ACIT, Hisar V. M/s. Dakshin Haryana Bijli Vitran Nigam Ltd, Hisar

ITA 6663/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4910 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN CHANDRA
• Assessee Lawyers: K SAMPAT
• Keywords: Advance ruling

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 6663/DEL/2013 (ASSESSMENT YEAR: 2009 - 10 ) ACIT, HISAR CIRCLE, HISAR VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM LTD, DELHI ROAD, HISAR PAN:AABCD0033C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI NAVEEN CHANDRA, CIT DR ASSESSEE BY: SHRI K SAMPAT, ADV DATE OF HEARING 20/06 / 2017 DATE OF PRONOUNCEMENT 24 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI , A . M . 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A), ROHTAK DATED 14.10.2013 FOR THE ASSESSMENT YEAR 2009 - 10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.80.41 CRORES MADE ON ACCOUNT OF PROVISIONS FOR UNREALISED SURCHARGE LEVIED ON ACCOUNT OF DELAY IN PAYMENTS OF BILLS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT BEING A COMPANY, THE ASSESSEE IS OBLIGED TO FOLLOW MERCANTILE SYSTEM OF ACCOUNTING AS PER COMPANIES ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING TH AT THE ASSESSEE HAS LEVIED BASIC CHARGE ON ACCOUNT OF USE OF ELECTRICITY AND THE SURCHARGE IN THE SAME BILL AND HAS SAME POWERS UNDER THE ELECTRICITY ACT / RULES OF RECOVERY IN RESPECT OF BOTH. HOWEVER, BY ACCOUNTING UNREALIZED PART OF BASIC CHARGE AS INCO ME AND NOT ACCOUNTING THE UNREALIZED SURCHARGE ALSO AN INCOME, THE ASSESSEE IS VIOLATING THE PRINCIPLES OF ACCOUNTING AS ENVISAGED IN SECTION 145(2). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE PRACTICE ADOPTED BY THE ASSESSEE IN RESPECT OF UNREALIZED SURCHARGE, TANTAMOUNT TO FOLLOWING CASH METHOD OF ACCOUNTING WHICH IS A VIOLATION OF PRINCIPLES OF ACCOUNTANCY IN CASE OF A COMPANY ASSESSEE. PAGE 2 OF 5 2 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT{A) HAS ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAS NOT TREATED THE SAID UNREALIZED AS BAD DEBT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.2,52,14.78,365/ - MADE BY TH E ASSESSING OFFICER U/S 40(A)(IA) OF THE INCOME - TAX ACT ON ACCOUNT OF NON - DEDUCTION OF IDS U/S 194J ON THE PAYMENTS OF WHEELING/TRANSMISSION CHARGES PAID TO HVPNL LTD. AND THE STATE LOAD DISPATCH CENTRE (SLDC). 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C!T(A) HAS ERRED IN NOT APPRECIATING THAT THE WHEELING / TRANSMISSION CHARGES PAID IN THE CASE ARE CLEARLY COVERED WITHIN THE DEFINITION OF 'TECHNICAL SERVICES' MENTIONED IN THE SECTION. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE WHEELING / TRANSMISSION CHARGES PAID IN THE CASE ARE COVERED BY THE DECISION OF THE ADVANCE RULING AUTHORITY DATED 27.08.2012 IN THE CASE OF M/S. AJMER VIDYUT VITRAN NIGAM LTD. 353 - ITR - 640 (2013). 9 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CLT(A) HAS ERRED IN DELETING THE ADDITION OF RS.27.50 CRORE MADE ON ACCOUNT OF PROVISION FOR EXPECTED/CONTINGENT LIABILITIES. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A ) HAS ERRED IN NOT APPRECIATING THAT ACTION CONTEMPLATED BY THE ASSESSES ON PART OF SUPPLIERS OF ELECTRICITY THAT THEY ARE GOING TO SEND REVISED BILLS, IS PURELY CONTINGENT AND THERE IS NO PROVISION IN THE SCHEME OF INCOME TAX ACT TO ALLOW SUCH KIND OF DED UCTION. 3. THE ASSESSEE COMPANY IS GOVERNMENT UNDERTAKING INCORPORATED ON 15/03/1999 AND IS CARRYING OUT THE BUSINESS OF DISTRIBUTION OF ELECTRICITY IN 10 DISTRICTS OF SOUTH HARYANA. THE ASSESSEE FILED ITS RETURN ON 29/09/2009 DECLARING LOSS OF RS. 1 90.04 C RORES. THE ASSESSMENT UNDER SECTION 143 (3) OF THE INCOME TAX ACT WAS PASSED ON 07/12/2011 WHEREIN 3 ADDITIONS WERE MADE TO THE TOTAL INCOME OF THE ASSESSEE AND IT WAS ASSESSED AT RS. 170 CROR E S AND AFTER SETTING OF THE CARRIED FORWARD LOSSES THE TOTAL INC OME WAS COMPUTED AT NIL. ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD. CIT APPEAL CONTESTED THE ADDITIONS MADE AND THE LD. CIT APPEAL DELETED THE ABOVE ADDITION. THEREFORE, REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE ORDERS OF VARIOUS APPELLATE FORUMS ON WHICH THESE GROUNDS OF APPEALS ARE CONTESTED. PAGE 3 OF 5 3 5. THE GROUND NO. 1 5 OF THE APPEAL WERE WITH RESPECT TO DELETION OF ADDITION OF RS. 80.41 CRORES MADE ON ACCOUNT OF PROVISIO NS FOR UNREALIZED SURCHARGE LEVIED ON ACCOUNT OF DELAY IN PAYMENTS OF BILLS. IT WAS SUBMITTED BY BOTH THE PARTIES THAT A BOY ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE WHICH HAS BEEN UPHELD BY THE HONBLE PUNJAB AND HARYANA HIGH COURT IN ITA NO. 209 2014 DATED 01/10/2014. IT WAS ALSO SUBMITTED THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE ISSUE INVOLVED COMPARED TO THE ISSUE DECIDED BY THE HONBLE HIGH COURT. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT A IN DELETING THE ABOVE ADDITION OF RS. 80.41 CRORES WHICH IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN ASSESSEES OWN CASE. IN THE RESULT GROUND NO. 1 5 OF THE APPEAL OF THE REVENUE ARE DISMISSED. 6. GROUND NO. 6 - 8 RELATE TO THE DISALLOWANCE UNDER SECTION 40 (A)(IA) OF THE ACT OF RS. 2 521478365/ ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE UNDER SECTION 194J ON THE PAYMENT OF WHEELING/TRANSMISSI ON CHARGES PAID TO HARYANA VPN NIGAM LTD AND THE STATE LOAD DISPATCH CENTRE. BOTH THE PARTIES AGREED BEFORE US THAT THIS ISSUE IS FURTHER COVERED BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 10 WHEREIN THE COORDINATE BENCH WIDE ORDER DATED 28/05/2010 HAS HELD THAT ASSESSEE WAS NOT REQUI RED TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF THE INCOME TAX ACT IN RESPECT OF PAYMENT BY WAY OF WHEELING CHARGES AND S LDC CHARGES. FURTHER THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT BY DECISION O F CIT VERSUS DELHI TRANSPORT LTD 68 TAXMAN.COM 231. THEREFORE WE CONFIRM THE ORDER OF THE LD. CIT A IN DELETING THE DISALLOWANCE OF RS. 2 521478365/ . IN VIEW OF THIS WE DISMISS GROUND NO. 6 8 OF THE APPEAL. 7. GROUND NO. 9 10 OF THE APPEAL OF REVENUE IS AGAINST THE DELETION OF THE DISALLOWANCE OF RS. 2 7.50 CRORE MADE ON ACCOUNT OF PROVISION FOR EXPECTED AND CONTINGENT LIABILITY. IN THIS YEAR THE APPELLANT STARTED PURCHASING POWER DIRECTLY FROM THE VARIOUS SUPPLIERS AND MANUFACTURERS FOR WHICH IT IS INCLU DED A SUM OF RS. 27.50 CRORE IS AN AMOUNT OF AN EXPECTED PRICE REVISION IN THE PAGE 4 OF 5 4 PURCHASE PRICE. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE A PROVISION FOR EXPECTED REVISED BILLS FROM THE SUPPLIERS OF ELECTRICITY BECAUSE IT WAS A GENERAL PRACTICE THAT WHEN THE MANUFACTURER OF ELECTRICITYS WERE NOT SATISFIED WITH THE TARIFF RATE FIXED BY THE REGULATORY COMMISSION SUCH MANUFACTURERS NORMALLY GO INTO APPEAL AND WHAT TARIFF RATES REVISED AT A LATER STAGE AND THEN SUBMITTED SUPPLEMEN TARY BILLS IN THE NEXT YEARS. THEREFORE THIS PROVISION HAS BEEN MADE. THE LD. CIT APPEAL HAS ALLOWED THIS CLAIM HOLDING THAT THE REVISION IS ON ACCOUNT OF THE PROVISION FOR EXPECTED REVISED BILLS WHICH HAS BEEN MADE IN KEEPING WITH THE PAST PRACTICES. IT W AS FURTHER HELD BY HIM THAT THIS IS A REGULAR FEATURE WITH ELECTRICITY BODIES AND IS AN ALLOWABLE PRACTICE IN THE LINE OF OPERATION. WE HAVE CONSIDERED THE NATURE OF PROVISION MADE BY THE ASSESSEE. ASSESSEE IS PURCHASING ELECTRICITY UP TO 31/03/2008 HOWEVE R DUE TO RESTRUCTURING IN THE POWER BUSINESS W.E.F. 01/04/2008 THE DISTRIBUTION COMPANIES WOULD NOW BE SUPPLIED POWER BY HARYANA POWER PURCHASE SALE. NOW THE POWER PURCHASE COMPANY WILL PURCHASE POWER FROM VARIOUS POWER PRODUCING MANY COMPANIES AS PER THE AGREEMENT. AS PER THE AGREEMENT THE ASSESSEE COMPANY WILL HAVE TO PAY ACCORDING TO THE TARIFF RATES DETERMINED BY THE REGULATORY AUTHORITY. IN CASE IF THE TARIFF IS NOT NOTIFIED THEN FIRSTLY IT WOULD BE PAID ON AD HOC TARIFF BASIS AND SUBSEQUENTLY WHEN THE TARIFF RATES ARE FIXED FOR THE RESPECTIVE AREA AND ON THE BASIS OF THE COST SAME WOULD BE PAID. TILL THEN BILLING ON PROVISIONAL BASIS WOULD BE MADE BY THE POWER PURCHASING COMPANIES TO THE ASSESSEE COMPANY AND SUBSEQUENTLY WHEN THERE WOULD BE A REVISION IN THE RATES ADDITIONAL BILLS WOULD BE RAISED. THEREFORE THIS PROVISION HAS BEEN MADE BY THE ASSESSEE FOR ANY LIABILITY WHICH MAY COME LATER ON PERTAINING TO THIS YEAR ON THE ASSESSEE. IT WAS ALSO CLAIM OF THE ASSESSEE THAT THOUGH ASSESSEE HAS PROVIDED FOR 27.50 CRORES FOR THE YEAR ENDED ON 31/03/2009 BUT IT HAS TO PAY RS. 83.61 CRORES AGAINST THIS PROVISION. THEREFORE IT IS APPARENT THAT IF THE PROVISION IS MADE IN THIS YEAR IN THE NEXT YEAR ON ACTUAL BILLING OF THE ESCALATION SAME IS REVERSED AND ACTUAL AMOUNT IS BOOKED. ACCORDING TO US THIS IS A SOUND PRACTICE OF PROVISIONING AND IT IS NOT AT ALL CONTINGENT. IN ANY WAY IN THE NEXT YEAR EXCESS OR SHORT PROVISION ARE PAGE 5 OF 5 5 REVERSED AND CHARGED TO OR CREDITED TO RESPECTIVE PROFIT AND LOSS ACCOUNT. THEN AT THE MOS T IT CAN BE A TIMING DIFFERENCE BETWEEN 2 YEARS. THEREFORE WE DO NOT FIND ANY INFIRMITY IN ALLOWING A SUM OF RS. 27.50 CRORES BY THE LD. CIT APPEAL ON ACCOUNT OF PROVISION ON ESCALATION OF THE BILL WHEREIN IN THE SUBSEQUENT YEAR HIGHER AMOUNT WAS REQUIRED TO BE PAID BY THE ASSESSEE FOR THE CURRENT YEAR. IN THE RESULT WE DISMISS GROUND NO. 9 AND 10 OF THE APPEAL.. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 / 08 / 2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 4 / 08 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI