGATION CAST ON THE APPELLANT UNDER SECTION 5 OF THE ELECTRICITY DUTY ACT, 1963.' 11 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, 4.3.1. IT IS SEEN THAT IN THE EARLIER ASSESSMENT YEARS, THE ISSUE WAS DECIDED AGAINST THE APPELLANT FOLLOWING THE HON'BLE GUJRAT HIG H COURT'S DECISION IN THE CASE OF AHMEDABAD ELECTRICITY CO. LTD. [262 1TR97 (GUJ)]. 4.3.2. HOWEVER, IT IS A SETTLED PRINCIPLE OF LAW THAT IF THERE ARE TWO VIEWS OF POSSIBLE THEN THE APPELLATE AUTHORITY HAS TO DECIDE THE ISSUE WHICH IS FAVOURABLE TO THE ASS ESSEE. KEEPING THIS PRINCIPLE IN MIND AND RESPECTFULLY FOLLOWING THE HON'BLE KERALA HIGH COURT'S DECISION [196 TAXMAN 1 (KER)], I HOLD THAT THE PROVISION OF SECTION 43B IS NOT APPLICABLE WITH RESPECT TO ELECTRICITY DUTY IN THE APPELLANT'S CASE. IN VIEW OF THIS, I DIRECT THE AO TO DELETE THE ADDITION. IT WAS FURTHER SUBMITTED BY LD. AR THAT THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY HONBLE ITAT IN CO NO. 11/196/197/MUM/10 IN CASE TITLED M/S MAHARASHTRA STATE ELECTRICITY BOARD VRS. DCIT, MUMBAI I.E. IN ASSESSEES OWN CASE FOR AY 2001 - 02 TO 2003 - 04. THE OPERATIVE PORTION OF HONBLE ITAT IS CONTAINED IN PARA NO. 5.3 AND THE SAME IS REPRODUCED BELOW: - 12 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, 5.3.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT ISSUE OF APPLICABILITY OF THE PROVISIONS OF SECTION 43B OF THE ACT HAS BEEN DISCUSSED AND DECIDED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD(SUPRA) AS UNDER: SECTION 43B(A) DEALS WITH ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, . . . UNDER ANY LAW FOR THE TIME BEING IN FORCE. THE WORDS, BY WAY OF TAX ARE INDICATIVE OF THE NATURE OF LIABILITY.THE LIABILITY TO PAY AND THE CORRESPONDING AUTHORITY OF THE STATE TO COLLECT THE TAX (FLOWING FROM A STATU TE) IS ESSENTIALLY IN THE REALM OF THE RIGHTS OF THE SOVEREIGN, WHEREAS THE OBLIGATION OF THE AGENT TO ACCOUNT FOR AND PAY THE AMOUNTS COLLECTED BY HIM ON BEHALF OF THE PRINCIPAL IS PURELY FIDUCIARY. THE NATURE OF THE OBLIGATION CONTINUES TO BE FIDUCIARY E VEN IN A CASE WHEREIN THE RELATIONSHIP OF PRINCIPAL AND AGENT IS CREATED BY A STATUTE. SECTION 43B(A) DEALS WITH AMOUNTS PAYABLE TO THE SOVEREIGN QUA SOVEREIGN,NOT AMOUNTS PAYABLE TO THE SOVEREIGN QUA PRINCIPAL. THEREFORE SECTION 43B CANNOT BE INVOKED IN T HE CASE OF THE ELECTRICITY BOARD WITH REGARD TO ELECTRICITY DUTY COLLECTED BY IT PURSUANT TO THE OBLIGATION UNDER SECTION 5 OF THE KERALA ELECTRICITY DUTY ACT, 1963. 13 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, IN THE MATTER OF MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD.(SUPRA)THE TRIBUNAL HAS DECIDED THE ISSUE FOLLOW: 28. GROUND NO.2,THIS GROUND DEALS WITH THE ACTION OF LD. CIT(A) IN HOLDING THAT ELECTRICITY DUTY COLLECTED AND PAID/ADJUSTED BY THE ASSESSEE COMPANY AMOUNTING TO RS.23291.59 LAKHS IS COVERED UNDER THE PROVISIONS OF SECTION 4 3B OF THE INCOME TAX ACT 1961. THE LD. AO HAS DISCUSSED THIS ISSUE AT PARA NO.12.1 TO 12.2 ON PAGES 3 TO 4 OF THE ASSESSMENT ORDER WHEREAS THE LD. CIT(A) HAS DISCUSSED THIS ISSUE IN PARA NO.12 TO 12.3 ON PAGE NO.25 TO 27 OF THE ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE COMPANY HAD SHOWN LIABILITY TO THE TUNE OF AFORESAID AMOUNT ACCORDINGLY, HE