The ACIT, Circle-1(1), Guntur V. M/s JOCIL Ltd., Guntur

ITA 696/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1125 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Assessee Lawyers: C V K PRASAD
• Keywords: Period of limitation; Deemed to accrue or arise in india
• Section: 142(1)

Judgement Text

ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.696/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) ACIT, CIRCLE - 1(1), GUNTUR VS. M/S. JOCIL LTD., GUNTUR [PAN: AAACJ5606L] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI, DR / RESPONDENT BY : SHRI C.V.K. PRASAD, AR / DATE OF HEARING : 27.04.2016 / DATE OF PRONOUNCEMENT : 27.05.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), GUNTUR DATED 27.8.2013 AND IT PERTAINS TO THE ASSESSMENT YEAR 2009-10. ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PUBLIC LIMITED COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFA CTURE AND SALE OF FATTY ACIDS AND ALSO GENERATION OF BIO-MASS POWER. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 26.9.2009 DECLARING TOTAL INCOME OF RS. 14,28,09,174/-. THE C ASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') WERE ISSUED. IN RESPONSE TO THE NOTICES, THE AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED BOOKS OF A CCOUNTS AND INFORMATION. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, FROM THE NOTES ON ACCOUNT APPENDED TO THE FINANCIAL STATEMEN TS OF THE ASSESSEE, THE A.O. NOTICED THAT THE ASSESSEE STATED DURING TH E YEAR UNDER CONSIDERATION, AN AMOUNT OF RS. 82,35,112/- WAS TRA NSFERRED TO CONTINGENT SALES ACCOUNT FROM THE TOTAL SALES, REDU CING THE DEBTORS TO THAT EFFECT IN THE BALANCE SHEET. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS RAISED INVOICES TOWARDS SALE OF POWER INCLUDING THE ALLEGED CONTINGENT SALE TOWARDS SUPPLY OF POWER, HOWEVER, A T THE END OF THE FINANCIAL YEAR DEDUCTED THE AMOUNT PERTAINS TO CONT INGENT SALE FROM THE TOTAL SALES. SINCE, ASSESSEE IS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNTING, IT NEEDS TO RECOGNIZE THE REVENUE ON ACCRUAL BASIS WHEREAS, THE ASSESSEE HAS POSTPONED THE REVENUE THOUGH THE REVEN UE ACCRUES FOR THE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 3 RELEVANT FINANCIAL YEAR. HENCE, ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE AMOUNT OF RS. 82,35,112/- SHOULD NO T BE TREATED AS SALES AND BROUGHT TO TAX. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE HAS FILED WRITTEN SUBMISSIONS VIDE LETTER DATED 19.12.2011 AN D STATED THAT IT HAS ESTABLISHED A 6 MW BIO MASS POWER PLANT IN MARCH, 2 001. THE ASSESSEE HAS USED THE PART OF THE ELECTRICITY GENERATED FROM THE PLANT FOR ITS CAPTIVE CONSUMPTION FOR MANUFACTURING ACTIVITY AND THE REMAINING SURPLUS WAS SOLD TO APTRANSCO. THE COMPANY ENTERED INTO A POWER PURCHASE AGREEMENT (PPA) WITH APTRANSCO FOR SALE OF SURPLUS POWER AT THE RATE SPECIFIED IN THE AGREEMENT. AS PER THE SAID AGREEMENT, THE APTRANSCO HAS AGREED TO PURCHASE THE POWER @ ` 2.25 PER UNIT WITH 5% ESCALATION PER ANNUM WITH 1994-95 AS BASE YEAR A ND IT CONTINUES UP TO FINANCIAL YEAR 2003-04. ACCORDING TO THE AGREEME NT, THE PRICE PAYABLE FOR THE ENERGY DURING THE FINANCIAL YEAR 2003-04 WO RKED OUT TO RS. 3.48 PER UNIT. FROM THE FINANCIAL YEAR 2003-04 ONWARDS, ANDHRA PRADESH ELECTRICITY REGULATORY COMMISSION (APERC) IS EMPOWE RED TO FIX THE SELLING PRICE, ACCORDINGLY, THE APERC HAS FIXED THE PRICE IN TWO PARTS WHICH COMPRISE OF VARIABLE COST AND FIXED COST WHIC H VARIES FROM PERIOD TO PERIOD. FINALLY, BASED ON SUCH FORMULA, THE APER C HAS FIXED SELLING ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 4 PRICE OF RS. 2.76 PER UNIT AS AGAINST THE EXISTING RATE OF ` 3.48 PER UNIT AS ON 31.3.2004. IN VIEW OF THE ABNORMAL REDUCTION IN PRICE, BIO-MASS ENERGY DEVELOPERS ASSOCIATION (BEDA) ON BEHALF OF I TS MEMBERS APPROACHED A.P. HIGH COURT AND OBTAINED A DIRECTION VIDE INTERIM ORDER DATED 20.8.2004 AND AS PER THE HIGH COURT ORDER, TH E HIGH COURT HAS DIRECTED TO PAY THE PRICE FIXED BY THE APERC + 50% OF THE DIFFERENCE BETWEEN THE PRICE FIXED BY THE APERC AND PRICE PREV AILING AS ON 31.3.2004. 