T. Sheshagiri Rao, Income Tax Officer, Ward-16(3, Hyderabad V. Mytrah Wind Developers Private Limited, Hyderabad

ITA 758/Hyd/2020

AI Insights

The case revolves around the appeal by the Income Tax Officer against M/s. Mytrah Wind Developers Private Limited concerning the assessment year 2014-15. The primary issue was the treatment of certain receipts by the assessee, which the Assessing Officer classified as 'lease premium', thus taxable in the year of receipt. However, the CIT(A) reversed this decision, leading to the Revenue's appeal to the Tribunal. The Tribunal examined the agreements and the nature of the receipts, concluding that they were advance payments for services to be rendered over a period of 20 to 25 years, and not lease premiums. Consequently, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122341 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 27-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 07-12-2020
• Other Referred Cases: New Mangalore Port Trust Vs ACIT, Circle-1(1), Mangalore, R K Palshikar (HUF) Vs CIT, CIT Vs A R Krishna Murthy, Madras Industrial Investment Corporation Limited vs CIT, Treasure Island Resorts Private Limited vs Deputy Commissioner of Income Tax, Alankar Slimming & Cosmetics Clinic Pvt. Ltd. Vs. ITO, Ward 1(7), Kolkata
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Competent authority; TDS
• Section: 145; 143(3); 142(1); 115JB; 143(1); 143(2); 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA No.758/Hyd/2020 Assessment Year: 2014-15 Income Tax Officer, Ward – 16(3), Hyderabad. Vs. M/s. Mytrah Wind Developers Private Limited, Gachibowli, Hyderabad. PAN : AAICM1274H. (Appellant) (Respondent) Assessee by: Shri K.C. Devdas, C.A. Revenue by: Shri Rajendra Kumar – CIT DR Date of hearing: 28.12.2022 Date of pronouncement: 05.01.2023 O R D E R PER LALIET KUMAR, J.M. The appeal of the Revenue for A.Y. 2014-15 arises from the order of Commissioner of Income Tax (Appeals) – 4, Hyderabad dt.31.03.2017 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”). 2 ITA No.758/Hyd/2020 2. The appeal filed by the Revenue is barred by limitation by 210 days. It has moved a condonation application explaining the reasons thereof. We have heard both the parties on this preliminary issue. Having regard to the reasons given in the petition, we condone the delay and admit the appeal for hearing. 3. The solitary ground raised by the Revenue reads as under : “The ld.CIT(A) erred in deleting the addition made by the Assessing Officer towards the ‘lease premium’.” 4. Facts of the case, in brief, are that assessee is a company engaged in setting up of sub-stations and extra high voltage lines for facilitating the transmission of the power generated from wind power farms. It has filed its return of income electronically for A.Y. 2014-15 on 29.11.2014 admitting Nil income and current year loss Rs.1,10,33,081/-. The book loss declared u/s 115JB of the Act was at Rs.1,67,232/- and the same was processed u/s 143(1) of the Act on 10.07.2015. The case was selected for scrutiny under CASS and notice u/s 143(2) of the Act was issued on 31.08.2015, followed by notice u/s 142(1) of the Act on 04.05.2016 calling for certain information. Later, the case was transferred to the appellant herein and again notice u/s 142(1) of the Act was issued on 21.10.2016 asking explanation as to why the deferred revenue of Rs.10.33 crore should not be treated as income and brough to tax. After perusal of the information 3 ITA No.758/Hyd/2020 submitted by the assessee, finally the Assessing Officer had completed the assessment u/s 143(3) of the Act dt.30.12.2016 interalia making an addition of Rs.10,32,97,673/- towards lease premium. The assessing officer in paragraph 4.5 had decided the issues in the following manner:- “4.5 The claim of the assessee is that the company has commenced its commercial operations in February, 2014 and the lease rent for land and user fee for power evacuation are for the operational life of the agreements, as specified therein and therefore, were right in considering only the proportionate amount, for the operative period of the financial year, as revenue in the Profit and Loss account and the balance amount received as deferred revenue in the Balance Sheet. However, the claim of the assessee is not acceptable for the following reasons: i) As seen from the Agreement for Land dated 22.02.2013 entered into by the assessee with MVKPL, the Clause 5.1 relating to Price stipulates rent at the rate of Rs. 5,77,63,261/- (inclusive of all taxes) i.e. Rs. 13.12,801/- per location. Thus, it does not stipulate the rent per month or per annum. Also, Clause 5.2 refers to the Price as `Consideration' which includes all payments by MVKPL to the assessee towards Transfer of Lease/Sub-lease of the location. Further, Clause 2.2.1 relating to the Scope of Agreement stipulates that the parcels of land (0.89 acre) shall be made available through Transfer of Lease/Sub-Lease to company. Thus, the Price fixed is a consolidated amount and thus falls within the meaning of Lease Premium. ii) Similarly, are the terms of User Agreement entered into for power evacuation facility wherein it is mentioned in Clause 6.1 that the total User Fee of Rs. 5,24.43,405/- is the fee paid to the assessee for the term and where there is no mention of fee per month or annum. Thus, the said User Fee is a single time payment received by the assessee. Clause 3 of Scope of the Agreement states that the MVKPL has contributed proportionate costs for the construction and development of the Common Facilities and hence, entitled to use the same. Thus, this amount is a lumpsum payment received which is akin to Lease premium. 4 ITA No.758/Hyd/2020 i) The assessee has received the Service Tax from MVKPL on the entire amount. In the Service Tax returns, the assessee has declared the entire lease amount received towards land as well as user fee as Service Charges and paid Service Tax. If the amounts not offered as revenue for this year are in the nature of an advance or deposit, then the assessee should have been liable for Service Tax in respective years and not in the year of receipt. ii) As seen from the financial statements, the assessee has received Security Deposit of Rs. 28,57,37,329/- from MVKPL separately with regards to lease of land and power evacuation facilities. iii) The assessee has considered only the proportionate amount as revenue for this year based on the operational life of the agreement whereas the same is not adopted in the case of intangible assets of Rs. 7,69,12:345/- i.e. Power Evacuation Rights. In respect of the intangible assets, the assessee has claimed depreciation @ 25% of the said value. vi) The assessee has claimed credit for the entire TDS of Rs. 63,19,418/- made on the amount of price received on sub-lease of land and the user fee of power evacuation facilities received, including on the amount shown as deferred revenue which indicates that the entire amount as income for this assessment year. iv) On identical facts and circumstances, the ITAT, Bangalore Bench upheld the action of the Assessing Officer in taxing the entire consideration (upfront premium) in the year of receipt in the case of New Mangalore Port Trust Vs ACIT, Circle-1(1), Mangalore in ITA No. 1299 of 2013 dated 06.11.2013. v) Further, the Hon'ble Supreme Court had held in the case of R K Palshikar (HUF) Vs CIT (172 ITR 311) and CIT Vs A R Krishna Murthy 176 ITR 417 that such amounts received is the price of the lease i.e. it is a consideration for lease and not advance received. 4.6 In view of the above discussion, the entire consideration received towards sub-lease of land and also the User Fee for power evacuation facilities is treated as income of this year. Accordingly, the balance of such amounts totaling to Rs. 10,32,97,673/- is added in the assessment and brought to tax.” 5 ITA No.758/Hyd/2020 5. Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who allowed the appeal of assessee. The findings of the Ld. CIT(A) granting the relief to the assessee, are captured hereinbelow:- “4.2 The AO rejected the claim of the appellant Company. The AO has cited clause 5.1 of the Agreement dated 22.02.2013 between the appellant and MVKPL where it is mentioned that the rent will be Rs 13,12,801/- per location and thus total rent will be 5,77,63,261/- and the clause does not specify any monthly or annual rent. AO also refers to clause 5.2 and clause 2.2.1 where he claims that only consolidated amount has been mentioned. Similarly, for agreement for power evacuation the AO refers to clause 6.1 and clause 3 where the user fee of Rs.5,24,43,405/- is mentioned in consolidated manner and no monthly or annual fee is mentioned. The AO also reasons that since the service tax has been paid on the entire lease amount and service charges, the entire amount received by the appellant on account of lease rent for land and power evacuation facilities should be charged to tax in the AY 2014-15. 4.3. However, as against the AO's contentions, the AR, vide his letter dated 28.03.2019, has made the following submission with respect to the lease rent received for land. "Submission of AR : In this regard we submit that Clause 5.1 of land lease agreement under the heading Price which states that The Company shall pay the rent of Rs. 5,77,63,261 i.e. Rs. 13,12,801 per location (Inclusive of taxes). i. Further, _clause 1.1(p) defines operational life of the project as a period of twenty (20) years commencing from the Commissioning of the last WTG of the Project. ii. From the above, it is clear that the rent received will be for the operational life of the project i.e. 20 years commencing from the Commissioning of the last WTG of the Project. iii. As the Company received entire rent in advance from MVKPL, by following mercantile system of accounting and applying the concept of matching principle i.e. matching of revenue with expenditure, the Company recognized Rs. 2,74,651 (apportioned based on no. of days) in profit and loss account as income on accrual basis for the FY 2013-14 and the balance of advance Rs. 5,11,34,445 has been accounted as deferred 6 ITA No.758/Hyd/2020 revenue which has been shown under 'Other Current Liabilities' which is to be spread over future years i.e. remaining years of operational life of the project, which is in compliance with the mercantile system of accounting recognized u/s. 145 of the Income Tax Act, 1961 and also in line with AS- 9- Revenue Recognition issued by 'CAI. iv. Lease premium is the price paid for obtaining the lease of an immovable property or is the price paid for grant of a lease, and apart from the lease premium monthly or quarterly or yearly rent is usually to lessor. In our case, the amount of Rs. 5,14,09,096/- received by the Company was Consolidated lease rent received in advance but not lease premium as there are no other regular/recurring lease rentals. Accordingly, we pray that it can't be treated as lease premium and addition of Rs.5,11,34,445 is deleted. 4.4. I have carefully considered the assessment order and the submissions of the AR. As can be seen from the Agreement dated 22.02.2013, the rent received by the appellant will be for the operational life of the project, i.e 20 years commencing from the commissioning of the project. At para 1(p) of the Agreement states that, "Operational Life of the Project" means a period of twenty (20) years commencing from the Commissioning of the last WTG of the Project.' Thus, the Agreement clearly specifies that the amount of lease rent received is for the period of 20 years. Following the mercantile system of accounting and applying the matching principle, the claim of the appellant company is that it has shown Rs.2,74,651/-(apportioned amount) in Profit & Loss Account as income, on accrual basis and the balance of advance of Rs.5,11,34,445/- has been accounted as "deferred revenue" which is to be spread over future years. Since in the mercantile system of accounting, receipt entailing a continuing liability of rendering services in future years can be spread over years, the AO is directed to determine the issue in accordance with law and work out proportionately. Hence, the grounds raised in this regard are allowed. 5. With regard to the terms LI User agreement entered into for power evacuation facility, the AO observed that in Clause 6.1 that the total User Fee of Rs.5,24,43,405/- is the fee paid to the assessee for the term and where there is no mention of fee per month or annum. Thus, the AO held that the said User Fee is a single time payment received by the assessee. Clause 3 of the Scope of Agreement states that the MVKPL has contributed proportionate costs for the construction and development of the common facilities and hence, entitle to use the same. Thus, this amount is a lump- sum payment received which is akin to Lease Premium. 7 ITA No.758/Hyd/2020 5.1 The AR, vide his submissions has stated that: - In this regard we submit that Clause 6.1 of the user agreement refers to fees which states that "The Company shall pay the fee for Term towards the Common facilities". Hence, pursuant to the said clause the Company agreed to pay a total amount of Rs. 5,24,43,405/- for the entire term. i. Clause 1.1(qq) defines Term as "Term means the period from the Effective date until the first to occur of (a) the common facilities being transferred to the relevant Government Authority in accordance with clause 10, or (b) the conclusion of the operational life of the project or (c) termination of this Agreement in accordance with the provisions hereunder' ii. Further, clause 1.1(bb) defines operational life of the project as a period of twenty-five (25) years commencing from the Commissioning of the last WTG of the Project. iii. From the above, it is clear that the fee received will be for the operational life of the project i.e. 25 years commencing from the Commissioning of the last WTG of the Project. v. As the Company received entire user fee in advance from MVKPL, by following mercantile system of accounting and applying the concept of matching principle i.e. Matching of revenue with expenditure, the Company recognized Rs. 2,80,177 (apportioned based on no. of days) in profit and loss account as income on accrual basis for the FY 2013-14 and the balance of advance Rs. 5,21,63,228 has been accounted as deferred revenue which has been shown under 'Other Current Liabilities' which is to be spread over future years i.e. remaining years of operational life of the project, which is in compliance with the mercantile system of accounting recognized u/s. 145 of the Income Tax Act, 1961 and also in line with AS- 9- Revenue Recognition issued by ICAI. iv. From the above and as per the lease premium meaning mentioned in point a(iv), it is clear that amount of Rs. 5,24,43,405 received by the Company is not akin to lease premium and it is a user fee advance. Accordingly, we pray that the addition of Rs. 5,21,63,228 is deleted. 5.2 I have carefully considered the assessment order and the above submissions of the AR on this issue. As can be seen from the User Agreement, it clearly stated at para 6.1 that "The Company shall pay the fee for Term towards the Common facilities". Further, in para 1(qq) the definition of 'Term' is given as under. 