Principal Commissioner Of Income Tax, Hisar v. M/S Dakshin Haryana Bijli Vitran Nigam Ltd., Hisar

ITA-295-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-295-2018 (O&M) Date of Decision: 29.11.2018 Principal Commissioner of Income Tax, Hisar Versus ....Appellant. M/s Dakshin Haryana Bijli Vitran Nigam Ltd., Hisar ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Yogesh Putney, Sr. Standing Counsel for the appellant. *** AJAY KUMAR MITTAL, J. 1.This appeal has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order dated16.1.2018 (Annexure A-3) passed by the Income Tax Appellate Tribunal,Delhi Bench 'B', New Delhi (hereinafter referred to as “the Tribunal”) inITA No. 5743/DEL/2014, for the assessment year 2005-06, claiming thefollowing substantial questions of law:- a)Whether on the facts and in the circumstances ofthe case, the Ld. ITAT was right in dismissing theRevenue's appeal, upholding the order of theCommissioner of Income Tax (Appeals) wherebyhe has deleted the addition of ` 1,95,95,85,359/-made by the Assessing Officer on account of non-inclusion of “surcharge levied on electricity bills,the case, the Ld. ITAT was right in dismissing theRevenue's appeal, upholding the order of theCommissioner of Income Tax (Appeals) wherebyhe has deleted the addition of ` 1,95,95,85,359/-made by the Assessing Officer on account of non-inclusion of “surcharge levied on electricity bills, yet not realized during the year” in its total incomeeven though the Respondent Assessee hasregularly been following the mercantile system ofaccounting? b)Whether on the facts and in the circumstances ofthe case, the Ld. ITAT was right in deleting theabove addition, ignoring the fact that theconsumers have not challenged such levy ofsurcharge and thus right to receive the surchargehas matured? c) Whether on the facts and in the circumstances ofthe case, the Ld. ITAT was right in deleting theabove addition holding that the Hon'ble HighCourt has decided the issue in favour of theRespondent Assessee in the Assessee's own case,ignoring the fact that the issue has still not attainedthe finality, as the Revenue is in appeal on theissue before the Hon'ble Supreme Court in theAssessee's own case for the AY 2006-07, which isstill pending? 2.Put shortly, the facts necessary for adjudication of the instantappeal as narrated therein may be noticed. The assessee is purchasing theelectricity from M/s Haryana Power Generation Corporation Ltd. anddistributing the same to the consumers at the rate fixed by the HaryanaElectricity Regulatory Commission (in short “the Commission”). Theassessee filed its return of income on 31.10.2005 by declaring a loss of ITA-295-2018 -3- 2.Put shortly, the facts necessary for adjudication of the instantappeal as narrated therein may be noticed. The assessee is purchasing theelectricity from M/s Haryana Power Generation Corporation Ltd. anddistributing the same to the consumers at the rate fixed by the HaryanaElectricity Regulatory Commission (in short “the Commission”). Theassessee filed its return of income on 31.10.2005 by declaring a loss of ITA-295-2018 -3- ` 163,32,42,391/- for the assessment year 2005-06. The said return wasprocessed under Section 143(1) of the Act on 11.10.2006. The assessee alsofiled a revised return of income on 18.10.2006 by declaring a loss of `222,90,10,540/- and the said return was processed under Section 143(1) ofthe Act on 28.12.2006. Thereafter, the assessee filed revised return ofincome on 22.3.2007 by declaring a loss of ` 124,33,57,290/- which wasalso processed under Section 143(1) of the Act on 30.3.2007. TheAssessing Officer vide order dated 19.11.2007 framed the assessment underSection 143(3) of the Act at a returned loss of ` 124,33,57,290/- andallowed to carry forward the unabsorbed business loss and depreciation.Subsequently, the proceedings under Section 147 of the Act were initiatedand a notice dated 9.3.2012 under Section 148 of the Act was issued to theassessee. The Assessing Officer vide order dated 4.2.2013 (Annexure A-1)passed under Section 143(3) read with Section 147 of the Act made theaddition of ` 195,95,85,839/- on account of 'surcharge levied but notrealized' as the assessee was following the mercantile system of accounting.It was noticed by the Assessing Officer that the assessee was charging thesurcharge on delay payment of bill. The surcharge was charged and billedas part of single bill along with electricity dues. However, the assessee wasnot accounting the surcharge as a part of income on the ground that itsrecovery was not definite. Feeling aggrieved by the order, Annexure A-1,the assessee filed an appeal before the Commissioner of Income Tax(Appeals) [for brevity “the CIT(A)”]. The CIT(A) vide order dated11.8.2014 (Annexure A-2) allowed the appeal and deleted the additionmade on account of 'surcharge levied but not realized' by following itsGURBACHAN SINGHearlier orders dated 6.11.2009, 3.1.2011, 11.8.2011 and 4.10.2011 for the2018.12.07 11:00I attest to the accuracy andintegrity of this document ITA-295-2018-4- assessment years 2006-07 to 2009-10 and that of the Tribunal's ordersdated 30.11.2011, 27.6.2012 and 10.2.2012 for the assessment years 2006-07 to 2008-09. Against the order, Annexure A-2, the revenue filed an appealwhereas the assessee filed cross-objections before the Tribunal. TheTribunal vide order dated 16.1.2018 (Annexure A-3) affirmed the order,Annexure A-2, of the CIT(A) and dismissed the appeal as well as the crossobjections by relying upon the decision of this Court in ITA-209-2014 (TheCommissioner of Income Tax, Hisat v. Dakshin Haryana Bijli VitranNigam Ltd., Hisar) decided on 1.10.2014. Against the order dated1.10.2014, SLP-9961-2015 filed by the revenue is also pending before theSupreme Court. Hence, the present appeal by the revenue. 3.We have heard learned counsel for the appellant and perusedthe paper-book with his assistance. 4.The question that arises in this appeal is 'whether surcharge fordelayed payment' contemplated in the bills raised by the assessee and itsaccounts, would invite payment of tax dehors recovery/payment/receipt ofsurcharge? 3.We have heard learned counsel for the appellant and perusedthe paper-book with his assistance. 4.The question that arises in this appeal is 'whether surcharge fordelayed payment' contemplated in the bills raised by the assessee and itsaccounts, would invite payment of tax dehors recovery/payment/receipt ofsurcharge? 5.The Assessing Officer while making the addition of` 195,95,85,839/- on account of 'surcharge levied but not realized' hadobserved that as soon as the surcharge was levied on delayed payment, theassessee acquires a right to receive money from the customers even thoughthe amount may not have been received and that if the assessee acquires aright to receive the said amount, the income can be said to accrue to it.Since the assessee had regularly been following the mercantile system ofaccounting, the income accrued but not realized amounting toGURBACHAN SINGH` 195,95,85,839/- was disallowed and added to the income of the assessee. 2018.12.07 11:00I attest to the accuracy andintegrity of this document ITA-295-2018 -5- 6.On appeal by the assessee, the CIT(A) vide order dated11.8.2014 (Annexure A-2) allowed the appeal and deleted the addition of` 195,95,85,839/- on account of 'surcharge levied but not realized' byobserving as under:- “This system is being followed from the assessment year2004-05 as the statutory auditors of the Nigam pointedout in their audit report on the accounts for the yearending 31[st] March, 2003 that the recognition of incomeby charging surcharge on delayed payments is incontravention of the Basic accounting assumption ofprudence as contained in Accounting Standard-1 onDisclosure of Accounting Policies and without anycertainty as to its recognition issued by the Institute ofChartered Accountants of India. Considering theauditors objection, the Audit Committee of the Boards ofdirectors of the Nigam decided in its 2[nd] Meeting held on21[st] February, 2003 to account for delayed paymentincome of surcharge on receipt basis henceforth.Accordingly, the income from surcharge of delayedpayment is being accounted for on the basis ofcollection.” 7.Thereafter, the revenue filed an appeal whereas the assesseefiled cross objections before the Tribunal. The Tribunal vide order dated16.1.2018 (Annexure A-3) affirmed the findings of the CIT(A) anddismissed the appeal filed by the revenue as well as cross-objections filedby the assessee. The relevant findings recorded thereof read thus:- 7.Thereafter, the revenue filed an appeal whereas the assesseefiled cross objections before the Tribunal. The Tribunal vide order dated16.1.2018 (Annexure A-3) affirmed the findings of the CIT(A) anddismissed the appeal filed by the revenue as well as cross-objections filedby the assessee. The relevant findings recorded thereof read thus:- “7.We have heard both the parties and perused therecords especially the impugned order as well as theTribunal's orders and the submission filed by the Ld. DRand the case laws cited therein. We find considerablecogency in the submissions of the Ld. Counsel of theassessee that the Tribunal in assessee’s own case hasdecided the similar and identical issue in favour of theAssessee and against the Revenue vide orders dated30.11.2011, 27.6.2012 and 10.2.2012 for the assessmentyears 2006-07, 2007-08 and 2008-09 respectively inassessee’s own case. We further find that the assessee hasalso succeeded in appeal on the similar and identicalissue for the assessment year 2006-07, 2007-08, 2008-09and 2009-10 vide earlier CIT(A)’s order dated 6.11.2009,03.1.2011, 11.8.2011 and 4.10.2013 respectively. Wefurther note that the books of accounts of the assessee areregularly audited by the CAG and Tax auditors and thesame has been duly accepted them. We further find thatthe case laws cited by the Ld. DR in the writtensubmissions are on different set of facts andcircumstances, hence, the same are not applicable in thepresent case. However, the assessee’s case is fullycovered by the Coordinate Bench decisions of theTribunal in assessee’s own case of assessment years2006-07 to 2008-09. In view of the above, we are of theconsidered view that Ld. CIT(A) has rightly deleted theaddition in dispute by respectfully following the decisionof the previous CIT(A) as well as the ITAT decisions inassessee’s own case of assessment years 2006-07 to2008-09, hence, the impugned order does not need anyinterference on our part, therefore, we uphold the actionof the Ld. CIT(A) on the issue in dispute and reject theground raised by the Revenue. 8. As regards, Assessee’s Cross Objection isconcerned, since we have already dismissed the ITA-295-2018 -7- Revenue’s Appeal as aforesaid on merit and also thegrounds raised by the Assessee in Cross Objection werenot raised before the Ld. CIT(A), during the appellateproceedings, hence, the same have become infructuous,hence, we reject the same.” 8.This Court in a similar matter bearing ITA-209-2014 (TheCommissioner of Income Tax, Hisar v. Dakshin Haryana Bijli VitranNigam Ltd. Hisar) decided on 1.10.2014 while dismissing the appeal of therevenue had recorded that as and when the assessee receives payment ofsurcharge, it would be obliged to pay tax on such amount. 9.In view of the above, no illegality or perversity could bepointed out by the learned counsel for the appellant in the aforesaid findingsrecorded by the CIT(A) and the Tribunal which may warrant interference bythis Court. However, it is recorded that as and when the assessee receivespayment of surcharge, it would be obliged to pay tax on such amount. 10.Accordingly, no substantial question of law arises and there isno merit in the appeal, consequently it is dismissed. (AJAY KUMAR MITTAL) JUDGE November 29, 2018gbs (MANJARI NEHRU KAUL)JUDGE Whether Speaking/Reasoned Whether Reportable YesYes