4. THE ASSESSEE FURTHER SUBMITTED THAT AFTER SETTIN G UP APPELLATE TRIBUNAL FOR ELECTRICITY, NEW DELHI THE HIGH COURT DIRECTED BEDA TO FILE THE APPEAL WITH APPELLATE TRIBUNAL FOR ELECTRICITY. THE APPELLATE TRIBUNAL FOR ELECTRICITY ALLOWED THE APPEAL FILED BY THE BED A, BUT APERC AND APTRANSCO HAS FILED APPEAL AGAINST THE ORDER PASSED BY THE APPELLATE TRIBUNAL FOR ELECTRICITY BEFORE THE HONBLE SUPREME COURT AND THE HONBLE SUPREME COURT REMANDED THE CASE TO APERC TO RECONSIDER THE CLAIMS OF POWER GENERATORS WHILE FIXING THE PRICE. THEREAFTER, A 3 MEMBER BENCH OF APERC HAS GIVEN 3 DIFFERENT ORDERS WITHOUT A MAJORITY OPINION, HENCE, A FURTHER APPEAL WAS FILED BY BEDA BEFORE THE ATE WHICH IS PENDING FOR DISPOSAL. MEANTIME, THE ANDHRA PRADE SH GOVT., BY ORDER DATED 12.11.2008 DIRECTED THE APTRANSCO FOR PAYMENT OF AN ADHOC ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 5 PRICE OF RS. 3.79 PER UNIT OF POWER W.E.F. 12.11.20 08 FOR A PERIOD OF ONE YEAR FROM THE DATE OF ISSUE OF ORDER OR TILL APERC FINALISES THE TARIFF. THE ASSESSEE FURTHER SUBMITTED THAT SINCE THE MATTER IS PENDING FOR DETERMINATION OF SELLING PRICE, THE ASSESSEE HAS RA ISED INVOICE TO M/S. APTRANSCO WITH A BASE PRICE FIXED AS PER THE POWER PURCHASE AGREEMENT WITH 5% ESCALATION TO JUSTIFY ITS CLAIM F OR PAYMENT, IF APERC/TRIBUNAL/HIGH COURT/SUPREME COURT GIVES A FAV OURABLE ORDER, THEN THE APTRANSCO CANNOT CLAIMS THAT THERE IS NO D EMAND FROM ASSESSEE. HOWEVER, THE COMPANY HAS RECOGNIZED THE R EVENUE IN THE BOOKS OF ACCOUNTS AS PER THE ORDERS OF THE STATE GO VERNMENT OF ANDHRA PRADESH AS PER WHICH THE STATE GOVERNMENT HAS DIREC TED THE APTRANSCO TO PAY A PRICE OF RS. 3.79 PER UNIT. SIN CE, THE COMPANY HAS ALREADY RAISED A SALE BILL WITH A PRICE OF RS. 4.23 AND RS. 4.44 PER UNIT, THE EXCESS BILLED AMOUNT HAS BEEN KEPT UNDER CONTIN GENT SALES. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE COMPAN Y A PUBLIC LIMITED COMPANY REQUIRED TO FOLLOW THE ACCOUNTING STANDARD NOTIFIED BY THE GOVERNMENT OR ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) AS PER THE PROVISIONS OF SECTION 211 (3C) OF THE COMPANIES ACT, 1956. ACCORDINGLY, THE ASSESSEE IS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING AND RECOGNIZING THE REVENUE ON ACCRUAL B ASIS WHETHER OR NOT THE SAME IS RECEIVED BY THE COMPANY DURING THE RELE VANT FINANCIAL YEAR. ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 6 IT IS FURTHER SUBMITTED THAT THE METHOD OF ACCOUNTI NG FOLLOWED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ACCOUNTING STAND ARD ISSUED BY THE ICAI, THEREFORE, ITS CLAIM OF CONTINGENT SALES HAS TO BE ALLOWED. IN SUPPORT OF ITS CONTENTION RELIED UPON THE JUDGEMENT OF HONBLE SUPREME COURT, IN THE CASE OF GODHRA ELECTRICITY COMPANY LT D. VS. CIT (1997) 225 ITR 746. 5. THE A.O. AFTER CONSIDERING EXPLANATIONS FURNISHE D BY THE ASSESSEE HELD THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS INCONSISTENT WITH THE ACCOUNTING STANDARD-9 ISSUED BY THE ICAI AND ALSO THE PROVISIONS OF INCOME TAX. THE A.O. FURTHER HEL D THAT AS PER THE TAX AUDIT REPORT FURNISHED BY THE ASSESSEE, THE ASSESSE E IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, ACCORDINGLY, IT HA S TO RECOGNIZE ITS REVENUES ON ACCRUAL BASIS. THE ASSESSEE HAS RAISED INVOICES TO THE APTRANSCO THAT MEANS THE CERTAINTY OF ACCRUAL OF IN COME FOR THE RELEVANT FINANCIAL YEAR IS NOT IN DOUBT. THE ASSES SEE HAS AN ESTABLISHED RIGHT TO RECEIVE THE BILLED AMOUNT FROM APTRANSCO B Y VIRTUE OF GOVERNMENT ORDERS, THOUGH THE DISPUTE IS PENDING BE FORE THE ATE. THIS CLEARLY ESTABLISHES THAT THE ASSESSEE HAS AN ABSOLU TE RIGHT TO RECEIVE THE BILLED AMOUNT. THE BILLS WERE RAISED WITH PRICE FIX ED AS PER PPA WITH 5% ESCALATION TOWARDS THE POWER SUPPLIED TO APTRANSCO, BUT THE REVENUE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 7 IS RECOGNIZED AS PER THE ORDER OF STATE GOVERNMENT, BECAUSE THE ISSUE IS PENDING BEFORE THE APERC. THE MERE FACT THAT THE IS SUE IS PENDING BEFORE THE ATE DOES NOT TAKE AWAY THE RIGHT OF THE ASSESSEE TO GET THE ESCALATED SALES PRICE FROM THE APTRANSCO, WHICH IS EVIDENT FROM THE CONDUCT OF ASSESSEE. THE ASSESSEE HAS RAISED SALE B ILL WITH ESCALATED SALE PRICE, THEREFORE, IT CANNOT TAKE A CONTRARY VI EW WHEN IT COMES TO RECOGNITION OF REVENUE. WITH THESE OBSERVATIONS MA DE ADDITIONS OF RS. 82,35,112/- TO THE TAXABLE INCOME. 6. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT IT IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOU NTING FOR THE PURPOSE OF RECOGNITION OF REVENUE. THE ASSESSEE FURTHER SU BMITTED THAT THOUGH IT RAISED SALE BILL WITH THE ESCALATED SALE PRICE, IT HAS RECOGNIZED THE REVENUE IN THE BOOKS OF ACCOUNTS AS PER THE PRICE F IXED BY THE STATE GOVERNMENT. THE STATE GOVERNMENT HAS FIXED THE SEL LING PRICE OF POWER BY AN INTERIM ORDER PENDING DISPOSAL OF THE APPEAL BY THE APPELLATE TRIBUNAL FOR ELECTRICITY. IT IS FURTHER SUBMITTED T HAT THE ASSESSEE IS A COMPANY REQUIRED TO FOLLOW THE PROVISIONS OF SECTIO N 211(3C) OF THE COMPANIES ACT, 1956 AND ALSO ACCOUNTING STANDARDS N OTIFIED BY THE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 8 GOVERNMENT/ISSUED BY THE INSTITUTE OF CHARTERED ACC OUNTANTS OF INDIA. AS PER THE ACCOUNTING STANDARDS-9 ISSUED BY THE ICA I, RECOGNITION OF REVENUE REQUIRES THAT REVENUE IS MEASURABLE AND THA T AT THE TIME OF SALE OR THE RENDERING OF THE SERVICES, IT WOULD NOT BE U NREASONABLE TO EXPECT ULTIMATE COLLECTION. WHEN THE UNCERTAINTY RELATING C OLLECTABILITY ARISES SUBSEQUENT TO THE TIME OF SALE OR THE RENDERING OF THE SERVICES, IT IS MORE APPROPRIATE TO MAKE A SEPARATE PROVISION TO RE FLECT THE UNCERTAINTY RATHER THAN TO ADJUST THE AMOUNT OF REVENUE ORIGINA LLY RECORDED. SINCE THE COLLECTION OF ESCALATED SALE PRICE FROM THE APT RANSCO WAS UNCERTAIN, IT IS RECOGNIZED THE REVENUE AS PER THE ORDER OF THE STATE GOVERNMENT, HOWEVER, MADE A SEPARATE DISCLOSURE IN THE BOOKS OF ACCOUNTS BY WAY OF NOTES ON ACCOUNTS. THE METHOD O F ACCOUNTING FOLLOWED BY THE COMPANY IS CONSISTENT WITH THE ACCO UNTING STANDARD ISSUED BY THE ICAI, THEREFORE THE SAME SHOULD BE AC CEPTED. 7. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS FU RNISHED BY THE ASSESSEE DELETED THE ADDITIONS MADE BY THE A.O. TH E CIT(A) FURTHER HELD THAT THE ASSESSEE HAS RIGHTLY RECOGNIZED THE R EVENUE IN THE BOOKS OF ACCOUNTS AS PER THE TARIFF FIXED BY THE STATE GO VERNMENT. HOWEVER, TO KEEP THE MATTER ALIVE, IT HAS RAISED THE SALES B ILLS WITH ESCALATED SALE PRICE AS PER THE POWER PURCHASE AGREEMENT ENTERED I NTO WITH THE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 9 APTRANSCO. IT IS FURTHER HELD THAT WHILE TAXING THE PARTICULAR INCOME, WHAT IS REALLY ACCRUED TO THE ASSESSEE HAS TO BE FO UND OUT AND WHAT IS ACCRUED MUST BE CONSIDERED FROM THE POINT OF VIEW O F REAL INCOME TAKING THE PROBABLE OR IMPROBABLE OF REALIZATION IN A REAL ISTIC MANNER AND DOVETAILING OF THESE FACTORS TOGETHER. BUT, ONCE TH E ACCRUAL TAKES PLACE, ON THE CONDUCT OF THE PARTIES SUBSEQUENT TO THE YEA R OF CLOSING AN INCOME WHICH IS ACCRUED CANNOT BE MADE NO INCOME. S AME PRINCIPLE HAVE BEEN FOLLOWED IN THE CASE OF GODHRA ELECTRICIT Y COMPANY LIMITED REPORTED IN (1997) 225 ITR 746. THE CIT(A) FURTHER HELD THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE SUPREME COURT IN THE CASE OF GODHRA ELECTRICITY COMPANY LIMITED A ND HENCE, HELD THAT THE AMOUNT OF RS. 82,35,112/- TREATED AS CONTINGENT SALE BY THE ASSESSEE AND ADDED TO THE INCOME BY THE A.O. CANNOT BE TREATED AS INCOME AND THE SAME IS DELETED. AGGRIEVED BY THE CI T(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 8. THE LD. D.R. SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (A) ERRED IN GRANTING RELIEF BY DELETING THE ADDITION O F RS. 82,35,112/- MADE BY THE A.O. ON ACCOUNT OF CONTINGENT SALES. THE D. R. FURTHER SUBMITTED THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE COMPANY HAS RAISED THE SALE BILLS AT ESCALATED PRIC E, ACCORDING TO THE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 10 ORDERS OF THE A.P. STATE GOVERNMENT AND THE ORDER O F THE APERC AND HENCE, THE CHANCES OF GETTING THE ESCALATED PRICE A RE NOT COMPLETELY CLOSED AND CEASED TO EXIST, EVEN THOUGH THERE IS A DISPUTE PENDING BEFORE APPELLATE TRIBUNAL FOR ELECTRICITY. THE D.R. FURTHER ARGUED THAT MERE WITHHOLDING A PART OF THE INVOICE PRICE BY APT RANSCO WILL NOT IN ANY WAY REMOVE THE RIGHT OF THE ASSESSEE TO RECEIVE SUCH AMOUNT. THE ASSESSEE HAS RAISED THE SALE BILLS WITH AN ESCALATE D PRICE AND THE MATTER HAS BEEN ADMITTED BY THE APPELLATE TRIBUNAL FOR ELE CTRICITY. THE ASSESSEE HAS EVERY RIGHT TO GET THE AMOUNT BILL ED TO THE APTRANSCO, THEREFORE, THE CIT WAS NOT CORRECT IN HO LDING THAT THE ASSESSEE DOES HAVE ANY RIGHT TO RECOGNIZE THE INCOM E IN THE ABSENCE OF CLEAR ORDERS FROM THE ATE. THE D.R. FURTHER SUBMITT ED THAT THE CIT(A) FAILED TO APPRECIATE THE FINDING MADE BY THE A.O. T HAT THE ASSESSEE COMPANY HAS NOT FOLLOWED CONSISTENT/UNIFORM METHOD OF ACCOUNTING TO RECOGNIZE ITS REVENUE. THE ASSESSEE HAS RECOGNIZED THE REVENUE IN RESPECT OF POWER SUPPLIED TO APTRANSCO EXCEEDING 2. 4 MW WITH BILLED AMOUNT, HOWEVER, IN RESPECT OF POWER SUPPLIED UP TO 2.4 MW, THE ASSESSEE HAS RECOGNIZED THE REVENUE AS PER THE SALE PRICE FIXED BY THE STATE GOVERNMENT. THE D.R. FURTHER SUBMITTED THAT T HE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS CONTRARY TO THE ACCOUNTING STANDARDS-9, WHICH IS DEALING WITH REVENUE RECOGNIT ION AND THE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 11 ACCOUNTING STANDARD-9 SPECIFIED THAT WHEN THE UNCER TAINTY RELATING TO COLLECTABILITY ARISES SUBSEQUENT TO THE TIME OF SAL E OR THE RENDERING OF THE SERVICES, IT IS MORE APPROPRIATE TO MAKE A SEPA RATE PROVISION TO REFLECT THE UNCERTAINTY, RATHER THAN TO ADJUST THE AMOUNT OF REVENUE ORIGINALLY RECORDED. THE ASSESSEE, INSTEAD OF MAKI NG SEPARATE PROVISION IN THE BOOKS OF ACCOUNTS REVERSED THE SALES BY TRAN SFERRING THE DISPUTED AMOUNT TO THE CONTINGENT SALES ACCOUNT WHICH IS CON TRARY TO THE ACCOUNTING STANDARD 9 ISSUED BY THE ICAI. THE D.R. FURTHER SUBMITTED THAT THE FACT THAT WHETHER THE MATTER HAS BEEN DECI DED OR NOT, THE ASSESSEE HAS AN ESTABLISHED RIGHT TO RAISE A BILL O N APTRANSCO BY VIRTUE OF STATE GOVERNMENT ORDERS AND THIS CLEARLY ESTABLI SHES THAT THE ASSESSEE HAS AN ABSOLUTE RIGHT TO RECEIVE THE BILLE D AMOUNT. THEREFORE, THE CIT(A) WAS NOT CORRECT IN DIRECTING THE A.O. TO DELETE THE ADDITIONS MADE TOWARDS CONTINGENT SALES. 9. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). THE A.R. FURTHE R SUBMITTED THAT THE DEPARTMENT HAS ACCEPTED THE CONTENTION OF THE ASSES SEE IN THE EARLIER YEARS AND ALSO IN SUBSEQUENT FINANCIAL YEARS, BUT D ISPUTED THE ISSUE IN THE FINANCIAL YEAR UNDER CONSIDERATION. WHEN THE PAR TICULAR ISSUE HAS BEEN ACCEPTED IN ONE FINANCIAL YEAR, THEN THE DEPAR TMENT CANNOT DISPUTE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 12 THE SAME MATTER FOR THE CURRENT FINANCIAL YEAR. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE RIGHTLY RECOGNIZED THE REVENUE IN THE BOOKS OF ACCOUNT AS PER THE ORDER OF THE STATE GOVERNMENT . THE DETERMINATION OF SELLING PRICE BY THE APERC HAS BEEN CHALLENGED B EFORE THE APPELLATE TRIBUNAL FOR ELECTRICITY AND THE APPELLATE TRIBUNAL FOR ELECTRICITY HAS NOT ADJUDICATED THE ISSUE. WHEN THE MATTER IS PENDING B EFORE THE APPELLATE AUTHORITIES, THE RIGHT TO RECEIVE THE SAID AMOUNT I S UNCERTAIN. UNDER THESE CIRCUMSTANCES, RECOGNITION OF REVENUE AS PER THE BILLED AMOUNT TO APTRANSCO IS NOT CORRECT. THE ASSESSEE BEING A COM PANY REQUIRED TO FOLLOW THE PROVISIONS OF SECTION 211(3C) OF THE COM PANIES ACT, 1956 AND ALSO ACCOUNTING STANDARD ISSUED BY THE ICAI. AS PE R THE ACCOUNTING STANDARDS-9 ISSUED BY THE ICAI, WHICH DEALS WITH RE COGNITION OF REVENUE STATES THAT AN ESSENTIAL CRITERION FOR THE RECOGNIT ION OF REVENUE IS THAT THE CONSIDERATION RECEIVABLE FOR THE SALE OF GOODS, THE RENDERING OF SERVICES OR FROM THE USE BY OTHERS OF ENTERPRISES R ESOURCES IS REASONABLY DETERMINABLE. WHEN SUCH CONSIDERATION IS NOT DETERMI NABLE WITHIN REASONABLE LIMITS, THE RECOGNITION OF REVENUE IS PO STPONED. THE ASSESSEE BEING A COMPANY CONSISTENTLY FOLLOWED THE MERCANTIL E SYSTEM OF ACCOUNTING FOR THE PURPOSE OF RECOGNITION OF REVENU E. AS PER THE MERCANTILE SYSTEM OF ACCOUNTING, IT HAS TO RECOGNIZ E REVENUE ON ACCRUAL BASIS. HOWEVER, WHEN THE RECOGNITION OF REVENUE IS UNCERTAIN, THE SAME ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 13 MAY BE DEFERRED UNTIL THE SAID REVENUE ACTUALLY ACC RUES. THE ASSESSEE BY FOLLOWING THE CONSISTENT METHOD OF ACCOUNTING AN D ALSO FOLLOWING THE ACCOUNTING STANDARD 9 ISSUED BY THE ICAI, RECOGNIZE D THE REVENUE AS PER THE INTERIM ORDER ISSUED BY THE A.P. STATE GOVERNME NT. THE DISPUTED AMOUNT AS PER THE CLAIM OF THE ASSESSEE AND THE ORD ER OF THE STATE GOVERNMENT HAS BEEN ADJUSTED FROM THE REVENUE ORIGI NALLY RECORDED BY TRANSFERRING THE DISPUTED AMOUNT TO THE CONTINGENT SALES. THEREFORE, THE ORDER PASSED BY THE CIT(A) SHOULD BE UPHELD. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE WHICH LEADS TO THE IMPUG NED ADDITION ARE THAT THE ASSESSEE ENTERED INTO A POWER PURCHASE AGREEMEN T (PPA) WITH APTRANSCO FOR SUPPLY OF POWER. AS PER THE SAID AGRE EMENT, THE ASSESSEE HAS AGREED TO SELL THE POWER AT A UNIT PRI CE OF RS.2.25 PER UNIT WITH A 5% ESCALATION PER ANNUM UP TO 31.3.2004, WIT H A BASE YEAR OF 1994-95. ACCORDINGLY, THE ASSESSEE COMPANY AND OTHE R NON CONVENTIONAL ENERGY PRODUCERS HAVE RECEIVED A CONSI DERATION OF RS.3.48 PER UNIT UP TO THE FINANCIAL YEAR ENDING 31.3.2004. FURTHER, AS PER THE SAID AGREEMENT AFTER 1.4.2004, THE APERC I.E. ANDHR A PRADESH ELECTRICITY REGULATORY COMMISSION IS EMPOWERED TO FIX THE PURCH ASE PRICE. ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 14 ACCORDINGLY, THE APERC HAS FIXED THE PURCHASE PRICE OF RS.2.76 PER UNIT AS AGAINST THE ASSESSEES CLAIM OF RS.3.48 PER UNIT . THEREFORE, THE BIO MASS ENERGY DEVELOPERS ASSOCIATION (BEDA) HAS APPRO ACHED THE A.P. HIGH COURT TO RESOLVE THE ISSUE. THE A.P. HIGH COU RT VIDE ITS INTERIM ORDER DATED 20.8.2004 DIRECTED THE APTRANSCO TO PAY A PRICE FIXED BY THE APERC TOGETHER WITH 50% OF DIFFERENCE BETWEEN T HE PRICE FIXED BY APERC AND PRICE AS PER ORIGINAL PPA. FURTHER, SUBS EQUENT TO THE SETTING UP OF THE APPELLATE TRIBUNAL FOR ELECTRICITY (ATE), THE HIGH COURT DIRECTED THE BEDA TO FILE AN APPEAL BEFORE THE ATE. THE ATE HAS ALLOWED THE APPEAL FILED BY THE BEDA. BUT, THE APERC AND APTRAN SCO HAVE APPEALED AGAINST THE ORDER PASSED BY THE ATE BEFORE THE SUPREME COURT, WHICH HAS REMANDED THE CASE BACK TO THE APER C WITH A DIRECTION TO RECONSIDER THE CLAIM OF POWER GENERATORS WHILE F IXING THE PRICE. THE APERC, AS PER THE DIRECTIONS OF THE SUPREME COURT H AVE HEARD THE MATTER AND COULD NOT REACH A CONSCIOUS DECISION BY THE 3 MEMBER BENCH OF APERC. HENCE, THE BEDA HAS FILED A FRESH APPEAL BEFORE THE ATE FOR DETERMINATION OF THE PRICE TO BE FIXED FOR SUPPLY O F POWER WHICH IS PENDING FOR ADJUDICATION. MEANWHILE, THE A.P. STAT E GOVERNMENT HAS ISSUED AN ORDER DATED 12.11.2008 AND HAS DIRECTED A PTRANSCO FOR PAYMENT OF AN ADHOC PRICE OF RS.3.79 PER UNIT FOR A PERIOD OF 1 YEAR OR TILL APERC FINALISES THE ISSUE AND DETERMINED THE T ARIFF. IN THIS ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 15 BACKGROUND, THE ASSESSEE COMPANY HAS CONTINUED TO R AISE THE SALE BILL AS PER THE ORIGINAL PPA WITH 5% ESCALATION PER YEAR . ACCORDINGLY, THE ASSESSEE COMPANY HAS RAISED SALE BILL FOR THE YEAR UNDER CONSIDERATION FOR A PRICE OF RS.4.23 PER UNIT UP TO 20.4.2008 AND RS.4.44 PER UNIT FROM 20.4.2008 TO TILL THE END OF THE FINANCIAL YEAR 31. 3.2009. HOWEVER, WHILE RECOGNIZING THE REVENUE IN THE BOOKS OF ACCOUNTS, T HE ASSESSEE HAS RECOGNIZED THE SALES REVENUE AS PER THE RATE FIXED BY THE STATE GOVERNMENT TILL FURTHER ORDERS FROM THE ATE AND DIS CLOSED THE REASONS FOR NOT RECOGNIZING THE DIFFERENTIAL AMOUNT OF SALE S AND TREATING IT AS CONTINGENT SALES IN THE NOTES APPENDED TO THE FINAN CIAL STATEMENTS. 11. THE A.O. MADE ADDITION TO CONTINGENT SALES FOR THE REASON THAT THE ASSESSEE HAS CONTINUED TO RAISE BILL FOR HIGHER PRI CE, BUT NOT RECOGNIZED THE REVENUE IN THE BOOKS OF ACCOUNTS. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS ABSOLUTE RIGHT TO RECEIVE THE SAID AMOUNT IN VIEW OF THE INTERIM ORDER PASSED BY THE STATE GOVERNMENT AN D ALSO THE FACT THAT THE MATTER IS PENDING BEFORE THE ATE. THEREFORE, T HE ASSESSEE REQUIRED TO RECOGNIZE THE SAID DISPUTED SALE AMOUNT FOR THE RELEVANT FINANCIAL PERIOD. IT IS THE CONTENTION OF THE ASSESSEE THAT SINCE THE MATTER IS PENDING FOR ADJUDICATION BEFORE THE APPELLATE AUTHO RITIES, THERE IS NO GUARANTEE THAT THE SAID AMOUNT IS RECEIVABLE BY THE ASSESSEE, UNLESS ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 16 THE ATE PASSES ITS FINAL ORDER. UNDER THESE CIRCUM STANCES, IT HAS RIGHTLY RECOGNIZED THE REVENUE WHICH IS ACCRUED TO THE ASSE SSEE AS PER THE SALE PRICE FIXED BY THE STATE GOVERNMENT AND THE REMAINI NG DISPUTED AMOUNT WAS NOT RECOGNIZED AS REVENUE WHICH WAS CONSIDERED AS CONTINGENT SALE AND DISCLOSED IN THE FINANCIAL STATEMENTS. 12. THE QUESTION BEFORE US IS WHETHER THE SAID DISP UTED SALES REVENUE IS ACCRUED TO THE ASSESSEE OR NOT FOR THE RELEVANT FINANCIAL PERIOD IS TO BE DECIDED BASED ON THE PREVAILING FACTS. THE TERM REVENUE IS NOT DEFINED UNDER THE ACT. HOWEVER, THE ACCOUNTING STA NDARDS 9 ISSUED BY THE ICAI, DEFINED THE TERM REVENUE AS PER WHICH THE TERM REVENUE IS THE GROSS INFLOW OF CASH RECEIVABLES OR OTHER CONSIDERA TION ACCRUED IN THE COURSE OF THE ORDINARY ACTIVITIES OF AN ENTERPRISE FROM THE SALE OF GOODS OR FROM THE RENDERING OF SERVICES. THEREFORE, A PA RTICULAR REVENUE IS ACCRUED TO THE ASSESSEE IS TO BE DECIDED BASED ON T HE FACTS WHICH PREVAIL AT THE TIME OF SELLING GOODS OR RENDERING S ERVICES. SIMILARLY, THE ACCOUNTING STANDARD 9 DEALS WITH RECOGNITION OF REV ENUE OF AN ENTERPRISE IN A FINANCIAL YEAR. AS PER THE SAID STANDARD, AN ESSENTIAL CRITERION FOR THE RECOGNITION OF REVENUE IS THAT THE CONSIDERATIO N RECEIVABLE FROM THE SALE OF GOODS, THE RENDERING OF SERVICES OR FROM TH E USE BY OTHERS OF ENTERPRISE RESOURCES IS REASONABLY DETERMINABLE. WH EN SUCH REVENUE IS ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 17 NOT DETERMINABLE WITHIN REASONABLE LIMITS, THE RECO GNITION OF REVENUE MAY BE POSTPONED. THE ASSESSEE CONTEND THAT IN VIEW OF THE FACT THAT THE MATTER IS PENDING BEFORE THE ATE FOR DETERMINAT ION OF PRICE TO BE PAID BY THE APTRANSCO TOWARDS SUPPLY OF POWER, THE ASSESSEE CONTINUED TO BILL THE SALE OF POWER AS PER THE ORIG INAL PPA ENTERED INTO WITH THE APTRANSCO. THE REASON FOR RAISING THE SALE BILLS AS PER THE TERMS OF THE ORIGINAL AGREEMENT IS TO KEEP THE ISSU E ALIVE SO THAT AT A LATER STAGE, THE APTRANSCO CANNOT SAY THAT THE ASSE SSEE HAS NOT MADE ANY CLAIM FOR THE ENHANCED PRICE. HOWEVER, IT IS CO NTINUOUSLY RECOGNIZING THE REVENUE AS PER THE PRICE FIXED BY T HE STATE GOVERNMENT, ACCORDINGLY, FOR THE YEAR UNDER CONSIDERATION IT HA S RECOGNIZED THE REVENUE ON ACCRUAL BASIS AS PER THE PRICE FIXED BY THE STATE GOVERNMENT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR T HE REASON THAT THERE IS NO DISPUTE WITH REGARD TO METHOD OF ACCOUNTING F OLLOWED BY THE ASSESSEE AND RECOGNITION OF REVENUE ON ACCRUAL BASI S. THE ONLY DISPUTE IS WITH REGARD TO THE DIFFERENTIAL SALE PRICE CLAIM ED BY THE ASSESSEE AND PRICE PAID BY THE APTRANSCO. WHEN THE UNCERTAINTY R ELATING TO COLLECTABILITY OF SUCH SALE PRICE IS EXISTED AT THE TIME OF RECOGNITION OF REVENUE, IT CANNOT RECOGNIZE THE REVENUE MERELY ON HYPOTHETICAL SALES FIGURES. THE REVENUE SHOULD BE RECOGNIZED ON REAL I NCOME BASIS AND NOT ON HYPOTHETICAL INCOME. THE DISPUTED AMOUNT CLAIME D BY THE ASSESSEE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 18 IS A CONTINGENT IN NATURE. THE COLLECTABILITY OF S UCH AMOUNT IS UNCERTAIN AS LONG AS THE ISSUE IS PENDING BEFORE THE ATE AND ALSO DETERMINATION OF SALE PRICE TO BE FIXED BY THE APERC. THEREFORE IT HAS RIGHTLY RECOGNIZED THE REVENUE AND WHICH HAS BEEN CONSISTENTLY FOLLOWE D FOR LAST SEVERAL YEARS. THE A.O. MERELY BASED ON THE COPIES OF SALE BILLS HAS COME TO THE CONCLUSION THAT THE ASSESSEE HAS ABSOLUTE RIGHT TO RECEIVE THE SAID DISPUTED AMOUNT WITHOUT UNDERSTANDING THE FACTS OF DISPUTES PREVAILING AT THE TIME OF RECOGNITION OF REVENUE. 13. THE FACTS WITH REGARD TO THE METHOD OF ACCOUNTI NG FOLLOWED BY THE ASSESSEE AND THE RECOGNITION OF REVENUE ARE NOT IN DISPUTE. THE ASSESSEE HAS CONSISTENTLY FOLLOWING MERCANTILE SYST EM OF ACCOUNTING TO RECOGNIZE THE REVENUE. THE ASSESSEE IS CONTINUOUSLY FOLLOWED THIS METHOD OF REVENUE RECOGNITION BY FOLLOWING THE ACCO UNTING STANDARD 9 ISSUED BY THE ICAI. THE ASSESSEE BEING A COMPANY BO UND TO FOLLOW THE PROVISIONS OF SECTION 211(3C) OF THE COMPANIES ACT, 1956 WHICH REQUIRES THE ASSESSEE TO FOLLOW ACCOUNTING STANDARDS NOTIFIE D BY THE GOVERNMENT OR ISSUED BY THE ICAI TO PREPARE ITS FINANCIAL STAT EMENTS. BEING A COMPANY BY FOLLOWING THE PRUDENT POLICIES, IT HAS F OLLOWED THE ACCOUNTING STANDARD 9 TO RECOGNIZE THE REVENUES. A CCORDINGLY, WHERE THE REVENUE HAS CLEARLY ACCRUED TO THE ASSESSEE THE SAME HAS BEEN ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 19 RECOGNIZED ON ACCRUAL BASIS BY MAKING NECESSARY ENT RIES. THE IMPUGNED CONTINGENT SALE AMOUNT IS NEITHER RECEIVED BY THE A SSESSEE NOR ACCRUED TO THE ASSESSEE. THE ASSESSEE MADE A CLAIM FOR THE HIGHER SALE PRICE BASED ON THE OLD PPA, BUT, THE PURCHASER APTRANSCO HAS DISPUTED THE PRICE CLAIMED BY THE ASSESSEE AND TAKEN THE MATTER BEFORE THE ATE. WHEN THE MATTER IS PENDING BEFORE THE ATE AND THE DE TERMINATION OF SALE PRICE IS NOT ASCERTAINED AT THE TIME OF RECOGN ITION OF REVENUE, THE ONLY OPTION FOR THE ASSESSEE IS TO RECOGNIZE THE RE VENUE AS PER THE RATE FIXED BY THE STATE GOVERNMENT. THEREFORE, THE A.O. WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE SAID DISPUTED AMO UNT WHICH WAS SHOWN AS CONTINGENT SALES HAS TO BE RECOGNIZED AS R EVENUE FOR THE RELEVANT FINANCIAL PERIOD. WE FURTHER OBSERVED THAT THE ASSESSEE HAS RECOGNIZED THE REVENUE AS PER THE RATE FIXED BY THE STATE GOVERNMENT. THE IMPUGNED CONTINGENT SALE IS ONLY A CLAIM MADE B Y THE ASSESSEE. THE SAID AMOUNT IS RECEIVABLE OR ACCRUED TO THE ASS ESSEE IS DEPENDING UPON THE OUTCOME OF THE DECISION OF ATE. WHEN THE UNCERTAINTY RELATING TO COLLECTABILITY ARISES EITHER AT THE TIME OF RECO GNITION OF REVENUE OR SUBSEQUENT TO THE TIME OF SALE OR THE RENDERING OF SERVICES, IT IS APPROPRIATE TO MAKE SEPARATE PROVISION TO REFLECT T HE UNCERTAINTY IN THE FINANCIAL STATEMENTS RATHER THAN RECOGNIZING THE RE VENUE AND MAKE SEPARATE PROVISIONS IN THE BOOKS OF ACCOUNTS. IN T HE PRESENT CASE ON ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 20 HAND, ON PERUSAL OF THE FACTS, WE FIND THAT THE ASS ESSEE HAS RIGHTLY RECOGNIZED THE REVENUE IN THE RELEVANT FINANCIAL PE RIOD AS PER THE RATE FIXED BY THE STATE GOVERNMENT WHICH IS THE AMOUNT P AYABLE BY THE APTRANSCO. THE DISPUTED AMOUNT CLAIMED BY THE ASSE SSEE IS A MERE CLAIM AND THE ASSESSEE HAS NO RIGHT TO RECEIVE THE SAID AMOUNT, UNLESS THE MATTER IS DECIDED BY THE ATE. THE FACT THAT TH E MATTER IS PENDING BEFORE THE ATE FOR FINAL DETERMINATION OF THE SALE PRICE CANNOT BE IGNORED. UNLESS, THE ATE DETERMINED THE FINAL SALE PRICE, THE ASSESSEE CANNOT RECOGNIZE THE REVENUE AS PER THE DEMAND OR A S PER THE CLAIM MADE BEFORE THE APTRANSCO. THEREFORE, WE ARE OF TH E OPINION THAT THE A.O. WAS NOT CORRECT IN TREATING THE CONTINGENT SAL ES AS INCOME OF THE ASSESSEE. 14. COMING TO THE CASE LAWS RELIED UPON BY THE ASSE SSEE. THE ASSESSEE RELIED UPON JUDGEMENT OF HONBLE SUPREME C OURT OF INDIA, IN THE CASE OF GODHARA ELECTRICITY COMPANY LTD. VS. CI T (1997) 225 ITR 746, WHEREIN THE HONBLE SUPREME COURT HELD THAT TH E INCOME ACCRUED TO THE ASSESSEE HAS TO BE CONSIDERED BY TAKING THE PROBABILITY OF REALIZATION OF INCOME AND IN CASE IF THE AMOUNT TO BE REALIZED IS UNDER DISPUTE, THERE WAS NO REAL INCOME ACCRUES TO THE AS SESSEE. THE RELEVANT PORTION IS EXTRACTED BELOW:- ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 21 UNDER THE ACT INCOME CHARGED TO TAX IS THE INCOME THAT IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA IN THE PREVIOU S YEAR RELEVANT TO THE YEAR FOR WHICH ASSESSMENT IS MADE OR ON THE INC OME THAT ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE IN INDIA DURING SUCH YEAR. THE COMPUTATION OF SUCH INCOME IS TO BE MADE IN ACC ORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. IT MAY BE EITHER THE CASH SYSTEM WHERE ENTRIES ARE MADE ON THE BASIS OF ACTUAL RECEIPTS AND ACTUAL OUTGOINGS OR DISBURSEMEN TS OR IT MAY BE THE MERCANTILE SYSTEM WHERE ENTRIES ARE MADE ON ACC RUAL BASIS, I.E., ACCRUAL OF THE RIGHT TO RECEIVE PAYMENT AND THE ACC RUAL OF THE LIABILITY TO DISBURSE OR PAY. IF THE ACCOUNTS ARE MAINTAINED UNDER THE MERCANTILE SYSTEM WHAT HAS TO BE SEEN IS WHETHER IN COME CAN BE SAID TO HAVE REALLY ACCRUED TO THE ASSESSEE-COMPANY. EVE N THOUGH THE ASSESSEE-COMPANY WAS FOLLOWING G THE MERCANTILE SYS TEM OF ACCOUNTING AND HAD MADE ENTRIES IN THE BOOKS REGARD ING ENHANCED CHARGES FOR THE SUPPLY MADE TO THE CONSUMERS, NO RE AL INCOME HAD ACCRUED TO THE ASSESSEE COMPANY IN RESPECT OF THOSE ENHANCED CHARGES IN VIEW OF THE FACT THAT SOON AFTER THE ASS ESSEE COMPANY DECIDED TO ENHANCE THE RATES IN 1963 REPRESENTATIVE SUITS (CIVIL SUITS NOS. 152 OF 1963 AND 50 OF 1964) WERE FILED BY THE CONSUMERS WHICH WERE DECREED BY THE TRIAL COURT AND WHICH DECREE WA S AFFIRMED BY THE APPELLATE COURT AND THE SINGLE JUDGE OF THE HIGH CO URT AND IT IS ONLY ON 8TH DEC., 1968 THAT THE LETTERS PATENT APPEALS F ILED BY THE ASSESSEE-COMPANY WERE ALLOWED BY THE DIVISION BENCH OF THE HIGH COURT AND THE SAID SUITS WERE DISMISSED. BUT APPEAL S WERE FILED AGAINST THE SAID JUDGMENT BY THE CONSUMERS IN THIS COURT AND THE SAME WERE DISMISSED BY THE JUDGMENT OF THIS COURT D T. 26TH FEB., 1969. SHORTLY THEREAFTER, ON 19TH MARCH, 1969, THE UNDER SECRETARY TO THE GOVERNMENT OF GUJARAT WROTE A LETTER ADVISIN G THE ASSESSEE - COMPANY TO MAINTAIN THE STATUS QUO FOR THE RATES TO THE CONSUMERS FOR AT LEAST SIX MONTHS AND THE CHIEF ELECTRICAL IN SPECTOR WAS DIRECTED TO GO THROUGH THE ACCOUNTS OF THE ASSESSEE-COMPANY FROM YEAR TO YEAR AND TO REPORT TO THE GOVERNMENT ABOUT THE ACTU AL POSITION ABOUT THE REASONABLE RETURNS EARNED BY THE ASSESSEE-COMPA NY. ON 16TH MAY, 1969 ANOTHER REPRESENTATIVE SUIT (SUIT NO. 118 OF 1969) WAS FILED BY THE CONSUMERS WHEREIN INTERIM INJUNCTION W AS GRANTED BY THE COURT AND WHICH WAS FINALLY DECREED IN FAVOUR OF TH E CONSUMERS ON 23RD JUNE, 1974, IT WOULD THUS APPEAR THAT AFTER TH E DECISION WAS TAKEN BY THE ASSESSEE COMPANY TO ENHANCE THE CHARGE S IT WAS NOT ABLE TO REALISE THE ENHANCED CHARGES ON ACCOUNT OF PENDENCY OF THE EARLIER REPRESENTATIVE SUITS OF THE CONSUMERS FOLLO WED BY THE LETTER OF THE UNDER SECRETARY TO THE GOVERNMENT OF GUJARAT AN D THE SUBSEQUENT SUIT OF THE CONSUMERS AND DURING THE PEN DENCY OF THE SUBSEQUENT SUIT THE MANAGEMENT OF THE UNDERTAKING O F THE ASSESSEE- COMPANY WAS TAKEN OVER BY THE GOVERNMENT OF GUJARAT UNDER THE DEFENCE OF INDIA RULES, 1971 AND THE UNDERTAKING WA S SUBSEQUENTLY TRANSFERRED TO THE GUJARAT STATE ELECTRICITY BOARD. IT IS NO DOUBT TRUE THAT THE LETTER ADDRESSED BY THE UNDER SECRETARY TO THE GOVERNMENT OF GUJARAT TO THE ASSESSEE-COMPANY HAD NO LEGALLY B INDING EFFECT BUT ONE HAS TO LOOK AT THINGS FROM PRACTICAL POINT OF V IEW. THE QUESTION WHETHER THERE WAS REAL ACCRUAL OF INCOME TO THE ASS ESSEE-COMPANY IN RESPECT OF THE ENHANCED CHARGES FOR SUPPLY OF ELECT RICITY HAS TO BE CONSIDERED BY TAKING THE PROBABILITY OR IMPROBABILI TY OF REALISATION IN A REALISTIC MANNER. IF THE MATTER IS CONSIDERED IN THIS LIGHT, IT IS NOT POSSIBLE TO HOLD THAT THERE WAS REAL ACCRUAL OF INC OME TO THE ASSESSEE-COMPANY IN RESPECT OF THE ENHANCED CHARGES FOR SUPPLY OF ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 22 ELECTRICITY WHICH WERE ADDED BY THE ITO WHILE PASSI NG THE ASSESSMENT ORDERS IN RESPECT OF THE ASSESSMENT YEARS UNDER CON SIDERATION. THE AAC WAS RIGHT IN DELETING THE SAID ADDITION MADE BY THE ITO AND-THE TRIBUNAL HAD RIGHTLY HELD THAT THE CLAIM AT THE INC REASED RATES AS MADE BY THE ASSESSEE COMPANY ON THE BASIS OF WHICH NECESSARY ENTRIES WERE MADE REPRESENTED ONLY HYPOTHETICAL INC OME AND THE IMPUGNED AMOUNTS AS BROUGHT TO TAX BY THE ITO DID N OT REPRESENT THE INCOME WHICH HAD REALLY ACCRUED TO THE ASSESSEE -COMPANY DURING THE RELEVANT PREVIOUS YEARS. THE HIGH COURT WAS IN ERROR IN UPSETTING THE SAID VIEW OF THE TRIBUNAL.CIT VS. GODHRA ELECT RICITY CO. LTD. (1983) 32 CTR (GUJ) 141 : (1983) 140 ITR 657 (GUJ) : TC 39R.493 SET ASIDE; CIT VS. SHOORJI VA!LABHDAS& CO. (1962) 4 6 ITR 144 (SC) : TC 39R.737; CIT VS. BIRLA GWALIOR (P)LTD. 1973 CTR (SC) 349 : (1973) 89 ITR 266 (SC) TC 39R.754; POONA ELECTRIC SUPPLY C O. LTD. VS. CIT (1965) 57 ITR 521 (SC) : TC 13R.287, STATE.BANK OF TRAVANCORE VS. CIT (1986) 50 CTR (SC) 290 : (1986) 158 ITR 102 (SC ) TC 39R.795 AND H,M...KASHIPAREKH&CO. LTD. VS. CIT (1960) 39 IT R 706 (BORN) : TC 39R.791 APPLIED. 15. THE ASSESSEE RELIED UPON THE COORDINATE BENCH D ECISION OF ITAT, HYDERABAD IN THE CASE OF DCIT VS. SRI BALAJI BIO MA SS POWER PVT. LTD. IN ITA NO.1748/HYD/2008. THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT MERELY BASED ON THE INVOICES RAISED, THE INCOME CANNOT BE DEEMED TO ACCRUE TO THE ASSESSEE, WHEN THE DIFFERENTIAL INCOME WAS SUBJECT MATTER OF LITIGATIO N AND ALSO THERE IS NO CERTAINTY OF THE ASSESSEE BEING INTENDED TO SUCH IN COME UNLESS IT SUCCEEDS IN SUCH LITIGATION. THE RELEVANT PORTION O F THE ORDER IS REPRODUCED HEREUNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE WITH REGARD TO THE MATERIAL FACTS OF THE CASE. THE ONLY QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE DIFFERENTIAL AMOUNT OF SALES, VIZ, WORKED OUT AT RS.3.48/- PER UNIT AS PER THE POWER PURCHASE AGR EEMENT APPLYING WHICH INVOICES FOR SUPPLY OF POWER TO APTRANSCO WER E RAISED AND RS.3.18/- APPLYING WHICH IN TERMS OF THE INTERIM OR DERS OF THE HON'BLE A.P. HIGH COURT, INVOICES OF THE ASSESSEE WERE SETT LED BY THE APTRANSCO AND ACCOUNTED FOR BY THE ASSESSEE IN THE BOOKS OF A CCOUNT, CAN BE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 23 TREATED AS THE INCOME OF THE ASSESSEE FOR THE ASSES SMENT YEAR 2005- 06. WE FIND THAT THE CIT(A) HAS GIVEN ELABORATE REA SONING BEFORE CONCLUDING THAT THE INCOME WORKED AT THE RATE OF RS .3.48/- PER UNIT OF POWER SUPPLIED HAD NEITHER ACCRUED TO THE ASSESSEE NOR WAS RECEIVABLE DURING THE PREVIOUS YEAR AND THEREFORE, NO CORRESPONDING DEBT IN RESPECT OF THE DIFFERENTIAL AMOUNT STOOD CR EATED IN THE BOOKS OF THE PURCHASER, I.E. APTRANSCO. MERELY BASED ON T HE INVOICES RAISED, INCOME CANNOT BE DEEMED TO ACCRUE TO THE AS SESSEE, WHEN THE DIFFERENTIAL INCOME WAS SUBJECT MATTER OF LITIGATIO N, AND THERE IS NO CERTAINTY OF THE ASSESSEE BEING ENTITLED TO SUCH IN COME, UNLESS IT SUCCEEDS IN SUCH LITIGATION. EVEN IF AN ASSESSEE SU CCEEDS ULTIMATELY IN THE LITIGATION, A DEBT ENFORCEABLE AGAINST THE OTHE R PARTY DOES NOT GET CREATED, UNLESS A CLAIM IN THAT BEHALF WAS RAISED B EFORE THE SAME BEING BARRED BY LIMITATION. IT IS FOR THIS REASON T HAT AN ASSESSEE, TO KEEP THE ISSUE ALIVE, HAS TO RAISE THE CLAIM AGAINS T THE OTHER PARTY WITHIN THE PERIOD OF LIMITATION, WHICH IN ITS VIEW IS DUE TO IT ACCORDING TO THE TERMS OF THE CONTRACT, SO AS TO GET AN ENFOR CEABLE RIGHT FOR THE RECOVERY OF THE AMOUNT AS AND WHEN IT SUCCEEDS IN T HE LITIGATION. IN THIS VIEW OF THE MATTER, THOUGH INVOICES RAISED CON STITUTE FUNDAMENTAL RECORD FOR MAINTENANCE OF ACCOUNTS IN THE NORMAL CO URSE, AS OBSERVED BY THE ASSESSING OFFICER, THAT LOGIC DOES NOT HOLD GOOD WHEN THE SUBJECT MATTER WAS UNDER DISPUTE AND WAS UNDER LITI GATION BEFORE THE JUDICIAL FORA, INCLUDING THE JURISDICTIONAL HIGH CO URT AND HON'BLE SUPREME COURT DURING THE RELEVANT POINTS OF TIME. A SSESSEE'S METHOD OF ACCOUNTING ONLY THE AMOUNT WHICH WAS NOT SUBJECT MATTER OF LITIGATION AND WHICH IN FACT WAS RECEIVED BY IT FRO M THE APTRANSCO IN TERMS OF THE INTERIM ORDER OF THE A.P. HIGH COURT, WAS IN CONFORMITY WITH THE ACCOUNTING STANDARD 9 AND THE RATIO LAID D OWN BY THE APEX COURT, AMONG OTHERS, IN THE CASE LAW DISCUSSED BY T HE CIT (A) IN THE IMPUGNED ORDER, AND ALSO IN THE CASE-LAW RELIED UPO N BY THE ASSESSEE BEFORE US. IN THIS VIEW OF THE MATTER, WE FIND NO I NFIRMITY IN THE ORDER OF THE CIT(A), WHICH IS ACCORDINGLY CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE REJECTED. 16. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPR EME COURT OF INDIA, IN THE CASE OF GODHARA ELECTRICITY SUPPLY COMPANY VS. CIT (SUPRA), WE ARE OF THE VIEW THAT THE IMPUGNED CONTINGENT SALE ON AC COUNT OF DIFFERENTIAL SALE PRICE CLAIMED BY THE ASSESSEE WHICH WAS PENDIN G BEFORE THE ATE FOR ADJUDICATION IS NOT ACCRUED TO THE ASSESSEE AS REVENUE FOR THE RELEVANT FINANCIAL YEAR. THE ASSESSEE HAS RIGHTLY RECOGNIZED THE REVENUE ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 24 AS PER THE SALE PRICE FIXED BY THE STATE GOVERNMENT WHICH IS THE REAL INCOME ACCRUED TO THE ASSESSEE AS PER THE PREVAILIN G SITUATION. THE ADDITIONAL CLAIM MADE BY THE ASSESSEE IS A MERE CLA IM WHICH WAS NOT SETTLED BY THE AUTHORITIES. UNLESS THE ISSUE IS SET TLED, THE ASSESSEE CANNOT RECOGNIZE ITS REVENUE MERELY BASED ON ITS CL AIM. THE ASSESSEE HAS RIGHTLY TREATED THE DIFFERENCE BETWEEN SALE PRI CE CLAIMED AND THE PRICE PAID BY THE APTRANSCO AS CONTINGENT SALES. TH E CIT(A) AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE HAS RIGHTLY DELETED THE ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY ER ROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE CIT(A) ORDER AND DISMISS THE APPEAL FILED BY THE REVENUE. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH MAY16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 27.05.2016 VG/SPS ITA NO696/VIZAG/2013 M/S. JOCIL LTD., GUNTUR 25 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1(1), GUNTUR 2. / THE RESPONDENT M/S. JOCIL LTD., DOKIPARRU, NAR ASARAOPET ROAD, GUNTUR DIST. 3. + / THE CIT, GUNTUR 4. + ( ) / THE CIT (A), GUNTUR 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM