The commissioner of Income Tax IV V. M/s Lanco Kondapalli Power (P) Ltd

ITTA/121/2013

AI Insights

The case involves the Commissioner of Income Tax-IV, Hyderabad, as the appellant, and M/s. Lanco Kondapalli Power Pvt. Ltd., Hyderabad, as the respondent. The dispute centered on the assessment year 2006-07, concerning the addition of Rs.5,06,40,000 to the assessee's income, which was allegedly reimbursable by AP TRANSCO and was under dispute pending arbitration. The Tribunal had deleted this addition, leading to the appeal by the Commissioner of Income Tax. The main legal questions revolved around the correctness of the Tribunal's decision in light of the disputed nature of the amount and its accounting treatment under the relevant standards.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 719102 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 26-07-2013
• Assessment Year: misc
• Other Referred Cases: Godhra Electricity Company Ltd. vs. CIT, DCIT vs. Sri Balaji Bio Mass Power P. Ltd.
• Laws Referred To: Income Tax Act, Accounting Standard-9
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Accounting Standard; Accrual of income; Arbitration; Disputed amount; Income Tax
• Section: 225 ITR 746

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE K.C BHANU I.T.T.A. No. 121 OF 2013 DATED: 26.7.2013 Between: The Commissioner of Income Tax-IV, Hyderabad. … Appellant And M/s. Lanco Kondapalli Power Pvt. Ltd., Hyderabad. … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE K.C BHANU I.T.T.A. No. 121 of 2013 Judgment: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is preferred against the judgment and order of the learned Tribunal in relation to assessment year 2006-07 and is sought to be admitted on the following suggested questions of law: 1) Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in deleting the addition of Rs.5,06,40,000/- being the tax paid by the assessee and reimbursable by the AP TRANSCO ? 2) Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in deleting the addition of Rs.5,06,40,000/- on the ground that amount is disputed and the dispute is yet to be resolved by the Arbitrator ? 3) Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in relying on the Accounting Standard-9 issued by the ICAI which has not been approved by the Central Government ? We have heard the learned counsel for the appellant and have gone through the impugned judgment and order. From a perusal of the impugned judgment and order in relation to the aforesaid suggested questions, we find that the learned Tribunal has come to a fact finding that the amount which has been deleted is subject matter of arbitration. But, it appears, although the assessee has raised a bill, in his books of account, he has not shown that the said amount has been received by way of income. When the dispute is pending, there cannot be a crystalisation of the dues. Unless the dues are crystallized by the arbitration, there cannot be any accrual of income in any sense. The learned Tribunal has relied on a judgment of the Supreme Court in the case of Godhra Electricity Company Ltd., vs. CIT reported in 225 ITR 746 and also relied on its earlier decision dated 31.1.2011 in the case of DCIT vs. Sri Balaji Bio Mass Power P. Ltd., rendered in I.T.A. No. 1748/Hyd/2008. In view of the aforesaid settled position of law, we do not find any element of law is involved in this matter. We quote what the Supreme Court has decided in a situation like this in the case of Godhra Electricity Company. “Income-tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt. But the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialize.” The Supreme Court has held in the aforesaid decision that even in extreme cases, where in the books of account such income has been hypothetically shown, it does not materialize. But, in this case, in the books of account, such income has not been accrued at all and the alleged dues are pending adjudication before the Tribunal. The appeal is accordingly dismissed. ________________________ K.J. SENGUPTA, CJ ______________________ K.C. BHANU, J 26.07.2013 pnb "