8 ITA No.758/Hyd/2020 `1(qq) "Term" means the period from the Effective Date until the first to occur of (a) the Common Facilities being transferred to the relevant Government Authority in accordance with Clause 10, or (b) the conclusion of the Operational Life of the Project, or (c) termination of this Agreement in accordance with the provisions hereunder.' Further, at para 1(bb) of the Agreement, it is specified that, `(bb) "Operational Life of the Project" means a period of twenty five (25) years commencing from the Commissioning of the last WTG of the Project.' Thus, the Agreement clearly specifies that the amount of user charges received is for the period of 25 years. Following the mercantile system of accounting and applying the matching principle, the AR argues that the amount received of Rs.5,24,43,405/- is for the entire term, i.e. for entire operational life of the project as a period of 25 years, commencing from the Commissioning of the last WTG of the Project. Therefore, it has rightly taken into account Rs.2,80,177/- (apportioned based on no. of days) in Profit and Loss Account as income on accrual basis and the balance of advance of Rs.5,21,63,228/-has been shown as deferred revenue under "Other Liabilities". Since in the mercantile system of accounting, receipt entailing a continuing liability of rendering services in future years can be spread over years, the AO is directed to determine the issue in accordance with law and work out proportionately. Hence, the grounds raised in this regard are allowed.” 6. Feeling aggrieved with the order of ld.CIT(A), Revenue is now in appeal before us. 7. Before us, ld. DR submitted that the rent received by the assessee attracts the definition of ‘lease premium’ and thus, he supported the order of Assessing Officer and aggrieved with the order of ld.CIT(A) wherein he deleted the addition made by the Assessing Officer towards lease premium. 9 ITA No.758/Hyd/2020 8. On the other hand, ld. AR submitted that an amount of Rs.5,14,09,096/- was received by it and the same was consolidated lease rent received in advance but cannot be considered as ‘lease premium’ as there were no other regular / recurring lease rentals and prayed not to treat the same as lease premium. He relied upon the order passed by the ld.CIT(A) and our attention was drawn to Para 4.5 reproduced hereinabove. Ld.AR further submitted that the appeal of the Revenue on the ground reproduced hereinabove is not sustainable in the eyes of law as no lease premium was received by the assessee from MVKPL. Even the Assessing Officer in the order, had mentioned that the rent was received by the assessee for the purpose of providing 40 parcels of land (0.89 acres) respectively for a period of 20 years. It was also mentioned by the Assessing Officer on the basis of the agreement entered between the assessee and MVKPL that subsequent transfer of lease / service were effected by the assessee in favour of MVKPL in terms of this agreement. It was the case of the assessee before us that since the terms of lease was for 20 years, therefore, the upfront revenue received was evenly spread by the assessee for the term of lease and, therefore, two months rental falling in the A.Y. 2014-15 was offered to tax. It was submitted by the ld.AR that in the subsequent assessment years, the Assessing Officer had accepted the lease / rent for 12 months accrued in that year in Assessment Year 2017-18 and assessment order passed u/s 143(3) of the Act. 10 ITA No.758/Hyd/2020 9. Besides ld.AR submitted that the Revenue has not challenged the order of the ld.CIT(A) wherein the ld.CIT(A) had deleted the user charges received by the assessee for providing the designated services to MVKPL for a period of 20 years amounting to Rs.5,24,43,405/-. It was submitted that it is the case of the Assessing Officer that such user charges received by the assessee were akin to lease premium vide Para (4.5(ii)) of the assessment order. It was submitted that once the Assessing Officer has not held the user fee of Rs.5,24,43,405/- as lease premium, therefore, the revenue cannot be said to be aggrieved as per the ground raised before the Tribunal. Further, it was submitted that the revenue is required to follow the principle of consistency and cannot be permitted to take a contrary stand to tax the entire receipt in the year under consideration as it would disturb the concluded assessments/ intimation for the subsequent Assessment Years. Further, it was submitted that once the assessee has declared the accrued amount of rental / user charges for two months in Assessment Year under consideration and further had declared remaining amount in the subsequent assessment years, then the Assessing Officer cannot be said to be aggrieved by the accounting treatment given by the assessee as it would be tax neutral. The ld.AR had also made the following submissions : “The Appellant submits that there is no ‘Premium’ or ‘Pagadi’ in the Transactions as it is only Lease rent for Land and User Fee simplicitor payable upfront. 11 ITA No.758/Hyd/2020 A copy of the Land lease rentals agreement finds a place at pages 40 to 50 in the consolidated paper book filed on 8 th July 2022 comprising of 148 pages. A perusal of Land lease agreement between the parties at Para 2 styled as scope of agreement clearly states that the appellant company has offered 44 parcels of Land for the development of the project comprising of 44 No’s of Wind Turbine Generator (WTG) of 0.58 MW each. A Perusal of clause 5 at page 45 of the paper book under the caption price, it has been clearly stated that the Mytrah Vayu (Krishna) Private Limited (MVKPL) shall pay a rent of Rs.13,12,801/- per location and for 44 Locations the aggregate amount would be Rs.5,77,63,261/ (13,12,801*44 locations). Thus, the nomenclature of the amount paid is clearly mentioned as Lease rent and not as premium. ‘Premium’ or ‘Pagadi’ is a onetime extra payment with no obligation to render any services during the Tenure of the agreement. The Land lease rental agreement is for the operational life of the project comprising of 20 years (Please see ‘Clause P’ at page 41 of the paper book). Thus what has been paid upfront as onetime payment is nothing but advance rent payment in respect of providing the land during the tenure of the Agreement and which is to be apportioned during the Tenure of the period of the Lease. Clause 8 at page 45 of the paper book deals with Termination clause at clauses 8.1 and 8.2. Thus there is an Termination clause in the agreement as the revenue department, govt of Andhra Pradesh is involved. Thus the appellant company rightly amortised the lease rent for the land towards the Tenure of the agreement. The details of which finds a place at page 130 of the paper book which covers the Land lease rentals and Power Evacuation (PE) user fee. User Fee Agreement: The User fee agreement finds a place at pages 51 to 65 and this agreement places a great onus on the Appellant company to make available the facilities required for evacuating power required from the project to the relevant grid. (Please see clause E at page 2 of the Agreement) 12 ITA No.758/Hyd/2020 The Operational life of the project covers a period of 25 years as per clause BB at printed page 5 of the agreement/ page 53 of the paper book A perusal of the agreement would clearly show that there is an obligation caste on the appellant company to provide all the facilities for evacuating power from the project to the Grid. A perusal of clause 4.3 would show the other obligation caste on the Appellant company for transmitting power from the project to the grid and this should be done for a period of 25 years. Clause 6 of the User agreement which deals with the Fee and Payments finds a place at printed page 10 of the agreement. The Terms and Conditions of the payment that it should be paid upfront and schedule 1,2 & 3 of the aforesaid contains stipulated. Schedule 1 to 8 of the user agreement which finds a place at page 62 to 65 which speaks about various terms and conditions including payment. It is the plea of the Appellant company that the payments under Land lease rentals and User fee charges for the power evacuation is nothing but advances paid and therefore cannot be treated as income as income accrues only when there is a right to receive or when there is a right to accrue and where there are stipulations and conditions attached to the accrual the income accrues only at that point of time. Applying the afore said test to both the agreements it is clearly discernible that the income accrued in each of the years are definitely not in the year of the payment. In the year of advance received nothing has been done. The entire rights for the User fee and Land lease rental fee accrues only when the parties have performed their terms of the contract. SI. No Description User Fee per WTG (in rupees) No. of WTGs Total User Fee (in Rupees) 1 Use of power evacuation facility for 37.40 MW project located at Burgula in the state of Andhra Pradesh 11,91,896 44 5, 24,43,405 2 Service Tax on above as applicable 1,47,318 44 64,82,005 Total 13,39,214 5,89,25,410 13 ITA No.758/Hyd/2020 Keeping in view the accounting standard 9 promulgated by the Institute of Chartered Accountants to be point of time of accrual and they have also introduced the concept of ‘matching concept’. i.e., to say the income and expenditure should match with the one another. If this principle is not applied one would see a distorted pictures of the financial results as in this case the assessing officer has assessed the entire receipts in the AY 2014-15 as it was paid in upfront. If all the incomes are taxed in one year what would happen in the succeeding years when the appellant company has to render services by provision of various services including the Tenure of the period there would be no income at all and only expenditure. At that point of time, will not the assessing officer disallow the entire expenditure on the ground that there is no income. This would totally distort the financial results, and this would be against statutory provisions. We would commend to your acceptance the various written submissions filed from time to time on the subject and enclosed in the paper book as to how the assessing officer was wrong in taxing the entire receipts in one year. The Assessing officer has relied on certain decisions at page 100 of the paper book S wherein a copy of the Assessment order has been placed and all these decisions deal with “Lease premium" which is not the case in the case of the Appellant thus all the decisions cited by the Assessing officer in the Assessment order are not applicable and therefore distinguishable. The Appellant wishes to bring to the notice of the Honourable Tribunal the decision of the supreme court in Madras Industrial Investment corporation limited vs CIT reported 225 ITR 802 clearly stated that in some exceptional cases it can justify the spreading of the expenditure and claiming it over a period of ensuing years. It is important to know that in the aforesaid judgement it was the Asses see who wanted spreading the expenditure over a period of time and justified the same. The court found that the Asses see would still be allowed to spread the expenditure over the entire period of time as applicable. For the supreme court in Madras Industrial Investment Corporation Limited vs CIT (supra), the supreme court referring to the order of the Tribunal to say — "The tribunal, however, held that since the entire liability to pay the discount had been incurred in the accounting year in question, the Asses see was entitled to deduct the entire amount in that accounting year. This conclusion doesn’t appear to be justified looking to the nature of the liability. It is true that the liability has been incurred in 14 ITA No.758/Hyd/2020 the accounting year, but the liability is the continuity liability which stretches over a period of 12 years. It is, therefore, a liability spread over 12 years. Ordinarily, revenue expenditure which is incurred only and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over in number of years even if the Assessee written off in his books over a period of years. However, the facts may justify an Assessee who was incurred the expenditure in a particular year to spread and claim over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of the year. Thus, in the case of Hindustan Aluminium corporation ltd vs CIT reported in 144 ITR 474 Calcutta, the Calcutta high court upheld the claim of the asses see to spread out a lumpsum payment to secure technical assistance and training for a number of years and allowed a proportionate deduction in the accounting year in the question. Recently, the Kerala high court in Commissioner of Income Tax cochin Vs Apollo Tyres reported in 447 ITR page 377, the Kerala high court while referring to the judgement of supreme court in madras industrial investment corporation limited vs CIT (supra) upheld the write off of discount on issue of debentures over a long period of time. [Order copy of Kerala High Court Enclosed] Having regard to the facts stated above yet an another issue which is worthy of consideration and which has been upheld by the supreme court and high court is of the question relating to taxability when the rate of tax is the same and being a company is definitely the rate is the same and whether the income is taxed on one year or spread over number of years would be Tax Neutral. The following decisions dealing with rate of tax being the same and tax effect being neutral is relied upon: SI. No Name of the case Court Citation Remarks 1 C.I.T. vs. Excel Industries Ltd Supreme Court 358 295(SC) 2 Pr.C.I.T. vs. Rajesh Prakash Timblo Bombay High Court 415 334(Bombay) C.I.T. vs. Gujarat State Forest Development Gujarat 288 28(Gujarat) 4 C.1.T. vs. Triveni E ngg. & Industr ieS Ltd Delhi 336 374(Delhi) S C.I.T. vs. Nagri Mills Co. Ltd Bombay 33 681(SC) 6 C.I.T. vs. Aditya Builders Bombay 378 75(Bombay) 7 Berger Paints India Ltd vs. C.I T. Supreme Court 266 99(SC) 15 ITA No.758/Hyd/2020 Reliance is also placed on the decision of Hyderabad B bench of the Tribunal reported in 90 ITD 814 in the case of Treasure Island resorts private limited vs Deputy commissioner of Income Tax reported in 90 ITD 814 which finds a place at page 48 to 56 of the precedence paper book filed on 28/12/2022, relating to time recently the Telangana High Court in Mylan Laboratories held that the co-ordinate bench decision was binding and was to be followed. (Enclosed].” 10. We have heard the rival submissions and perused the material on record. From the perusal of the assessment order, it is the case of the Assessing Officer that the assessee had received an amount of Rs.5,14,09,096/- towards the lease of the land entered between the assessee with MVKPL. The Assessing Officer had referred to the agreement for land dt.22.02.2013 whereby the assessee was obliged to provide 44 parcels of land admeasuring 0.8 acres per each for the purpose of setting up of wind farm. The Assessing Officer after referring to clauses 5.1 and 5.2 had concluded that the initial amount received by the assessee was not the advance lease rental but was in the nature of lease premium. For appreciating the facts of the present case, it is relevant to extract some of the important stipulations of the agreements entered by the parties dt.22.02.2013 which are as under : “2.1 Pursuant to understanding between the parties, MWDPL has offered 44 parcel of land (Location) for the development of Project (44 Nos. of WTG of 0.85 MW each). The Parties acknowledge that the minimum area requires for each Location shall be 0.89 Acre. 2.3 The Parties have agreed upon 44 number of parcels of land and co- ordinates specified in Schedule 1 on which the WTGs comprising the Project shall be installed (these parcels of land and co-ordinates are collectively referred to as the "Locations"). The Parties acknowledge that the Locations are situated on Revenue Lands. MWDPL therefore agrees to 16 ITA No.758/Hyd/2020 provide appropriate permissions or sanctions from the competent authority and execute Transfer of Lease/Sub—Lease deed in favour of the company with respect to the locations: 2.3.1 The parcels of lands (0.89 Acre) shall be made available through Transfer of Lease / Sub-lease to company, as per prevailing AP Govt. Revenue Land policy. 