WAS OF THE OPINION THAT THE SAID AMOUNT OF DUTY WAS COLLECTED BUT WAS NOT PAID TO THE GOVERNMENT AND CONSEQUENTLY THE PROVIS IONS OF SECTION 43B WERE ATTRACTED AND THE IMPUGNED AMOUNT WAS DISALLOWABLE AND ACCORDINGLY, THE AO MADE AN ADDITION OF THIS AMOUNT TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND SUBMITTED BEFORE LD. CIT(A) THAT TH E ASSESSEE COLLECTED ELECTRICITY DUTY FROM THE CONSUMERS ON BEHALF OF THE GOVERNMENT OF MAHARASHTRA AND WAS REQUIRED TO PAY THE SAME TO THE 14 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, GOVERNMENT. IT WAS FURTHER SUBMITTED THAT SINCE THE GOM ITSELF WAS REQUIRED TO MAKE PAYMENT TO THE APPELLANT UNDER A VARIETY OF ACCOUNTS, OR TO CERTAIN POOR OR BACKWARD REGION/SECTION OF SOCIETY, AT NIL OR SUBSIDIZED CHARGES, TO BE RECOVERED FROM THE GOVERNMENT, THE GOM SETTLES ITS INTER SE ACCOUNTS WITH THE APPELLANT ON ACCOUNT OF ELECTRICITY DUTY BY SETTING OFF/ADJUST ING THE AMOUNT RECEIVABLE AGAINST THE AMOUNT PAYABLE. THE INTER SE PAYMENTS WERE THUS EFFECTED THROUGH SET OFF OF MUTUALLY RECEIVABLE/PAYABLE BALANCES, FOR WHICH NOTIFICATIONS WERE ISSUED BY THE GOM FROM TIME TO TIME. THE PROCESS OF ISSUE OF SUCH NOTIFICAT ION WAS COMPLEX AND TIME CONSUMING, SINCE IT INVOLVED A VARIETY OF PROCEDURE WITH VARIOUS AUTHORITIES. DURING THE APPELLATE PROCEEDINGS THE APPELLANT FURNISHED A COPY OF NOTIFICATION DT.31.03.2008 ISSUED BY THE GOM IN SUPPORT OF ITS CONTENTION. 29. IT IS F URTHER SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESSEE DID NOT ACCOUNT FOR THIS AMOUNT THROUGH ITS PROFIT AND LOSS ACCOUNT AND ONLY THE NET AMOUNT WAS DULY EFFECTED IN THE BALANCE SHEET AND THUS ELECTRICITY DUTY WAS NOT EXPENDITURE OF THE ASSESSEE AND TH EREFORE, IT WAS OUTSIDE THE PREVIEW OF SECTION 43B OF THE INCOME TAX ACT. IT WAS FURTHER ARGUED THAT THE RATION OF CHOURANGHEE SALES BUREAU COULD NOT BE APPLIED IN THE CASE OF APPELLANT SINCE THAT 15 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, CASE WAS PERTAINING TO SALES TAX COLLECTED, WHEREAS THE APP ELLANTS CASE WAS IN RESPECT OF COLLECTION OF ELECTRICITY DUTY IN THE LIGHT OF SECTION 4 OF BOMBAY ELECTRICITY ACT 1958. 30. IT WAS FURTHER ARGUED BY THE ASSESSEE BEFORE THE LD. CIT(A) WITHOUT PREJUDICE THAT IN CASE IF THE PROVISIONS OF SECTION 43B ARE HEL D TO BE APPLICABLE TO THE ELECTRICITY DUTY, THEN IN THE ALTERNATIVE APPROPRIATE DIRECTION MUST BE GIVEN TO THE AO TO ALLOW AS DEDUCTION THE ELECTRICITY DUTY PAID UPTO THE DATE OF FILING OF THE RETURN. FOR THE PURPOSE OF PAYMENT OF ELECTRICITY DUTY THE APPE LLANT ARGUED THAT SINCE THE DUTY PAYABLE TO GOM ARE SETTLED BY ADJUSTMENT OF THE AMOUNT RECEIVABLE BY IT TOWARDS THE SALE OF POWER, THE ADJUSTMENT OF SUCH AMOUNT BETWEEN THE APPELLANT AND GOVT. BE CONSIDERED AS PAYMENT OF ELECTRICITY DUTY IN THIS REGARD. 31. THE LD. CIT(A) CONSIDERED THE ARGUMENTS OF THE ASSESSEE BUT DID NOT ACCEPT ITS CLAIM BUT WITH A PARTIAL RELIEF BY GIVING A DIRECTION THAT PAYMENT BY WAY OF ADJUSTMENT MADE AND ACTUAL PAYMENT BOTH TILL DATE OF FILING OF RETURN SHOULD BE ALLOWED. THE OPE RATIVE PARA OF LD. CIT(A)S ORDER IS REPRODUCED AS UNDER : I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLANT COMPANY CAME INTO EXISTENCE AS A RESULT OF TRIFURCATION OF MSEB. EARLIER MSEB WAS PAYING ELECTRICITY DUTY TO 16 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, GOVT. AND THE ISSUE OF DISALLOW ANCE U/S.43B OF UNPAID ELECTRICITY DUTY WAS ALSO THERE. IN THE APPELLANT PROCEEDINGS OF MSEB, IT WAS HELD THAT THE PROVISION OF SECTION 43B WERE APPLICABLE IN RESPECT OF UNPAID ELECTRICITY DUTY. AS A RESULT, THE PROVISIONS OF SECTION 43B ARE ALSO APPLICABL E IN CASE OF APPELLANT BEING SUCCESSOR COMPANY OF MSEB. THEREFORE, IT IS HELD THAT PROVISION OF SECTION 43B ARE APPLICABLE IN RESPECT OF APPELLANTS UNPAID ELECTRIFY DUTY. HOWEVER, THE AO IS DIRECTED THAT THE UNPAID ELECTRICITY DUTY SETTLED BY WAY OF ADJUS TMENT WITH GOVT. OF MAHARASHTRA SHOULD BE TREATED AS PAYMENT OF ELECTRICITY DUTY. 32. BEFORE US, LD. COUNSEL OF THE ASSESSEE ARGUED THE MATTER AT LENGTH AND SUBMITTED THAT THE PROVISIONS OF SECTION 43B ARE NOT APPLICABLE IN THIS CASE AND RELIANCE WAS PLA CED BY HIM ON THE FOLLOWING JUDGMENTS: (I)CESC LDT. VS. CIT IN ITA NO.82/110/83/84 OF 2004/2005 (II) KERALA STATE ELECTRICITY BOARD VS. DCIT REPORTED IN (2010) 329 ITR 91 III) A.W. FIGGIS & CO. LTD. VS. CIT REPORTED IN (2003) 256 ITR 268 17 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, (IV) CIT VS OV IRA LOGISTICS PVT. LTD. REPORTED IN (2015) 58 TAXMANN.COM 206 33. IT WAS FURTHER SUBMITTED BY LD. COUNSEL THAT THE CREDIT FOR THE SIMILAR AMOUNT WAS GRANTED BY THE AO IN THE ASSESSMENT ORDER PASSED FOR A.Y. 2007 - 08 COPY OF THE ASSESSMENT ORDER IS PLACED I N PAPER BOOK AT PAGE NO.161 TO 175 ON OUR ATTENTION HAS BEEN DRAWN ON PAGE NO.174. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND REQUESTED FOR CONFIRMING THE ORDER OF LD. CIT(A). 33A. WE HAVE GONE THROUGH THE ARGUMENTS MADE BY BOTH THE SIDES AS WELL AS THE MATERIAL PLACED BEFORE US. WE HAVE ALSO CONSIDERED THE CASE LAWS RELIED UPON BY THE LD. COUNSEL ON THIS ISSUE, COPIES OF WHICH HAVE ALSO BEEN PLACED BEFORE US. IT IS SEEN THAT IN THE CASE OF KERALA STATE ELECTRICITY BOARD(SU .),IT WAS HELD BY THE HONBLE HIGH COURT THAT IN THESE CIRCUMSTANCES THE PROVISIONS OF S.43B WOULD NOT BE APPLICABLE. WE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. OVIRA LOGISTICS PVT. LTD. (SU.),WHEREIN THEI R LORDSHIPS HAVE HELD THAT IN THE CASE OF SERVICE TAX PAYMENT BY THAT ASSESSEE WHERE IT WAS FOUND THAT BEFORE END OF THE YEAR,AMOUNT ON WHICH SERVICE TAX WAS PAYABLE HAVE NOT BEEN RECEIVED FROM THE PARTIES TO WHOM SERVICES WERE RENDERED, THE CLAIM 18 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, OF SERVI CE TAX PAID COULD NOT BE DISALLOWED. IT WAS HELD THAT S.43B DOES NOT CONTEMPLATE LIABILITY TO PAY THE SERVICE TAX BEFORE ACTUAL RECEIPT OF FUNDS IN THE ACCOUNT OF THE ASSESSEE AND IT WAS FURTHER HELD THAT THE LIABILITY TO PAY SERVICE INTO THE TREASURY WILL ARISE ONLY UPON THE ASSESSEE RECEIVING FUNDS AND NOT OTHERWISE,AND IT WAS ACCORDINGLY HELD THAT LIABILITY TO PAY THE SERVICE TAX IN RESPECT OF CONSIDERATION PAYABLE WILL ARISE ONLY UPON RECEIPT OF SUCH CONSIDERATION, AND NOT OTHERWISE. IN THE CASE BEFORE US, THE ADMITTED POSITION IS THAT BECAUSE OF SOME SETTLEMENTS PENDING BETWEEN THE ASSESSEE COMPANY AND THE GOVERNMENT OF MAHARASHTRA, PAYMENTS COULD NOT BE MADE DURING THE FINANCIAL YEAR.IT IS FURTHER SEEN THAT THE ADMITTED FACTS ARE THAT THE ASSESSEE HAS NOT ROUTED THIS AMOUNT THROUGH THE P&L ACCOUNT.WE RELY WITH THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CESC LTD.