2.3.2 MWDPL shall submit necessary permissions from the competent authority on each parcel of land along with supporting documents to the company in respect of such Locations. MWDPL shall furnish any additional information and documents if required MWDPL by the company. 2.3.3 MWDPL shall process for getting the requisite permission from the competent authority for the Transfer of Lease/Sub-Lease Deed in favour of the Company, and shall get the Transfer of Lease/Sub-Lease Deed executed in favour of the Company from Revenue Department, Govt. of Andhra Pradesh. 3.2 Each Party represents to the other Party that: it has the requisite power and has been duly authorized to execute and consummate the transactions contemplated pursuant to this,.. 3.2.2 it is not insolvent nor has any insolvency proceedings been instituted, threatened or pending against it. 3.2.3 there are no actions, suits, claims, court orders, arbitration, judgments or decrees that materially affect compliance of the Agreement by such Party; and 3.2.4 it has neither made any statements nor provided any such information, which is materially inaccurate or misleading at the time of entering into the Agreement. 4.2 Stamp Duty MWDPL shall bear the applicable stamp duty, registration charges and other costs and expenses incidental to the registration of the Transfer of Lease I Sub lease deed and this Agreement. 5. PRICE 51:The Company shall pay the rent at the rate of Rs. 5,77,63,261 (Rupees Five Crores Seventy Seven Lakhs Sixty Three Thousand Two Hundred Sixty One Only) i.e. 13,12,801/- (Rupees Thirteen Lakhs Twelve 17 ITA No.758/Hyd/2020 Thousand Eight Hundred and One Only) per location ("Consolidated Lease Rent"). The Lease Rent shall be inclusive of all applicable taxes and paid in accordance with the payment terms set out in Schedule 3 and as per the covenants of the Lease Deed. In addition to the Consideration, the Company agrees to pay to MWDPL / the relevant Government Authority the statutory charges as and when levied and requisitioned by such relevant Government Authority. 5.2 The Parties acknowledge that the Consideration mentioned in Clause 5.1 includes all payments by the Company to MWDPL towards Transfer of Lease / Sub — lease, as the case may be, of the Location. 5.3 It is clarified that subsequent to execution of the Transfer of Lease/ Sub-Lease Deeds between Government and the Company, the Company shall be liable to pay any amounts payable with respect to the Locations, to the relevant Government Authority as required under Applicable Law. 5.4 The Consideration is inclusive of stamp duties, registration charges and Service Tax, as applicable as on the date of this Agreement, required for execution of Transfer of Lease/Sub-Lease Deed in favor the Company, However exclusive of levies, taxes (except service tax), duties etc. payable as on the date of this Agreement. However, any increase in duties, taxes, levies, etc. or in case of introduction of any new duties, levies, taxes, such as GST shall be payable by the Company. 6.1 Parties acknowledge that Company is entitle to levy damages on MWDPL at its sole discretion, in the event of a delay of 5 months beyond Scheduled Lease Date or before Commissioning date, whichever is earlier, in providing the grant of land, if such delay is caused due to reasons solely attributable to MWDPL. 6.2 If the delay caused is solely attributable to MWDPL, Company is entitled and MWDPL is liable to pay the following liquidated damages, which are a genuine pre-estimate of damages that may be caused to MWDPL. 6.3 Liquidated Damages of 0.25% of annual Consideration per un- granted Location per week for delay providing the land beyond the Scheduled Lease Date, subject to a maximum of 2.5% of annual Consideration, in respect of such individual un-granted Location. 8. TERMINATION 8.1 The Company shall be entitled to terminate this Agreement if Transfer of Lease/Sub Lease Deeds between the Company and the Revenue Department, Govt of Andhra Pradesh in relation to the Locations identified 18 ITA No.758/Hyd/2020 for the development of Project are not executed and registered as per provisions of clause 2.3.3 and 2.3.4, as the case may be, or such other date as mutually agreed between the Parties. 8.2 In the event the Company does not accept the Project or part thereof in accordance with the provisions of any of its orders, then the Locations constituting unaccepted Project shall be transferred back by the Company to MWDPL upon MWDPL refunding the pro-rata Purchase Consideration to the Company representing the sums paid by the Company for the Locations constituting the unaccepted Project. 9. Execution of transfer of lease / sub-lease deed. MWDPL shall in furtherance and implementation of the agreement, execute the transfer of lease / sub-lease Deeds in relation to the locations and such Transfer of Lease / Sub-Lease Deeds are registered on the terms and conditions as stipulated herein and such other terms that are customary to a transaction of this nature.” 11. From the perusal of the various clauses of the agreement, it is abundantly clear that – a) that the assessee was duty bound to make available 44 parcels of land for the purpose of installing the wind farm at the location forming part of the agreement. b) the assessee was under an obligation to provide appropriate permission for sanction from the competent authority and execute transfer of lease / sub-lease in favour of MVKPL. c) The assessee was to bear stamp duty, registration charges and other costs incidental to registration of lease / sub-lease in favour of MVKPL. 19 ITA No.758/Hyd/2020 d) The agreement has provided per location lease / rent of Rs.13,12,801/- for a period of 20 years. e) The amount / consideration mentioned in clause 5.1 was towards transfer of lease / sub-lease of the location. f) The assessee was obliged to bear the cost of stamp duty and registration . g) The assessee was liable to pay the damages to MVKPL in case the assessee failed to provide the land / location within the time provided under the agreement vide clause 6. h) The MVKPL can terminate the agreement if the assessee failed to execute the transfer of lease / sub- lease in its favour. 12. The reading of the clauses reproduced hereinabove and also the other conditions mentioned in the agreement, it is clear that the agreement entered between the assessee and MVKPL was nothing but an agreement to enter into 44 lease for 44 locations for a consolidated rent of Rs.5,77,63,261/- (Rs.5,14,09,096/- + TDS). It is not the case of the revenue that the assessee has not transferred the lease / sub-lease in favour of MVKPL for a period of 20 years and such lease/ sublease were not registered thereafter. Undoubtedly, the assessee was under obligation to provide the land for a period of 20 years, and obliged such pieces of land continued to be available for the purpose of setting up of wind farm. The only reason provided by the Assessing Officer in 20 ITA No.758/Hyd/2020 his order is that the assessee in clause 5.1 had quantified the stipulated rent based on per location for Rs.13,12,801/-. We cannot approve the approach of Assessing Officer as, the Assessing Officer cannot read the clause in isolation by ignoring the other stipulations of the agreement. Undoubtedly, per location rent has been provided in the agreement but at the same time agreement also stipulates the other conditions like execution of sublease/ lease, registration of lease, termination of agreement, payment of damages etc, which in our view proves the real character of the agreement and upward sum received by the assessee . One of the possible reasons for providing the location wise rental, could be in our opinion, was to adjudicate the claim of damages from the assessee, in case the assessee failed to provide the location within the location / land beyond the schedule date of the agreement. For the above said inference, we draw support from clause 6.3 of the agreement, which provides as under : “6.3. Liquidated Damages of 0.25% of annual Consideration per un- granted Location per week for delay providing the land beyond the Scheduled Lease Date, subject to a maximum of 2.5% of annual Consideration, in respect of such individual un-granted Location.” 13. Further, it is the consistent case of the Assessing Officer that the “term” for providing the land was 20 years and for that the assessee was obliged to transfer the lease / sub-lease in favour of MVKPL. In fact, the Assessing Officer has not contradicted that no agreement in the form of lease / sub-lease were entered between the assessee / MVKPL pursuant to agreement. Further nothing has been brought on the record by the 21 ITA No.758/Hyd/2020 Revenue in support of its contention that the amount received by it was in the nature of lease premium. 14. In our view, once the agreement is terminable by the parties before the lapse of the term of agreement, than it can not be concluded that the MVKPL will have a perpetual right to use the land for a term of 20 years based on initial amount paid towards the lease rent. Both the parties can terminate the agreement as per the termination clause. Once the parties entered into lease / sub-lease based on the basis of agreement dt.22.02.2013, then the lease rent shall accrue in favour of the assessee after the due date as per the Transfer Of Property Act. Further, if we look into the balance-sheet of the assessee, it is clear that the assessee had shown an amount of Rs.1,79,400/- towards the lease payment (page 15 of the paper book) as against the revenue of Rs.5,54,828/- (revenue from operation – page 4 of the paper book.) from the lease receipts from MVKPL. Note 20 at page 15 of the paper book provides as under : “Leases: Lease payments made under operating leases aggregating Rs.1,79,400/- (Previous year : Nil) have been recognised as an expense in the statement of profit and loss.” 15. The revenue had neither disputed the term of lease nor it had disputed that sublease/ lease rental of Rs.1,79,400/-was not paid by the assessee. The Special Bench in the case of Mahindra Holiday Resorts had elaborately discussed the concept of accrual 22 ITA No.758/Hyd/2020 in Paras 23 to 30 and had held that when there is a present obligation on account of the past events, which results in an outflow of revenue from the said enterprises resources embodying economic benefit than corresponding income is required to be taxed in that year. In the present case, there is an obligation on the assessee to continue to provide the lease property for a period of 20 years, in case of failure of the assessee to provide the lease land uninterrupted for that year, then the assessee shall be liable to pay the damages as contemplated in the agreement and further can suffer termination as well. In our view, the pro rata income for two months would only accrue to the assessee in the assessment year as assessee had only provided the lease land / sub-lease land to the other party for this period only. The additional amount received by the assessee beyond the rent of two months would accrue in subsequent years, when the land was used by the other party, without termination of lease, therefore the balance amount will be in the nature of advance as has been mentioned by the assessee in its profit and loss account wherein this amount along with other amount, amounting to Rs.10,32,97,673/- has been reflected as deferred revenue under other current liabilities. The principle of deferred revenue has been recognized by the Special Bench in the case of Mahindra Holidays and Resorts Limited reported in 2010 39 SOT 438 and also in the case of Treasure Island Resorts Pvt. Ltd (supra). Further the Kolkata Tribunal in the case of Alankar Slimming & Cosmetics Clinic Pvt. Ltd. Vs. ITO, Ward 1(7), Kolkata reported in [2018] 94 taxmann.com 11 (Kolkata - Trib.)/ [2018] 171 ITD 1 23 ITA No.758/Hyd/2020 (Kolkata - Trib.)[15-05- 2018] relying upon the Mahindra Holidays and Resorts Limited (supra) had held as under :- “4. We have heard the rival submissions. The facts stated herein above remain undisputed and hence are not reiterated for the sake of brevity. It is not in dispute that the subject mentioned receipt of Rs.22,00,000/- is a revenue receipt. The only dispute is that whether the entire Rs.22,00,000/- accrued as income to the assessee during the year itself or it is to be spread over a period of five years. We have perused the copy of the subject mentioned agreements in lieu of which the assessee received consideration of Rs.22,00,000/-. These agreements are enclosed from pages 15 to 46 of the paper book. From the perusal of the various clauses of the agreement we find that this agreement is valid for a period of five years and the assessee has to carry on certain activities through out the period of five years by taking participation into management of business affairs of the vibes clinic among other responsibilities as enumerated (supra). Hence in our considered opinion, the assessee is justified in deferring the income of Rs.22,00,000/-over a period of five years i.e. tenor of the agreement. We also take assistance from the Special Bench decision of Chennai Bench in the case of Asstt. CIT v. Mahindra Holidays and Resorts India Ltd. [2010] 39 SOT 438 to 2002-03 dated 26.05.2010 wherein it was held that the amount of timeshare receivable by the assessee upfront at the time of enrolment of a member is not the income chargeable to tax in the initial year on account of contractual obligation that is fastened to the receipt to provide services in future over a term of contract. We hold that the principle of deferment of revenue recognition has been upheld by the Special Bench of Chennai Tribunal (supra). We also find from the AS-9 of revenue recognition issued by ICAI in para-8 as under :— "8. The Use by Others of Enterprise Resources Yielding Interest, Royalties and Dividends 8.1 The use by others of such enterprise resources gives rise to : (i) interest - charges for the use of cash resources or amounts due to the enterprise ; (ii) royalties - charges for the use of such assets as know-how, patents, trade mark and copyrights; 24 ITA No.758/Hyd/2020 (iii) dividends - rewards from the holding of investments in shares. 8.2 Interest accrues, in most circumstances, on the time basis determined by the amount outstanding and the rate applicable. Usually, discount or premium on debt securities held is treated as though it were accruing over the period to maturity. 8.3 Royalties accrue in accordance with the terms of the relevant agreement and are usually recognized on that basis unless, having regard to the substance of the transactions, it is more appropriate to recognize revenue on some other systematic and rational basis. 8.4 Dividends from investments in shares are not recognized in the statement of profit and loss until a right to receive payment is established. 8.5 When interest, royalties and dividends from foreign countries require exchange permission and uncertainty in remittance is anticipated, revenue recognition may need to be postponed." 4.1 We find that the relevant clause relied upon by the ld. AO from AS-9 on revenue recognition pertains to the sale of goods where the risk and reward incidental to the ownership of the product has been transferred by the seller to the buyer. But in the instant case, the assessee has not made any sale of goods instead it only received a consideration in the form of royalty for enabling the usage of its trade mark " Vibes". Hence as per the revenue recognition prescribed under AS-9 of ICAI in respect of royalties supra, the same has to be recognized only over the validity of tenure of the agreement which has been rightly done by the assessee. Hence we have no hesitation to direct the ld. AO to delete the addition in the sum of Rs.20,08,334/-. The grounds raised by the assessee are allowed. 16. In view of the above, the ground raised by the revenue is required to be dismissed. However, at this stage, we may also like to point out that the Revenue has accepted the method of accounting treatment adopted by the assessee by following the accounting standard in the subsequent assessment years for A.Y. 2018-19 wherein the assessee had shown the long term liabilities 25 ITA No.758/Hyd/2020 in its balance-sheet to an extent of Rs.5,20,40,816/-as other liabilities. The assessment order is passed by the Assessing Officer under section 143(3) of the Act on 29.01.2019 by accepting the return of income. Further, the revenue for A.Y. 2020-21 had also processed the return of income and had granted the similar benefit to the assessee. In our view, though, the principle of consistency is not strictly applicable, however, the conduct of the Revenue clearly shows that in subsequent assessment years, the Revenue had accepted the accounting method of the assessee, whereby the assessee had shown the lease rent on accrual basis. If we accept the argument of revenue, than it will have spinning effect on already concluded assessment. On this account also, the ground of the Revenue is liable to be dismissed. 17. We may also point out that the only quarrel in this matter is whether the amount received by the assessee is required to be taxed in A.Y.2014-15 or it is to be spread over in the subsequent assessment years when the assessee continued to provide the lase / sub-lease of the land to the other party. In our view, whether it is to be taxed in 2014-15 or in other subsequent assessment years the tax is neutral, as the same rate of tax would be applicable in the subsequent assessment years. For the foregoing reasons mentioned in preceding paragraphs , we do not find any merit in the submissions of the ld.DR and accordingly, the ground raised by Revenue is dismissed. 26 ITA No.758/Hyd/2020 18. The Assessing Officer, in his order as mentioned hereinabove had also treated the “User Fees” of Rs.5,24,43,405/- as a single time payment and therefore, is required to be taxed in the A.Y. 2014-15. The Assessing Officer had treated the lumpsum payment for power evacuation facilities akin to the lease premium and had held to be taxable in the assessment year 2014-15. The ld.CIT(A) had deleted the above said addition made by the Assessing Officer and the finding of the ld.CIT(A) has already been reproduced in the preceding paragraph, for the sake of brevity we are not mentioning herein. In this regard, we have examined the ground of appeal from the record. From perusal of the grounds of appeal and the order passed by the Assessing Officer and the ld.CIT(A), it is not descendible that the ground raised by the Revenue is relatable or arises out of the order passed by the ld.CIT(A). As the grounds of appeal is not relatable to the user charges received by the assessee, the appeal of the Revenue is bound to be dismissed on this ground only. 18.1 However, for the completeness, we are dealing with various contractual obligations of the assessee as per User Agreement dt.29.02.2013. The obligations of the assessee are mentioned in clauses 4.1 to 4.33 and regarding Damages vide clause 11 are provided at pages 54, 55 and 57 of the paper book, which are to the following effect : 27 ITA No.758/Hyd/2020 “4.1 MWDPL's General Obligations 4.1.1 MWDPL must, on and from the effective date, perform its obligations under this Agreement in order to complete the Common Facilities Works to set up the common facilities works to set up the common facilities; and 4.1.2. MWDPL makes available for the Company the Common Facilities for the evacuation of power generated from the Project to the Grid and to perform its obligations in relation to the Common Facilities. 4.1.3 MWDPL must, on and from the Commencement Date make available for the Company a nonexclusive access arid unrestricted right to use the Common Facilities wherever applicable, for the Term. 4.2 Performance of the Common Facilities As part of performance of its obIiga0oris under the Agreement, MWDPL represents and warrants that: 4.2.1 The Common Facilities shall during the Term be free from any Defect, in accordance with the Applicable Law, applicable safety standards and shall be suitable for the evacuation of energy generated by the Project to the Grid. However, it is further clarified that in the event a change in the Common Facilities is required to be made due to s change in Applicable Law or a directive horn a statutory authority or a licensee under the Electricity Act, 2003 file costs of such change to the Common Fact litres shall be borne by the Company; 4.2.2. it has as of the date hereof and on end from the Commencement Date, procured an d maintained tire Government Approvals required for the establishment of the Common Facilities during the Term; 4.2.3. it shall not during the Term, through itself or its Personnel, do any acts or omissions in the Common Facilities which will adversely affect the Project; 4.2.4. for and during the Term, provide the Company wherever applicable, with unrestricted and unhindered right of use and access to the Common Facilities to enable it to operate and maintain the common facilities; 4.2.5 it shall have engaged services of all necessary, skilled and experienced supervisors, engineers, designers, and other personnel in setting up the Common Facilities and in performing its obligations under this Agreement; 28 ITA No.758/Hyd/2020 4.2.6 if required by any Government Authority, appear through its authorized officer in the office of any Government Authority or any other office in connection with anything or matter related to the Common Facilities; 4.2.7 provide the Company’s Representative arid/oi Company‘s engineer with all such assistance, including non- exclusive access wherever applicable, to Common Facilities in order for the Company‘s Representative and/or Company’s engineer to undertake inspection of the Common Facilities during office hours as the Company may reasonably require for the Term; 4.2.8 it shall pay and satisfy or cause to be paid, settled arid/or satisfied all proper Invoices and claims of any subcontractor engaged by MWDPL in connection with the development of the common facilities; 4.2.9 it shall during the Term take such measures as may be reasonably necessary to ensure that its performance in relation to the Common Facilities does not interfere with feral traffic in the vicinity of the site and where such interference is unavoidable shall make such arrangements as may be reasonably required to minimize the effect of such interference; 4.2.10 upon obtaining knowledge thereof, promptly notify the Company verbally (with notice to follow within five (5) working days of any emergency or hazardous condition or occurrence that in any way affects, or could affect, the safe operation of the Common Facilities and the safety of Personnel at the Common Facilities or the Site for the Term; 4.2.11 MWDPL, either owns o* has current rights to use or license all Intellectual Property Rights embodied in or used in relation to the Common Facilities hereunder, any documents provided by MWDPL to the Company under or in correction with this Agreement and that such rights to use or license does not violate or infringe any third party Intellectual Property Rights; 4.2.12 the Company's non-exclusive right wherever applicable, to use the Common Facilities shall not be affected by any act or omission of MWDPL, or by the fact that the Common Facilities is a shared facility to be also used by other investors; 4.2.13 The Common Facilities will be made available to the Company, except fit the case of transfer of such Common Facilities in accordance with Clause 10 herein. Once the Common Facilities are transferred to the relevant Government Authority in accordance to Clause 10, MWDPL jointly with the Company, shall use its best endeavours to persuade the 29 ITA No.758/Hyd/2020 relevant Government Authority to allow the Company to use such infrastructure forming part of the Common Facilities for evacuation of power from the Project for the Term; 4.2.14 it acknowledges and is aware that Company has relied on the Technical Specifications for the Common Facilities as approved by relevant Government Authority provided by MWDPL (attached hereto as Schedule 4) in evaluating the technical feasibility of the Project. MWDPL may at any time during the Term, carry out changes to the Technical Specifications for the Common Facilities as per the instructioris and/or requirements of Government Authority, however, MWDPL shall during the Term ensure that the Services shall not be obstructed due to such change in the Technical Specifications; and 4.2.15 all the information and data in relation to the Common Facilities provided by it to the Company under this Agreement, except any third party information, is complete, true and accurate in all respects. Third party information provided by MWDPL to the Company further to this Agreement shall be to the Best of Knowledge of MWDW 4.3 Other Obligations of MWDPL 4.3.1 During the Term. MWDPL shall ensure that the Common Facilities designed and developed by MWDPL for transmitting power from the Project to the Grid must be Lee from any Defect and shall remain stable while providing the Services in accordance with the Technical Specifica0oris, provided in the approval letter issues by relevant Government Authority or APRRC and make the Common Facilities available for the use by the Company. 4.3.2 MWDPL shall submit the following documents to the Company for the verification of the Common Facilities: 4.3.2.1 approval from the relevant Government Authority or the electricity board of the state of Andhra Pradesh (“EB”), as the case may be, for evacuation of power and connectivity to the Grid; 4.3.2.2 map of the Grid as published by the relevant Government Authority; 4.3.2.3 single line diagram showing the power how from the Project to the Grid; 4.3.2.4 detailed report on load flow study conducted by Power Research fi Development Consultants Private Limited, Bangalore or as equivalent agency, during peak wind season and after considering future generating stations in the vicinity of the Site; 30 ITA No.758/Hyd/2020 4.3.2.5 the as-built drawings of the Common Facilities; and 4.3.2.6 copies of approval from CEIG and certificate of charging for the bay extension and transformers. 4.3.3 In addition to the above, MWDPL shall provide the documents listed in Schedule 7. 5. OBLIGATION OF COMPANY 5.1 The Company shall comply with all government formalities as may be prescribed from time to time by any of the concerned Government Agencies. The Company shall also submit any document as may be required/ requested by any of the concerned Government Agencies. 5.2 The Company shall make timely payments to MWDPL as provided under this Agreement without any delay. 5.3. In case of a directive in future from a Government Authority the Company is required to make any payments to such Government Authority in relation to the Common Facilities the Company shall promptly make such payments. 5.4. The Company shall if required by any Government Authority, appear through its authorized officer in the office of any Government Authority or any other office in connection with anything or matter related to the Common Facilities. Clause 11 Damages. 11.1. J Parties acknowledge that Company is entitle to levy damages on MWDPL at its sole discretion, in the event of a delay of 5 months beyond Scheduled Facilitation Date or before Commissioning date, whichever is earlier, in providing the Common Facilities, if such delay is caused due to reasons solely attributable to MWDPL. 11.2 If the delay caused is solely attributable to MWDPL, Company is entitled and MWDPL is liable to pay the following liquidated damages, which are a genuine pre- estimate of damages that may be caused to MWDPL. 11.3 Liquidated Damages of 0.25% of annual User Fee per week for delay in providing the Common Facilities beyond the Scheduled Facilitation Date, subject to a maximum of 2.5% of annual user fee. 31 ITA No.758/Hyd/2020 11.4 Notwithstanding anything to the contrary contained in this Agreement, the maximum overall liability of MWDPL, alone or in the aggregate, including any Claims or Loss in connection with the Scope of this Agreement arising or occasioned howsoever hereunder, whether in contract, tort, strict liability, indemnification or any other legal theory, shall not exceed 5 'f« of annual User Fee.” 19. From the perusal of the various clauses reproduced hereinabove, it is abundantly clear that the assessee was under a contractual obligation to provide the evacuation facilities / common facilities to the company for a period of 25 years for which the assessee had received the payment of Rs.5,24,43,405/-. Thus, though the assessee has received upfront payment for providing the user facilities, however these facilities are required to be provided for a period of next 25 years. Thus, applying the same principle of incurring the present obligations on the basis of the past events, the assessee was required to incur the expenditure for providing the user facility in the subsequent assessment years and hence there would be an outflow of the revenue, therefore, the assessee was right in showing the matching income for the said period by evenly spreading the income in the subsequent assessment years when the corresponding obligation on assessee would be discharged by the assessee. 19.1. Furthermore, in clause 11 at Page 13 of the paper book, the assessee was liable to pay liquidated damages to the other party, in case the assessee failed to provide earmarked services as per the agreement, to MVKPL. Thus, in our view, the order passed by the ld.CIT(A) allowing the ground of revenue is in 32 ITA No.758/Hyd/2020 accordance with the law. In our view, all the receipts received by the assessee were not in the nature of income unless it complies the provisions of section 4 of the I.T. Act, 1961. The amount received by the assessee will only partake the character of the income when it is accrued or arise to the assessee. In the present case, the income only accrued to the assessee for the period for which the services were rendered and will not accrue to the assessee for subsequent periods for which the assessee was obliged to render the services in subsequent assessment years. We may also mention that the revenue had accepted the accounting policy of the assessee for the subsequent assessment year and had accepted the return of income filed for A.Y. 2017-18 by passing assessment order u/s 143(3) of the Act. In view of the above discussion, we find no merit in the appeal of Revenue and accordingly, the appeal of Revenue is dismissed. 20. In the result, the appeal of Revenue is dismissed. Order pronounced in the Open Court on 05 th January, 2023. Sd/- Sd/- (RAMA KANTA PANDA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 5 th January, 2023. TYNM/SPS 33 ITA No.758/Hyd/2020 Copy to: S.No Addresses 1 M/s. Mytrah Wind Developers Private Limited, Gachibowli, 8001, 8 th Floor, Q-City, Nanakramguda, Gachibowli, Hyderabad – 500032. 2 Income Tax Officer, Ward – 16(3), Hyderabad. 3 Commissioner of Income Tax (Appeals) – 4, Hyderabad. 4 Pr.CIT – 4, Hyderabad. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order