(SU.) AND HONBLE KERALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD (SUPRA) TO HOLD THAT THE ELECTRICITY DUTY IS NOT BEING A SUM PAYABLE BY THE ASSESSEE AS A PRIMARY LIABILITY BY WAY OF TAX, DUTY CESS OR FEE, SECTION 43B IS NOT ATTRACTED TO THE ASSESSEE IN RESPECT OF ELECTRICITY DUTY COLLECTED BY IT FOR BEING PASSED ON THE STATE GOVT. TWO RELEVANT PARAS FROM THE REC ENT ORDER OF THE HONBLE CALCUTTA HIGH COURT IN THE 19 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, CASE OF CESC LTD. (SUPRA), VIDE ITS ORDER DATED 14.05.2015 ARE REPRODUCED HEREUNDER: 19. THUS, IN OUR VIEW, THE ELECTRICITY DUTY, NOT BEING A SUM PAYABLE BY THE ASSESSEE AS A PRIMARY LIABILITY BY WAY O F TAX, DUTY, CESS OR FEE, SECTION 43B IS NOT ATTRACTED TO THE LICENCEE/ASSESSEE IN RESPECT OF ELECTRICITY DUTY COLLECTED BY IT FOR BEING PASSED ON THE STATE GOVERNMENT. ON THIS POINT WE ARE IN RESPECTFUL DISAGREEMENT WITH THE DECISION OF THE GUJARAT HIGH C OURT IN THE CASE OF COMMISSIONER OF INCME TAX - VS - AHMEDABAD ELECTRICITY CO. LTD. (SUPRA) AND WE ARE IN AGREEMENT WITH THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD - VS - DEPUTY COMMISSIONER OF INCOME TAX (SUPRA). WE ARE OF THE OPINION THAT SECTION 43B OF THE INCOME TAX ACT IS ATTRACTED TO A CASE WHERE PAYABLE IS TO BE MADE TO THE STATE GOVERNMENT IN THE CAPACITY OF THE STATE AS A SOVEREIGN AND NOT TO A CASE WHERE PAYMENT IS TO BE MADE TO THE STATE GOVERNMENT IN ITS CAPACITY AS A PRINCIPAL BY AN AGENT. IN THE INSTANT CASE, THE RELATIONSHIP BETWEEN THE STATE AND THE LICENSEE IS OF A PRINCIPAL AND AGENT/FIDUCIARY AND NOT THAT OF A SOVEREIGN AND A SUBJECT. 20) LOOKING AT THE ISSUE FROM ANOTHER ANGLE, THE ELECTRICITY DUTY COLLECT ED BY THE LICENSEE FROM THE CONSUMERS IS SO DONE BY THE LICENSEE 20 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, AS AN AGENT OF THE STATE AND, HENCE, THE SAME CANNOT BE CONSIDERED TO A TRADING RECEIPT IN THE HANDS OF THE LICENSEE. IT DOES NOT CONSTITUTE INCOME OF THE LICENSEE AND CANNOT BE INCLUDED IN T HE LICENSEE'S INCOME FOR THE PURPOSE OF COMPUTATION OF INCOME TAX. IT IS NOT A BUSINESS RECEIPT OF THE LICENSEE WHICH THE LICENSEE COLLECTS ON ITS OWN BEHALF IN CONNECTION WITH ITS BUSINESS OF GENERATING AND SUPPLYING ELECTRICITY. THE LICENSEE DOES NOT COL LECT THE ELECTRICITY DUTY FOR ITS OWN CONSUMPTION OR UTILIZATION. IF THE LICENSEE COLLECTS THE DUTY BUT DOES NOT PAY THE SAME TO THE GOVERNMENT, THE STATUTE PROVIDES MECHANISM FOR THE GOVERNMENT TO RECOVER THE SAME FROM THE LICENSEE. EVEN III A CASE WHERE THE LICENSEE IS UNABLE TO RECOVER THE DUTY BUT RECOVERS THE ENERGY CHARGES, THE STATUTES STILL PROVIDES A PROCEDURE FOR THE GOVERNMENT TO RECOVER THE DUTY EITHER FROM THE CONSUMER OR FROM THE LICENSEE. THIS VIEW OF OURS FINDS SUPPORT FROM THE DECISION OF T HE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX - VS. - DEVATHA CHANDRAIAH (SUPRA). THOUGH THE SAID CASE DEALS WITH SALES TAX, THE PRINCIPLE LAID DOWN IN THAT CASE SUPPORTS OUR VIEW. THE MISCHIEF THAT SECTION 43B OF THE INCOME TAX ACT IN TENDED TO PRESENT, IS TAKEN CARE OF BY THE PROVISIONS OF THE BENGAL ELECTRICITY DUTY ACT ITSELF. 21 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, 34. THUS, IN OUR CONSIDERED VIEW, THE ASSESSEE DESERVES TO SUCCEED. THE DISALLOWANCE MADE BY LD. AO ON THIS GROUND FOR RS.23291.59 LAKHS IS HEREBY DELETED AN D GROUND NO.2 OF THE ASSESSEE IS ALLOWED. FOLLOWING THE ABOVE MENTIONED TWO DECISIONS, WE REVERSE THE ORDER OF THE FAA AND DECIDE GROUND NO.1 IN FAVOUR OF THE ASSESSEE . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES , HONBLE ITAT AND SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT LD. CIT(A) HAD CORRECTLY APPRECIATED THE FACTS OF THE PRESENT CASE . WE NOTICED THAT THE ELECTRICITY DUTY IS PAYBLE BY THE CONSUMER TO THE GOVERNMENT AND IN THIS RESPECT, THE ASSESSEE WAS LIABLE TO COLLECT THE SAME FROM THE CONSUMERS AND USED TO REMIT THE SAME TO THE GOVERNMENT. ON THESE FACTS, HONBLE KERALA HIGH COURT IN THE CASE OF KERALA STATE ELECTRICITY BOARD - VS - DCIT [(2011) 196 TAXMAN 1 (KER) H AS HELD THAT SECTION 43B OF THE INCOME - TAX ACT IS NOT APPLICABLE TO ELECTRICITY BOARDS THAT ARE 22 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, LIABLE TO COLLECT THE ELECTRICITY DUTY FROM THE CUSTOMERS AND TO REMIT TO THE GOVERNMENT. EVEN THE COORDINATE BENCH OF HON BLE ITAT IN ASSESSEES OWN CASE HAS ALSO DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE BY RELYING UPON THE JUDGMENT OF HONBLE KERALA HIGH COURT AND OTHER JUDGMENTS. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT IN ASSESSEES OWN CASE, WHICH IS AP PLICABLE MUTANDIS MUTANDI IN THE PRESENT CASE AND ACCORDINGLY DISMISS THIS GROUND RAISED BY THE REVENUE. GROUND NO. 2 TO 5 7. THESE GROUNDS RAISED BY THE REVENUE ARE INTER - CONNECTED AND INTER - RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF INCOME ACCRUED TO THE ASSESSEE ON ACCOUNT OF SUPPLEMENTARY BILLS ISSUED TO THE CUSTOMERS, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THESE GROUNDS BY THIS COMMON ORDER. 23 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, WE HAVE HEARD COUNSELS FOR BOTH THE PART IES AT LENGTH AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH T HE ABOVE GROUND RAISED BY THE REVENUE IN PARA NO. 5 OF ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. CIT(A) IS CONTAINED IN PARA NO. 5.3 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 5.3 I HAVE GONE THROUGH THE ISSUE. IT IS SEEN THAT THE APPELLAN T HAS NOT INCLUDED THE SUPPLEMENTARY BILLS RAISED TO THE CONSUMERS FOR THEFT OF ENERGY IN THE RECEIPTS IN THE P&L ACCOUNT. THE APPELLANT SUBMITS THAT THESE DURES ARE DISPUTED AND THE APPEALS ARE PENDING. APPEALS ARE PENDING AND THE RECEIPTS OF SUCH DEMANDS DEPENDS UPON THE OUTCOME OF THE APPEALS. IN VIEW OF THIS, THAE APPELLANT SUBMITS THAT THE INCOME CANNOT BE TAKEN AS ACCRUED AND HENCE, CANNOT BE TAXED. IN THIS REGARD, THE APPELLANT HAS RELIED ON THE HONBLE SUPREME COURTS DECISION IN THE CASE OF GODHRA ELECTRICITY COMPANY LTD. - VS - CIT [225 ITR 746 (SC) . THE HONBLE SUPREME COURT HAS HELD IN PARA NO. 9 OF THIS ORDER AS FOLLOWS: - 24 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, '9. THE QUESTION WHETHER THERE WAS REAL ACCRUAL OF INCOME TO THE ASSESSEE COMPANY IN RESPECT OF THE ENHANCED CHARGES FOR SUPPLY OF ELECTRICITY HAS TO BE CONSIDERED BY TAKING THE PROBABILITY OR IMPROBABILITY OF REALIZATION IN THE REALISTIC MANNER. IF THE MATTER IS CONSIDERED IN THIS LIGHT, IT IS NOT POSSIBLE TO HOLD THAT THERE WAS REAL ACCRUAL OF INCOME TO THE ASSESSEE - COMPANY IN R ESPECT OF THE ENHANCED CHARGES FOR SUPPLY OF ELECTRICITY WHICH WERE ADDED BY THE ITO WHILE PASSING THE ASSESSMENT ORDERS IN RESPECT OF THE ASSESSMENT YEARS UNDER CONSIDERATION, THE MC WAS RIGHT IN DELETING THE SAID ADDITION MADE BY THE ITO AND THE TRIBUNAL HAD RIGHTLY HELD THAT THE CLAIM AT THE INCREASED RATES AS MADE BY THE ASSESSEE - COMPANY ON THE BASIS OF WHICH NECESSARY ENTRIES WERE MADE PRESENTED ONLY HYPOTHETICAL INCOME AND THE IMPUGNED AMOUNTS AS SOUGHT TO TAX BY THE ITO DID NOT REPRESENT THE INCOME W HICH HAD REALLY ACCRUED TO THE ASSESSEE - COMPANY DURING THE RELEVANT PREVIOUS YEAR. THE HIGH COURT, IN OUR OPINION WAS IN ERROR IN UPSETTING THE SAID VIEW OF THE TRIBUNAL.' THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF FGP - VS - CIT [(2010) 326 ITR 444] HAS H ELD IN PARA 4 & 5 AS FOLLOWS: 25 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, '4. THE APEX COURT IN GODHRA ELECTRICITY CO. LTD. (SUPRA) HAS LAID DOWN THE TEST TO ASSESS INCOME IN THE HANDS OF AN ASSESSEE. THE ASSESSEE THEREIN WAS ALSO - FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND HAD MADE ENTRIES IN THE BOOKS REGARDING ELECTRICAL CHARGES FOR THE SUPPLY MADE TO THE CONSUMERS, HOWEVER, NO REAL INCOME HAD ACCRUED TO THE ASSESSEE COMPANY. THE TRIBUNAL HAD HELD THAT IT REPRESENTED HYPOTHETICAL INCOME AND THE AO WAS NOT RIGHT IN ASSESSING IT TO TAX. BEFO RE THE SUPREME COURT IT WAS URGED THAT EVEN IN CASE OF MERCANTILE SYSTEM OF ACCOUNTING, TAX CAN ONLY BE IMPOSED IF THERE IS REAL INCOME AND INCOME - TAX CANNOT BE IMPOSED ON HYPOTHETICAL INCOME. THE COURT HELD EVEN IN MERCANTILE SYSTEM WHAT HAS TO BE SEEN IS WHETHER INCOME CAN BE SAID TO HAVE REALLY ACCRUED TO THE ASSESSEE COMPANY. THE COURT REFERRED TO THE JUDGMENT OF THE COURT IN H. M. KAS HIPAREKH & CO. LTD. VS. CIT (1960) 39 ITR 706 (BOM ) WHICH VIEW WAS APPROVED BY THE SUPREME COURT IN CIT VS. BIRLA GWALIOR (P) LTD. 1973 CTR (SC) 349 : (1973) 89 ITR 266 (SC). WHAT CAN THEREFORE, BE ASSESSED IS REAL INCOME AS INCOME - TAX IS A TAX ON INCOME. THE TEST THEREFORE, BEFORE INCOME CAN BE TAXED IS WHETHER THERE IS REAL CFCRUAL OF INCOME. IN OUR OPINION, THE RATIO OF THAT JUDGMENT FULLY APPLIES TO THE FACTS OF THE PRESENT CASE. 26 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, 5. IN THE INSTANT CASE, THERE IS NO REAL ACCRUAL OF INCOME. THERE IS DISPUTE BETWEEN THE PARTIES FOR THE RELEVANT ASSESSMENT YEAR WHICH WAS PENDING IN ARBITRATION. IT IS ONLY ON THE ARBITRAL PROCEEDINGS COMING TO AN END AND AWARD BEING PASSED AND INCOME RECEIVED BY THE ASSESSEE, WILL IT BE LIABLE TO BE ASSESSED.' THE HON'BLE ITAT, DELHI IN THE CASE OF DCIT - VS - DAKSHIN HARYANA BIJLI VITRAN NIGAM LTD. [(2 012) 144 TTJ (DEL) 3071 HAS HELD AS FOLLOWS: 'THE ASSESSEE MAINTAINS ITS METHOD ON ACCOUNTING AS MERCANTILE SYSTEM. PRIOR TO ASST YR. 2004 - 05, THE ASSESSEE USED TO OFFER SURCHARGE CALCULATED IN THE BILLS. VIDE AUDIT COMMITTEE OF BOARD OF DIRECTORS MEETING DT. 21ST FEB., 2003 ON THE BASIS OF PRUDENCE NORMS THE METHOD OF ACCOUNTANCY WAS CHANGED AND THE SURCHARGE WAS HELD TO BE ACCOUNTABLE ON THE BASIS OF ACTUAL RECEIPT. THE ASSESSEE IS A STATE PSU AND THE ELECTRICITY POLICY OF THE E LECTRICITY BOARD HAS BEEN SUBJECT TO MANY EXIGENCIES, DEPENDING ON PUBLIC POLICY. IT HAS NOT BEEN DISPUTED THAT THOUGH THE ASSESSEE'S RULES PROVIDE LEVY OF SURCHARGE ON BELATED PAYMENT OF BILLS AT THE SAME TIME PAYMENT OF SURCHARGE IS SUBJECT TO PROTEST/WA IVER AND IS NOT MANDATORILY ENFORCEABLE BY ASSESSEE AT THE TIME OF PAYMENT OF BILL. THE SURCHARGE EXISTS IN THE 27 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, RULES AND IS PRINTED IN THE BILL BUT IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE HAS REGULAR MECHANISM TO ACCEPT THE BILLS WITHOUT PAYMENT OF SUR CHARGE. THE SAME IS DEFERRED TILL THE CONSUMER DISPUTE IS SETTLED BY THE APPROPRIATE MEANS WHICH MAY BE PROVIDED BY THE INSTRUCTIONS OF THE DECLARED POLICY OF THE GOVERNMENT IN VIEW OF THESE FACTS, COUPLED WITH THE FACT THAT ASSESSEE CHANGED ITS METHOD OF ACCOUNTING AFTER SEEKING NECESSARY APPROVAL OF CAG, SHOWS THAT AS FAR AS THE ASSESSEE IS CONCERNED, THE COLLECTION OF SURCHARGE WAS CONTINGENT AND DID NOT ACCRUE DUE TO ASSESSEE, THE LIABILITY WILL ACCRUE ON THE BASIS OF CRYSTALLIZATION I.E., THE PAYMENT O F THE SURCHARGE OR PASSING OF A SUITABLE ORDER BY THE APPROPRIATE AUTHORITY ON THE DISPUTE RAISED BY THE CUSTOMER. BY NOW IT IS A SETTLED PRINCIPLE THAT UNLESS FACTS AND CIRCUMSTANCES HAVE DRASTICALLY CHANGED, THE PRINCIPLE OF CONSISTENCY IS TO BE MAINTAIN ED IN DEPARTMENTAL ACTION. IN VIEW THEREOF, DEPARTMENT HAVING ACCEPTED A CLEAR - CUT AMENDMENT OF METHOD OF ACCOUNTING, AS PER THE PROVISIONS OF IT ACT, IT WILL NOT BE DESIROUS THAT THE COURSE OF ACTION ACCEPTED BY THE DEPARTMENT IS SUBJECT TO VARIATION BY A DOPTING DIFFERENT INTERPRETATION ON ANY SETTLED ISSUE. LOOKING AT THE INTRICACIES THE FACTS MAY VARY, THEREFORE, BASIC PRINCIPLES OF ACCRUAL OR MERCANTILE SYSTEM AS LAID DOWN BY VARIOUS AUTHORITIES 28 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, ARE TO BE APPLIED IN A CAREFUL MANNER. THE ASSESSEE BEING A STATE PSU, THE SURCHARGE ON DELAYED PAYMENT BEING DISPUTABLE ITEM, WAS NOT MANDATORILY PAYABLE AT THE TIME OF PAYMENT OF ELECTRICITY CONSUMPTION BILL, WAS NOT AN ACCRUED RECEIPT IN VIEW OF THE ACCOUNTING POLICY ACCEPTED BY THE REVENUE. THEREFORE, SUCH AM OUNT OF SURCHARGE CANNOT BE HELD TO BE TAXABLE AS IT IS NOT THE REAL INCOME OF THE ASSESSEE AND IS HYPOTHETICAL BY NATURE IN GIVEN FACTS AND CIRCUMSTANCES. - RADHASOAMI SATSANG VS. CIT (1991) 100 CTR (SC) 267: (1992) 193 ITR 321 (SC) APPLIED; CIT VS. SHOOR JI VALLABHDAS & CO. (1962) 46 ITR 144 (SC), CIT VS. MODI RUBBER LTD. (1998) 148 CTR (DEL) 448: (1998) 230 ITR 817 (DEL), UCO BANK VS. CIT (1999) 154 CTR (SC) 88: (1999) 237 ITR 889 (SC), GODHRA ELECTRICITY CO. VS. CIT (1997) 139 CTR (SC) 564: (1997) 225 IT R 746 (SC) AND POONA ELECTRICITY SUPPLY CO. LTD. VS. CIT (1965) 57 ITR 521 (SC) RELIED ON. (PARAS 5, 5.2, 5.3, 5.9 & 5.12)' I AM OF THE VIEW THAT THE IMPUGNED INCOME IS A HYPOTHETICAL INCOME UNTIL THE DISPUTE IS SETTLED. RESPECTFULLY FOLLOWING THE ABOVE DE C I SI ONS, I HOLD THAT THESE RECEIPTS ARE NOT CHARGEABLE TO INCOME - TAX IN THIS ASSESSMENT YEAR. IN VIEW OF THIS, I DIRECT THE AO TO DELETE THE ADDITION OF RS.101.01 CRORES. 29 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, THE APPELLANT HAS ALSO SUBMITT E D THAT ONLY RS.27 LAKHS OUT OF THE ABOVE RS.101.01 CR ORE IS RELATED TO THIS ACCOUNTING YEAR RELEVANT TO THIS ASSESSMENT YEAR 2006 - 07. THE AO IS DIRECTED TO VERIFY THE ACCOUNTS OF THE ASSESSEE AND GIVE A FINDING IN THE ORDER GIVING EFFECT TO THIS APPELLATE ORDER WHETHER THE CONTENTION O F THE APPELLANT THAT EV EN IF IT IS ASSUMED THAT THESE RECEIPTS ARE TAX A BLE THEN ONLY RS. 27 LAKSH I S TAXABLE IN THIS ASSESSMENT ORDER IS CORRECT OR NOT. GROUND NO. 3 IS ALL OWED AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT LD. CIT(A) HAD CORRECTLY APPRECIATED THE FACTS OF THE PRESENT CASE AND CONCLUDED THAT THE DUES I.E. THE CLAIM OF THE ASSESSEE RAISED THROUGH SUPPLEMENTARY BILLS ARE DISPUTED AND THE CONSUMERS HAVE FILED THEIR APPEALS AGAINST THE SAID DEMANDS WHICH ARE PENDING . SINCE THE RECEIPT OF SUCH CLAIM AMOUNT DEPENDS ON THE OUTCOME OF THE APPEA L S. HENCE THAT CANNOT BE TAKEN AS INCOME ACCRUED AND CANNOT BE THEREFORE TAXED. WE HAVE GONE THROUGH 30 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, THE JUDGMENT /DECISION OF HONBLE SUPREME COURT IN THE CASE OF GODHRA ELECTRICITY COMPANY LTD. VRS. CIT 225 ITR 746(SC) , WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT THE QUESTION WHETHER THERE WAS A REAL ACCRUAL OF INCOME TO THE ASSESSEE IN RESPECT OF THE ENHANCED CHARGES FOR SUPPLY OF ELECTRICITY HAS TO BE CONSIDERED BY TAKING THE PROBABILITY OR IMPROBABILITY OF REALIZATIO N IN THE REALISTIC MANNER. SINCE, THE HONBLE SUPREME COURT HAS ALREADY DECIDED THE IDENTICAL ISSUE AND HAS HELD THAT THE IMPUGNED AMOUNT HAS SOUGHT TO BE TAXED BY THE ITO DID NOT REPRESENT INCOME WHICH HAD REALLY ACCRUED TO THE ASSESSEE COMPANY DURING THE RELEVANT PREVIOUS YEAR, THEREFORE THE SAME CANNOT BE TAXED. IN THE PRESENT CASE, THE CLAIM AT THE INCREASED RATED AS MADE BY THE ASSESSEE ON THE BASIS OF WHICH NECESSARY ENTRIES WERE MADE, PRESENTED ONLY HYPOTHETICAL INCOME AND THE IMPUGNED AMOUNTS AS SOUGHT TO TAX BY THE ITO DID NOT REPRESENT 31 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, THE INCOME WHICH HAD REALLY ACCRUED TO THE ASSESSEE COMPANY DURING THE RELEVANT PREVIOUS YEAR. N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDI NGS SO RECORDED BY LD CIT (A) . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT (A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND RAISED BY THE REVENUE STANDS DISMISSED . CROSS OBJECTION NO. 160/MUM/2014 FOR AY 2006 - 07 . 8 . NOW WE TAKE UP ASSESSEE S CROSS OBJECTION NO. 160 /MUM/2014 FOR AY 2006 - 07. SINCE WE H AVE ALREADY UPHELD THE DELETION OF ADDITIONS BY THE LD. CIT(A), THEREFORE IN VIEW OF FINDINGS ON THE MERITS OF THE ADDITIONS, THE CROSS OBJECTIONS RAISED BY THE ASSESSEE BECOMES ACADEMIC. 32 ITA NO, 3559 /M UM/201 3 & CO NO. 160/MUM/2014 MAHARASHTRA STATE ELECTRICITY BOARD, 9 . IN THE NET RESULT, THE APPEAL AS WELL AS CROSS OBJECTION FILED BY THE REVENUE AS WELL AS ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH . 2018. SD/ - SD/ - (G. S. PANNU ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 07 .03 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI