DCIT, Hisar v. Dakshin Haryana Bijli Vitran Nigam Ltd., Hisar

ITA 250/DEL/2010 | 2006-2007
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 25020114 RSA 2010
Assessee PAN AABCD0033C
Bench Delhi
Appeal Number ITA 250/DEL/2010
Duration Of Justice 1 year(s) 10 month(s) 15 day(s)
Appellant DCIT, Hisar
Respondent Dakshin Haryana Bijli Vitran Nigam Ltd., Hisar
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-11-2011
Date Of Final Hearing 25-08-2011
Next Hearing Date 25-08-2011
Assessment Year 2006-2007
Appeal Filed On 15-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NO. 250/DEL/2010 ASSTT. YR: 2006-07 DCIT HISAR VS. DAKSHIN HARYANA BIJLI VITRAN NIG AM LTD. LTD. HISAR. PAN/GIR NO. AABCD0033C (APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI KRISHNA CIT DR ASSESSEE BY : DR. RAKESH GUPTA ADV. O R D E R PER R.P. TOLANI J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DAT ED 6-11-2009 RELATING TO A.Y. 2006-07. SOLE GROUND RAISED IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2 25 18 23 535/- MADE BY THE AO ON ACCOUNT OF NON-R EALIZATION OF PROVISION OF SURCHARGE. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS A HARYANA GOVT. UNDERTAKING INCORPORATED ON 15-3-1999; THE OBJECTS INTER ALIA INCLUDE DISTRIBUTION OF ELECTRICITY IN TEN DISTRICTS OF SOUTHERN HARYANA. A SSESSEE MAINTAINS A/C BOOKS ON MERCANTILE SYSTEM. IN THE BILLS ASSESSEE HAS A PRACTICE OF LEVY OF SUR- CHARGE FOR DELAYED PAYMENT OF ELECTRICITY BILLS BY CONSUMERS AFTER THE DUE DATE. ASSESSEES METHOD OF ACCOUNTING RAISING OF E LECTRICITY BILLS REMAIN SAME AS IN EARLIER YEARS. ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 2 2.1. AS A PRACTICE REGULARLY FOLLOWED A SUM OF RS . 13.86 CRORES ACTUALLY REALIZED AS SURCHARGE BY THE ASSESSEE HAS BEEN OFFE RED FOR ASSESSMENT AS AGAINST THE SURCHARGE RAISED AMOUNTING TO RS.239.76 CRORES (TRANSFERRED UNDER GH 62.240 TO 270 IN SCHEDULE 19 AS SURCHARGE) . FURTHER ASSESSEE WAIVED A SUM OF RS.0.72 CRORES OUT OF THE BILLS AND THE BALANCE AMOUNT OF RS.225.18 CRORES HAS BEEN TRANSFERRED TO ACCOUNT HE AD 'GH 23.934'CALLED AS 'FOR SURCHARGE NOT REALIZED'. THE ACCOUNT STATEM ENTS CONTAIN SCHEDULE-30 WHICH IS CAPTIONED IN NOTES IN ACCOUNTS. UNDER SERI AL NO.20 THEREIN IT IS STATED THAT SINCE THIS AMOUNT HAS NOT BEEN CHARGED TO THE PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION THEREFORE IT IS NOT ADDED TO THE TAXABLE INCOME WHILE COMPUTING TAX LIABILITY FOR TH E SUBJECT YEAR. 2.2. THE ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS MADE VARIOUS INQUIRIES ON THIS ISSUE T O WHICH ASSESSEE REPLIED THAT ACCOUNTING WAS DONE ON REALIZATION/COLLECTION BASIS AS PER THE PRUDENTIAL NORMS SINCE LAST TWO YEARS. ACCORDINGLY SURCHARGE COLLECTED AT RS.36.86 CRORES DURING THE FINANCIAL YEAR 2005-06 H AS BEEN REPORTED AS INCOME AND ONE AS RAISED THROUGH BILLS AT RS.239.76 CRORES (GROSS) HAS BEEN RETAINED IN THE BOOKS IN THE BALANCE SHEET. THERE W AS NO CHANGE IN METHOD OF ACCOUNTING AND THIS PRACTICE WAS REGULARLY FOLLO WED SINCE A.Y. 2004-05. AO HOWEVER ASKED THE APPELLANT TO EXPLAIN WHY INC OME FROM SURCHARGE OF RS.239.76 CRORES SHOULD NOT BE TAKEN AS INCOME OF T HE ASSESSEE COMPANY SINCE IT IS FOLLOWING THE MERCANTILE SYSTEM OF ACCO UNTING AS MENTIONED IN ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 3 7TH ANNUAL REPORT AND THE NOTES THERETO. 2.3. ASSESSEE SUBMITTED THAT INCOME-TAX IS A LEVY O N REAL INCOME AND IN CASE REAL INCOME DOES NOT RESULT THERE CANNOT BE A TAX EVEN THOUGH ENTRIES IN THE BOOKS MAY SUGGEST A HYPOTHETICAL INCOME. WHE RE NO INCOME CAN BE SAID TO HAVE RESULTED AN ENTRY SIMPLICITER IN THE BOOKS OF ACCOUNTS CANNOT MAKE THE INCOME TAXABLE. RELIANCE WAS PLACED ON APE X COURT DECISION IN CIT VS. SHOORJI VALLABH DS & CO. 46 ITR 144 (SC) AN D DELHI HIGH COURT DECISION IN CIT V. MODI RUBBER LTD. 230 ITR 817. 2.4. IT WAS CONTENDED THAT EVEN INTEREST ON STICKY LOANS THOUGH PROVIDED FOR IN THE BOOKS OF THE BANK WERE STILL NOT TAXABLE TO INCOME TAX IN TERMS OF THE BOARD CIRCULAR NO.F.201L21184TTA DATED 9 TH OCTOBER 1984 AND THE APEX COURT DECISION IN 237 ITR 889 IN THE CASE OF UCO BANK V. CIT . FURTHER RELIANCE WAS PLACED ON THE CASE OF GODHRA E LECTRICITY COMPANY V. CIT DECIDED BY HONBLE SUPREME COURT IN 225 ITR 7 46 WHERE THE ENHANCED TARIFF WAS DISPUTED AND THE QUESTION OF RE COGNIZING INCOME ON ACCRUAL AROSE. IT WAS HELD THAT THE INCREASED TARIF F HAVING BEEN STAYED ONLY THE REAL INCOME WAS EXIGIBLE TO TAX. ASSESSEE FURT HER RELIED ON THE DECISION OF THE APEX COURT IN POONA ELECTRICITY SUPPLY CO. L TD. V. CIT 57 ITR 521 FOR THE PROPOSITION THAT REBATE TO CUSTOMERS COULD NOT BE CONSIDERED AS PART ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 4 OF TAXABLE INCOME. 2.5. THE AO REJECTED ALL THESE CONTENTIONS AND OBS ERVED THAT UNDER THE MERCANTILE SYSTEM OF ACCOUNTING WHERE THE RIGHT TO RECEIVE MONEY MATURED THE INCOME EMBEDDED IN THE RECEIPT ACCRUED AND WAS TAXABLE EVEN THOUGH IT MAY NOT BE REALIZED. ACCORDING TO THE AO AS SOON AS SURCHARGE IS LEVIED IN BILLS FOR DELAYED PAYMENT THE ASSESSEE IS VESTED WITH THE RIGHT TO RECEIVE MONEY WHICH WAS TAXABLE EVEN THOUGH NOT REALIZED FR OM THE CONSUMER. THE AO ALSO RELIED UPON THE RATIO OF DECISIONS IN THE C ASES OF CIT V. GOVIND PRASAD (1988) 177 ITR (ALL);CIT V. BHARAT PETROLEUM CORPN. LTD. (1993) 202 ITR 492 (CAL.); MORVI INDUSTRIES LTD. VS. CIT ( 1971) 82 ITR 835 (SC); CAG IT V. RAJ RAJESHWARI V. NARI KELLY ESTATE (1993 ) 199 ITR 383; STATE OF KERALA VS. B. TEA PRODUCTS CO. LTD. 59 ITR 25 (SC); 2.6. THE AO FURTHER HELD THAT THE DELHI HIGH COURT DECISION IN CIT V. MODI RUBBER LIMITED 230 ITR 817 WAS NOT APPLICABLE TO THE FACTS OF THIS CASE AS SURCHARGE WAS LEVIABLE AS PER RULES AND T HERE WAS NO OPTION TO CONSUMERS FOR ACCEPTANCE OF TERMS OF SUPPLY. THE DE CISION OF THE APEX COURT IN GODHRA ELECTRICITY COMPANY V. CIT (SUPRA) WAS ALSO HELD TO BE NOT APPLICABLE BECAUSE IN ASSESSEES CASE NEITHER THERE WERE SUITS FILED NOR THERE ANY DECREES. AO DISTINGUISHED THE DECISION IN POONA ELECTRIC SUPPLY ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 5 COMPANY V. CIT 57 ITR 521 SC BY STATING THAT NO REBATE ON ACCOUNT OF THE PORTION EXCESS OVER CLEAR PROFITS HAS BEEN PROVIDED TO THE CONSUMERS BY THE .ASSESSEE COMPANY AND SO THE DECISION WAS NOT APPLI CABLE. THE ALTERNATIVE PLEA THAT IF THE ENTIRE SURCHARGE WERE TO BE RECKON ED AS INCOME THEN CORRESPONDING REBATE U/S 36(1)(VII) BE ALSO ALLOWED SIMULTANEOUSLY DID NOT APPEAL TO THE AO ON THE GROUND THAT THE STIPULATION S U/S 36(2) OF THE ACT WERE NOT FULFILLED. THE RIGHT TO MAKE A CLAIM WAS A LSO REJECTED BY THE AO ON THE GROUND THAT SUCH COULD BE DONE ONLY THROUGH A REVISED RETURN. AFTER REITERATING THAT THE ASSESSEE WAS KEEPING ITS ACCOU NTS ON MERCANTILE ACCOUNTING BASIS THE AO BROUGHT THE ENTIRE PROVISI ON FOR SURCHARGE THOUGH NOT ACTUALLY REALIZED TO TAX. 2.7. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL WH ERE THE ADDITIONS HAVE BEEN DELETED BY CIT(A). 2.8. AGGRIEVED REVENUE IS BEFORE US. 3. LEARNED DR SUPPORTED THE ORDER OF AO AND CONTEND S THAT THIS IS SETTLED PRINCIPLE OF LAW THAT PRINCIPLES OF RES-JUD ICATA ARE NOT APPLICABLE TO INCOME-TAX PROCEEDINGS. IN CASE AO INFERRED THAT TH E ASSESSEE IS FOLLOWING WRONG ACCOUNTING PRACTICE THEN HE HAD A RIGHT TO L OOK INTO THE MATTER AND ASK THE ASSESSEE TO CORRECTLY FOLLOW THE SAME. WHIL E DOING SO AO HAS TO COMPLY THE PROVISIONS OF NATURAL JUSTICE BY GIVING THE ASSESSEE AN ADEQUATE ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 6 OPPORTUNITY OF BEING HEARD WHICH IS DULY COMPLIED. AO WAS OF THE VIEW THAT THOUGH THE ASSESSEE HAD ADOPTED MERCANTILE SYSTEM O F ACCOUNTING THE SAME WAS NOT PROPERLY FOLLOWED AS ACCRUED RECEIPTS WERE NOT CONSIDERED. IN RESPECT OF SUR-CHARGE I.E. DELAYED PAYMENT OF ELECT RICITY CHARGE THOUGH THE SAME WAS PRINTED ON THE BILL IT WAS NOT BEING CRED ITED TO ELECTRICITY RECEIPTS ON MERCANTILE/ ACCRUED BASIS. THE PRACTICE OF CREDI TING ON REALIZATION OF SUR- CHARGE AMOUNT IN THE TAXABLE INCOME WAS CONTRARY TO THE ACCOUNTING POLICY ADOPTED BY ASSESSEE. THEREFORE AO WAS JUSTIFIED IN RAISING THIS ISSUE ALTHOUGH IN EARLIER YEARS THE ASSESSEES METHOD OF ACCOUNTING WAS ACCEPTED. 3.1. IT IS PLEADED THAT THE ACCOUNTING POLICY ADOPT ED BY THE ASSESSEE CANNOT OVER-RIDE THE SPECIFIC LAW. RELIANCE IS PLAC ED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS VS. CIT 227 ITR 127 FOR THE PROPOSITION THAT WHEN THE QUES TION IS WHETHER A RECEIPT OF MONEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDU CTIONS FROM THAT RECEIPTS ARE PERMISSIBLE IN LAW OR NOT THE QUESTION HAS TO BE DECIDED ACCORDING TO THE PRINCIPLES OF LAW AND NOT IN ACCORDANCE WITH AC COUNTANCY PRACTICE WHICH CANNOT OVER-RIDE SEC. 56 OR ANY OTHER PROVISION OF THE ACT. 3.2. LEARNED DR THUS CONTENDS THAT THOUGH ASSESSEE HAD CHANGED THIS METHOD SINCE A.Y. 2004-05 THERE WAS NOTHING WRONG IN AOS QUESTIONING ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 7 THE TERM OF SUR-CHARGE IN THE MANNER ADOPTED BY ASS ESSEE AND PRINCIPLE OF RES-JUDICATA WILL NOT APPLY TO THIS ADDITION. 3.3. COMING TO THE MERITS OF THE ADDITION LEARNED DR CONTENDS THAT IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE HAS ADOPTED MER CANTILE SYSTEM OF ACCOUNTING WHICH IMPLIES RECOGNITION OF REVENUE ON THE BASIS OF ACCRUAL OF THE RECEIPT. IN THIS CASE THE SUR-CHARGE IS LEVIED AS PER THE ELECTRICITY RULES. THE PERCENTAGE OF SUR-CHARGE PAYABLE ON THE DELAYED PAYMENT OF ELECTRICITY CHARGES IS PREFIXED AND IS PRINTED ON THE BILL. THE LEVY OF SUR-CHARGE IS THUS ASCERTAINED LIABILITY OF CONSUMER AND PREFIXED BY R ULES. THEREFORE WHEN THE BILL IS PAID BELATEDLY BY THE CONSUMER SUR-CHARGE BECOMES AN ASCERTAINED PAYMENT AND IS THUS A RECOGNIZABLE RECEIPT. RELIANC E IS PLACED ON HONBLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. WOODW ARD GOVERNOR INDIA P. LTD. (2009) 312 ITR 254 (SC) FOR THE PROPOSITION THAT I N MERCANTILE SYSTEM OF ACCOUNTING WHAT IS DUE IS BROUGHT INTO C REDIT BEFORE IT IS ACTUALLY RECEIVED. IT BRINGS INTO DEBIT AN EXPENDITURE FOR W HICH A LEGAL LIABILITY HAS BEEN INCURRED BEFORE IT IS ACTUALLY DISBURSED. LEAR NED DR CONTENDS THAT WOODWARD CASE LAYS DOWN A CONVERSE ANALOGY FOR THE INCOME ALSO WHICH IMPLIES THAT IT BRINGS INTO CREDIT AN ITEM OF RECEI PT FOR WHICH A LEGAL RIGHT HAS ACCRUED. ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 8 3.4. FURTHER RELIANCE IS PLACED ON HONBLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. G.R. KARTHIKEYAN 210 ITR 866. IT LA YS DOWN THE DEFINITION OF TERM INCOME IN SEC. 2(24) IS INCLUSIVE ONE AND SHOULD BE INTERPRETED WITH WIDEST AMPLITUDE. 3.5. IT IS CONTENDED THAT SUR-CHARGE BEING AN ASCER TAINED LEVY PRESCRIBED BY THE ELECTRICITY RULES HAS BEEN RIGHTLY BROUGHT TO BOOKS BY THE AO ON ACCRUAL BASIS IN THIS YEAR. 4. LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER H AND CONTENDS THAT THE APPELLANT CHARGES FOR ELECTRICITY CONSUMPTION AT PR E-AGREED RATES. BILLS ARE RAISED PERIODICALLY AT THOSE RATES. THOSE BILLS CO NTAIN A NOTATION STATING THAT IF PAYMENT IS MADE AFTER DUE DATE THERE WOULD BE A N IMPOSITION OF SURCHARGE. IN OTHER WORDS IF ONE WERE TO MAKE PAYM ENT BY THE DUE DATE OR BEFORE THE DUE DATE THE MENTION OF SURCHARGE BECOM ES SUPERFLUOUS UNNECESSARY AND INCONSEQUENTIAL. SUCH MENTION OF SU RCHARGE DEPENDS UPON THE CONTINGENCY OF THE CONSUMER DEFAULTING ON PAYMENT BY DUE DATE. 4.1. NO ENTRIES ARE MADE FOR SURCHARGE AT THE TIME OF PREPARATION OF THE BILL. THAT IS LOGICALLY SO BECAUSE IT CANNOT BE PRE DICATED AT THAT RELEVANT TIME WHEN THE BILL IS PREPARED AS TO WHICH THEY WILL BE PAID BY THE DUE DATE OR NOT. THE ENTRY FOR SURCHARGE IS MADE ONLY AFTER THE CUS TOMER HAS PAID THE ELECTRICITY CHARGES UNDER PROTEST WITHOUT PAYING TH E SURCHARGE PORTION. AT THE POINT OF BILL PAYMENT THE NON-PAYMENT OF SURCHARGE ASSUMES THE CHARACTERISTIC OF A DISPUTE RAISED BY CUSTOMER. WHE N A DISPUTE IS RAISED UNDER PROTEST PAYMENT NO INCOME CAN BE SAID TO ARISE OR ACCRUE. THERE MUST BE AN ACKNOWLEDGEMENT OF THE DEBT BY THE PAYEE TO THE PA YER FOR ACCRUAL . ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 9 RELIANCE WAS PLACED ON APEX COURT JUDGMENT IN THE C ASE OF E.D. SASSOON & CO. V. A.V. VISWANATHA SASTRI & ANR. 26 ITR 27. THE SAME PRINCIPLE WAS REITERATED BY THE APEX COURT IN CIT V. ASHOKBHAI CH IMANBHAI WHERE THE COURT POINTED OUT THAT 'INCOME BECOMES TAXABLE ON T HE FOOTING OF ACCRUAL ONLY AFTER THE RIGHT OF THE TAX PAYER TO THE INCOME ACCRUES OR ARISES AND IN THE CASE OF AN AGREEMENT WHICH MAKES PROFIT IS RECEIVA BLE ON THE HAPPENING OF A CONTINGENCY IT CANNOT BE HELD TO HAVE ACCRUED. 4.2. THE METHOD OF ACCOUNTING PURSUED BY NIGAM IS I N CONFORMITY WITH ACCOUNTING AND COMMERCIAL PRINCIPLES AND IS IN CONS ONANCE WITH THE APPLICABLE ACCOUNTING STANDARD. IT IS WELL RECOGNI ZED THROUGH A CATENA OF JUDGMENTS THAT THE TAXABLE INCOME IS REQUIRED TO B E COMPUTED IN TERMS OF THE STANDARD PRESCRIBED BY THE ACCOUNTING STANDARDS AND FINALLY IN SUPREME COURT IN 297 ITR 176 IN J.K. INDUSTRIES LTD. VS. UO I. THIS CASE HAS UPHELD THE SANCTITY AND UTILITY OF ACCOUNTING STANDARDS UN LESS THEY ARE ULTRAVIRES THE PROVISIONS OF COMPANIES ACT AND CONSTITUTION OF IND IA. THERE IS NO ALLEGATION THAT ACCOUNTING STANDARDS FOLLOWED BY TH E ASSESSEE SUFFER FROM SUCH INFIRMITY. 4.3. THE ASSESSEE IS PURSUING MERCANTILE SYSTEM OF ACCOUNTING YET REVENUE RECOGNITION FOR SURCHARGE IS DONE AS PER AS-L AND AS-9. THE METHOD PURSUED IS IN CONFORMITY WITH HONBLE SUPREME COURT JUDGMENT IN UCO BANK V. CIT 237 ITR 889 AND HONBLE DELHI HIGH COUR T 230 ITR 817CIT VS. MODI RUBBER LTD. AO ERRED IN HOLDING THAT IT IS NOT FOR THE CONSUMER OF ELECTRICITY TO ACCEPT OR NOT TO ACCEPT THE SURCHARG E WHICH IS LEVIED AS PER RULES. IF THE INTERNAL RULES ARE SO COERCIVE FOR CO NSUMERS THEN HOW CAN IT BE POSSIBLE THAT OUT OF TOTAL DEMAND OF RS.230 CRORES LESS THAN RS.14 CRORES HAVE BEEN ACTUALLY COLLECTED. THIS CLEARLY ESTABLIS HES THAT SURCHARGE PAYMENT WAS NOT MANDATORY. THE AO FAILED TO APPRECIATE THAT THE ACCRUAL OF REAL INCOME IS VIRTUALLY NEGATED BY THE PAYER WHEN SUCH A CASE BECOMES A SUIT ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 10 FILED ACCOUNT. THE DECISION IN 57 ITR 521 IS ALSO O NE CONCERNING REAL INCOME WHERE THE ASPECT OF COMMERCIAL PRINCIPLES BE ING APPLICABLE TO INCOME TAX WAS EMPHASIZED. 4.3. THE DEMAND FOR SURCHARGE IN BILL DOES NOT RESU LT IN ANY INCOME FOR NOT ONLY IT IS CONTINGENT DUE TO DELAYED PAYMENT UNDER PROTEST BUT IS ALSO CONTINGENT ON SUCH ACQUIESCENCE OF THE DELAYING CUS TOMER AS INVARIABLY A MAJORITY OF THE CUSTOMERS REFUTE SUCH CHARGES. THER EFORE PRINTING OF SURCHARGE IN BILL BY ITSELF IS NOT DECISIVE TO RECO GNIZE IT AS REVENUE IN TERMS OF AS-1 AND AS-9. SUCH AMOUNTS DO NOT REPRESENT REA L INCOME AND SO LONG AS REAL INCOME DOES NOT INURE OR ARISE THERE CANNOT BE ANY HYPOTHETICAL TAX ON SUCH INCOME BECAUSE OF PRINTING ON A BILL. 4.4. THE SURCHARGE IS IMPOSED ON CUSTOMER NOT WITH REGARD TO THE TRANSFER OF ANY GOODS OR SERVICES BUT ORIGINATES DUE TO A DEFAULT BASED ON LAPSE OF PERMITTED TIME FOR PAYMENT WHICH COULD BE PROTESTE D BY CUSTOMER. GOVERNMENT POLICY HAS ITS OWN WAY IN PUBLIC UTILITY SERVICES WHICH CREATE VARIOUS POLITICAL AND SOCIAL COMPULSIONS CAUSE TO WAIVER OR REDUCE SUCH LEVIES. IN THAT BACKGROUND IT WILL BE WRONG TO QUA LIFY SUCH SURCHARGE AS REAL INCOME IGNORING THE OBVIOUS MODALITIES OF POLICY I N THE GARB OF ACCRUAL. . 4.5. AO FAILED TO APPRECIATE THAT THE MERE MAKING OF AN ENTRY IN THE BOOKS WOULD NOT GIVE RISE TO ANY TAXABLE INCOME. TH E ASSESSEES MAIN EMPHASIS ON PRUDENTIAL NORMS OF BUSINESS HAVE BEEN COMPLETELY MISSED OUT BY THE AO. AS-L WHICH IS A RECOGNIZED STANDARD ST ATES AS UNDER ON THIS ISSUE: ITEM 5 : ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 11 'THE MAJOR CONSIDERATIONS IN SELECTING ACCOUNTING P OLICIES ARE PRUDENCE SUBSTANCE OVER FORM AND MATERIALITY. ' 4.6. IT IS CONTENDED THAT PRUDENCE REFERS TO THE AC COUNTING CONVENTION ACCORDING TO WHICH PROFITS ARE NOT ANTICIPATED BUT RECOGNIZED ONLY WHEN REALIZED. PROVISION IS MADE FOR ALL KNOWN LIABILITI ES AND LOSSES EVEN THOUGH THE AMOUNT CANNOT BE DETERMINED WITH CERTAINTY AND REPRESENTS ONLY A BEST ESTIMATE IN THE LIGHT OF AVAILABLE INFORMATION. 4.7. SUBSTANCE OVER FORM IMPLIES THAT THE ACCOUNTIN G TREATMENT AND PRESENTATION OF TRANSACTIONS SHOULD BE GOVERNED BY THEIR SUBSTANCE AND NOT MERELY BY THEIR LEGAL FORM. 4.8. GUJARAT HIGH COURT IN THE CASE OF ECHKE LTD V. CLT [2009J 310 ITR 44 HAS POINTED OUT THAT THE MERCANTILE SYSTEM REQUI RES ACCOUNTING ONLY OF REALIZABLE INCOME SO THAT AMOUNTS WHICH ARE UNLIKEL Y TO BE REALIZED CANNOT BE TREATED AS HAVING ACCRUED. APART FROM BONAFIDES EVEN THE MERCANTILE SYSTEM OF ACCOUNTING SHOULD SPARE RECOGNITION OF SU CH DOUBTFUL INCOME. 4.9. THE PRUDENTIAL NORMS AS ENVISAGED UNDER AS-I ITEM 5 HAVE BEEN GIVEN DUE LEGAL RECOGNITION. THE PUNJAB AND HARYAN A HIGH COURT IN CLT V. PUNJAB FINANCIAL CORPORATION LTD. (2009) BY HOLDIN G THAT ONLY REALIZABLE IS TAXABLE. 4.10. AS-9 ISSUED BY THE INSTITUTE OF CHARTERED AC COUNTANTS REGARDING REVENUES RECOGNITION WHICH REFERS TO RECOGNITION O F REVENUE FROM SALE OF GOODS AS WELL AS RENDERING OF SERVICES POSTULATES THAT THERE SHOULD NOT BE ANY SIGNIFICANT UNCERTAINTY EXISTING WITH REGARD TO THE AMOUNT OF THE CONSIDERATION THAT WOULD BE DERIVED FROM THE SALE O F THE GOODS. THE PAYMENT ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 12 OF SURCHARGE IS ALWAYS RESISTED BY THE CUSTOMER AND ASSESSEE HAS A MECHANISM TO ACCEPT THE PAYMENTS OF BILLS IN RESPEC T OF ONLY ACTUAL CONSUMPTION CHARGES AND DEFERRING THE PAYMENT OF SU RCHARGE. THE BILL MAY PROVIDE FOR LEVY OF SUR-CHARGE BUT BILLS PAID IN RE SPECT OF CONSUMPTION CHARGES ARE ACCEPTED BY NIGAM. THE NIGAM TO MAINTA IN LIQUIDITY IS THUS CONSTRAINED TO COLLECT DUES ON ACCOUNT OF ELECTRICI TY CONSUMPTION ALONE. MANY A TIMES THE ACCUMULATED ARREARS OF SURCHARGE A RE WRITTEN OFF IN TERMS OF GOVERNMENT DIRECTIONS ISSUED IN PUBLIC INTEREST. IN THIS WAY THE IMPOST OF SURCHARGE AND ITS REALIZATION IS FRAUGHT WITH INNUM ERABLE UNCERTAINTIES AND WITH REGARD TO ITEMS OF SUCH CATEGORIES THE PRUDENT NORMS POSTULATE THAT IRRESPECTIVE OF ACCOUNTING METHOD CLAIMED TO BE EMP LOYED THEY HAVE TO BE ACCOUNTED FOR ONLY ON RECEIPT. 4.11. THE ASSESSEE IS A STATE PSU AND DISTRIBUTES ELECTRICITY ON THE BASIS OF PUBLIC POLICY WHICH WAS SPECIFICALLY CHANGED FOR T HE FIRST TIME IN A.Y. 2004-05. ON THE RECOMMENDATION OF THE AUDIT COMMITT EE OF THE BOARD OF DIRECTORS BY A RESOLUTION ADOPTED ON 21-2-2003 WHI CH IS PLACED ON PAPER BOOK PAGE 90 WHICH READS AS UNDER: AUDIT REPORTS ON THE ACCOUNTS OF THE DHBVNL FOR TH E FINANCIAL YEAR 2001-02 THE COMMITTEE WENT THROUGH THE AUDIT REPORTS OF THE STATUTORY AUDITORS AND CAG ON THE ACCOUNTS OF THE COMPANY FOR THE FINANCIAL YEAR 2001-02 AND DECIDED TO TAKE UP THE O BSERVATIONS OF THE STATUTORY AUDITORS AND CAG IN ORDER TO PREPA RE THE COMPANY TO MEET THE REQUIREMENTS/ OBSERVATIONS OF T HE AUDITORS IN FUTURE: ON POINT NO. 4(F-III) IT WAS OBSERVED THAT THE AUDI TORS HAVE MADE A REMARK ABOUT THE ACCOUNTING OF INCOME BY CHA RGING SURCHARGE @ 2% PER MONTH OF DELAYED PAYMENT BEING I N CONTRAVENTION WITH THE BASIC ACCOUNTING ASSUMPTION OF PRUDENCE AS BEING IN CONTRAVENTION WITH THE BASIC A CCOUNTING ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 13 ASSUMPTION OF PRUDENCE AS CONTAINED IN ACCOUNTING S TANDARD-I ON DISCLOSURE OF ACCOUNTING POLICY AND ACCOUNTING STANDARD-9 ON REVENUE RECOGNITION ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA WHICH AHS RESULTED IN REVENUE RECOGNITION OF RS. 107.78 CRORE S DURING THE YEAR 2001-2002 OR UNDERSTATEMENT OF LOSSES BY THAT AMOUNT AND OVERSTATEMENT OF SUNDRY DEBTORS IN BALANCE SHEET. T HE AUDIT COMMITTEE WAS INFORMED THAT PRESENTLY EVEN THE SURC HARGE IS ACCOUNTED FOR ON THE BASIS OF ACCRUAL AND THAT THE PRESENT ACCOUNTING PRACTICE DOES NOT ALLOW KEEPING THE SURC HARGE ON THE BASIS OF RECEIPT. HOWEVER THE AUDIT COMMITTEE FELT THAT IN FUTURE RECOGNITION OF DELAYED PAYMENT SURCHARGE BE DONE ON RECEIPT BASIS ONLY AND IF REQUIRED THE BILLING SYS TEM OF THE COMPANY BE MODIFIED ACCORDINGLY. 4.12. A PERUSAL OF THE COMMITTEES RECOMMENDATION HAVE BEEN DULY ACCEPTED BY THE BOARD OF DIRECTORS AND IN DUE COURS E BY THE HIGHEST AUTHORITY IN RESPECT OF ELECTRICITY ISSUES OF STATE OF HARYANA. SUCH A PROCEDURE MAKES THE ACCEPTANCE OF THESE RECOMMENDAT IONS AS PART OF THE PUBLIC POLICY OF STATE OF HARYANA AND CANNOT BE USE D TO RECOGNIZE REVENUE COMPANY TO THE STATE GOVT. POLICY ON THIS ISSUE. IT HAS NOT BEEN DISPUTED THAT IN STATE OF HARYANA CONSUMER BILLS ISSUED BY ASSES SEE ARE ACCEPTED AT THE TIME OF DELAYED PAYMENT EVEN WITHOUT PAYMENT OF SU R-CHARGE UNDER PROTEST. THE FACT THAT CONSUMERS CAN PAY THE ELECTRICITY BIL LS WITHOUT PAYMENT OF SUR- CHARGE ITSELF INDICATES THAT SUCH LEVY CAN BE DEFER RED AND IN TERMS OF PUBLIC POLICY THE SAME CAN BE WAIVED PARTIALLY OR FULLY. THEREFORE THOUGH THE ELECTRICITY BILLS PRINTS PAYMENT OF SUR-CHARGE THE LEVY IS NOT ENFORCEABLE IMMEDIATELY AS IN CASE OF BELATED PAYMENTS ARE SUBJ ECT TO THE PROTEST IF ANY WHICH IS RAISED BY THE CONSUMER AND SUCH SUR-CHARGE IS TO BE DEFERRED. IT IS AKIN TO SALE BILL GENERALLY ISSUED BY ANY ESTABLI SHMENT GIVING A STANDARD NOTE THAT IN CASE OF DELAYED PAYMENT OF BILLS 18% T O 24% INTEREST MAY BE CHARGED AFTER ONE MONTH/ TWO MONTHS. A MENTION OF S UCH STIPULATION IN ANY ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 14 INVOICE DOES NOT MAKE THE LEVY ENFORCEABLE AND INTE REST TAXABLE ON ACCRUAL. 4.13. THIS METHOD OF ACCOUNTING WAS ACCEPTED BY THE AO IN A.Y. 2004-05 WITHOUT ANY PROTEST WHICH HAS FURTHER BEEN ACCEPTE D IN A.Y. 2005-06. BOTH THE ASSESSMENTS ARE U/S 143(3). ALL THE AUDIT REPOR TS NOTES ON ACCOUNTS AND CHANGE IN ACCOUNTING POLICY WAS DULY INTIMATED TO T HE DEPARTMENT IN A.Y. 2004-05. HAVING ACCEPTED THE ASSESSEES ACCOUNTING METHOD FOR TWO YEARS WITHOUT ANY OBJECTION AND FACTS AND CIRCUMSTANCES B EING SAME THE DEPARTMENT IS BARRED FROM RE-AGITATING THIS ISSUE A GAIN ON THE PRINCIPLE OF CONSISTENCY AS LAID DOWN BY HONBLE SUPREME COURT I N THE CASE OF RADHA SWAMI SATSANG 193 ITR 321. 4.14. LEARNED COUNSEL CONTENDS THAT THE CONCEPT OF MERCANTILE SYSTEM AND ACCRUAL SYSTEM HAVE NOT BEEN CORRECTLY APPRECIATED BY THE LEARNED AO. ACCRUAL SYSTEM DOES NOT MAKE EACH AND EVERY POSSIBL E RECEIPT TO BECOME TAXABLE INCOME. VARIOUS AUTHORITIES HAVE LAID DOWN THAT WHAT IS TAXABLE IS REAL INCOME. THE CONCEPT OF REAL INCOME HAS BEEN WELL DEFINED AND WHAT ACCRUES TO ASSESSEE IS THE INCOME IN THESE TERMS. I T IS NOT DISPUTED THAT THE SUR-CHARGE IS FOR PURPOSE OF ENSURING PAYMENT IN TI ME. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE IS OBLIGED TO COLLECT SUR- CHARGE IN EACH AND EVERY CASE ALONG WITH BILL. THE PROPOSITION OF THE AO DIC TATES THAT ONCE YOU MENTION THE LEVY OF INTEREST OR SURCHARGE ON BELATE D PAYMENT IN THE BILLS THE SAME BECOMES ACCRUED INCOME EVEN IF NOT REALIZED. T HIS IS BEING APPLIED IGNORING THE VITAL FACTS THAT CONSUMER CAN PAY THE BILL WITHOUT PAYMENT OF SURCHARGE UNDER PROTEST AND AGITATE THE LEVY OF SUR CHARGE WHICH IS AKIN IN TERMS OF DECLARED PUBLIC POLICY AND WAIVER OFFERED BY THE STATE GOVT. AND ELECTRICITY BOARD. ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 15 4.15. IT IS CONTENDED THAT THE ASSESSEE IN A.Y. 200 4-05 FILED ORIGINAL RETURN THEREAFTER A REVISED RETURN. ASSESSEES METHOD OF A CCOUNTING WAS ACCEPTED IN A DETAILED ORDER U/S 143(3) IN WHICH VARIOUS OTHER ALLOWANCES/ DEDUCTIONS HAVE BEEN AMENDED. THEREAFTER 154 ORDER DATED 27-3- 2009 WAS ALSO PASSED ON THIS ISSUE. PARA GIVING HISTORY OF THE CASE IS A S UNDER: RETURN DECLARING NIL INCOME WAS FILED BY THE ASSES SEE COMPANY ON 1-11-2004 WHICH ACCEPTED AS SUCH WHILE PROCESSING THE RETURN U/S 143(1) OF THE ACT ON 31-1 -2005. CONSEQUENT UPON SETTING OFF BROUGHT FORWARDED LOSSE S RELEVANT TO THE A.Y. 2000-01 THE ASSESSEE DECLARED ITS CURR ENT YEARS INCOME AT NIL. HOWEVER A REVISED RETURN WAS FILED BY THE ASSESSEE ON 26-09-2005 DECLARING NIL INCOME AFTER A DJUSTING BROUGHT FORWARD LOSSES TO THE EXTENT OF RS. 4 61 07 450/- AND SOUGHT CARRY FORWARD OF UNABSORBED DEPRECIATION AND UNADJUSTED LOSSES OF THE EARLIER YEARS AT THE REVIS ED FIGURE WHICH WAS ALSO PROCESSED AS SUCH ON 11-10-2006. SUBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTINY UN DER THE PREVALENT BOARDS INSTRUCTIONS. WHILE FINALIZING TH E SCRUTINY ASSESSMENT THE THEN AO DETERMINED TAXABLE INCOME A T RS. 7 32 61 944/- VIDE ORDER DATED 31-3-2004. HOWEVER THE INCOME SO DETERMINED WAS SET OFF OUT OF THE BROUGHT FORWARD BUSINESS LOSSES RELEVANT TO THE A.Y. 2001-02 AND NI L TOTAL INCOME WAS DECLARED; BEING THE SAID BROUGHT FORWARD LOSSES EXCEEDED THE INCOME DETERMINED U/S 143(3) OF THE AC T AND THE BALANCE LOSSES AND UNABSORBED DEPRECIATION WERE ALL OWED TO BE CARRIED FORWARD FOR THE SUCCEEDING YEARS. DEPARTMENT HAS NOT TAKEN ANY ACTION U/S 147 OR 263 IN RESPECT OF A.YRS. 2004-05 AND 2005-06. 4.16. THE CHANGE IN ACCOUNTING WAS ADOPTED IN TWO Y EARS EARLIER BASED ON PRESCRIBED NORMS OF PRUDENCE BY ICAI. THE GUIDELINE S ARE RECOGNIZED FOLLOWED BY GENERAL PUBLIC POLICY PSU STATE PSU A ND THE SUR-CHARGE BEING ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 16 SUBJECT TO THE PUBLIC POLICY THE DISPUTED SURCHARG E CANNOT BE HELD TO BE THE INCOME ACCRUED TO THE ASSESSEE. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: - CIT VS. SHOORJI VALLABH DAS & CO. 46 ITR 144 (SC); - CIT VS. MODI RUBBER LTD. 230 ITR 817 (DEL.); - UCO BANK VS. CIT 237 ITR 889 (SC); - GODHARA ELECTRICITY CO. LTD. VS. CIT 225 ITR 746 (S C); - POONA ELECTRIC SUPPLY CO. LTD. VS. CIT 57 ITR 521 ( SC); 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. FOLLOWING FACTS EMERGE FROM TH E RECORD: (I) ASSESSEE MAINTAINS ITS METHOD ON ACCOUNTING AS MERC ANTILE SYSTEM. (II) PRIOR TO A.Y. 2004-05 THE ASSESSEE USED TO OFFER S URCHARGE CALCULATED IN THE BILLS. (III) VIDE AUDIT COMMITTEE OF BOARD OF DIRECTORS MEETING DATED 21-2- 2003 (SUPRA) ON THE BASIS OF PRUDENCE NORMS THE ME THOD OF ACCOUNTANCY WAS CHANGE AND THE SUR-CHARGE WAS HELD TO BE ACCOUNTABLE ON THE BASIS OF ACTUAL RECEIPT. 5.1. DEPARTMENT HAS ACCEPTED THE METHOD OF ACCOUNTI NG IN A.Y. 2004-05 AND 2005-06 WHICH IS NOT DISPUTED. THIS CLEARLY ES TABLISHES THAT NEITHER ACTION U/S 148 NOR U/S 263 IS PROPOSED BY THE DEPA RTMENT AGAINST A.Y. ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 17 2004-05 AND 2005-0 COMPLETED ASSESSMENTS WHICH HAV E BECOME FINAL. 5.2. COMING TO THE MERITS THE ASSESSEE IS A STATE PSU AND THE ELECTRICITY POLICY OF THE ELECTRICITY BOARD HAS BEEN SUBJECT TO MANY EXIGENCIES DEPENDING ON PUBLIC POLICY. IT HAS NOT BEEN DISPUTE D THAT THOUGH THE ASSESSEES RULES PROVIDE LEVY OF SUR-CHARGE ON BELA TED PAYMENT OF BILLS BUT AT THE SAME TIME PAYMENT OF SURCHARGE IS SUBJECT TO PR OTEST/ WAIVER AND IS NOT MANDATORILY ENFORCEABLE BY ASSESSEE AT THE TIME OF PAYMENT OF BILL. THE SUR- CHARGE EXIST IN THE RULE AND IS PRINTED IN THE BILL BUT IT HAS NOT BEEN DISPUTED THAT THE ASSESSEE HAS REGULAR MECHANISM TO ACCEPT T HE BILLS WITHOUT PAYMENT OF SUR-CHARGE. THE SAME IS DEFERRED TILL THE CONSU MER DISPUTE IS SETTLED BY THE APPROPRIATE MEANS WHICH MAY BE PROVIDED BY THE INSTRUCTIONS OF THE DECLARED POLICY OF THE GOVERNMENT. 5.3. IN VIEW OF THESE FACTS COUPLED WITH THE FACT THAT ASSESSEE CHANGED ITS METHOD OF ACCOUNTING AFTER SEEKING NECESSARY APPROV AL OF CAG SHOWS THAT AS FAR AS THE ASSESSEE IS CONCERNED THE COLLECTION OF SUR-CHARGE WAS CONTINGENT AND DID NOT ACCRUE DUE TO ASSESSEE. THE LIABILITY WILL ACCRUE ON THE BASIS OF CRYSTALLIZATION I.E. THE PAYMENT OF TH E SURCHARGE OR PASSING OF A SUITABLE ORDER BY THE APPROPRIATE AUTHORITY ON THE DISPUTE RAISED BY THE CUSTOMER. 5.4. COMING TO THE CASE LAWS HONBLE SUPREME COURT IN THE CASE OF SHOORJI VALLABH DAS & CO. (SUPRA) HAD TO DEAL WITH AN ISSUE OF MANAGING AGENCY COMMISSION TRANSFERRED BY THE ASSESSEE TO TW O OTHER COMPANIES. SUBSEQUENT AGREEMENT AFTER THE END OF ACCOUNTING Y EAR RESULTED IN ASSESSEES RECEIVING LESSER COMMISSION THOUGH BOOK ENTRIES OF HIGHER ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 18 AMOUNT WERE MADE. REVENUE SOUGHT TO TAX THE HIGHER INCOME HONBLE COURT HELD THAT ASSESSEE CANNOT BE TAXED ON THE BAS IS OF HYPOTHETICAL INCOME. IN OUR VIEW THIS JUDGMENT IS APPLICABLE TO THE FACTS OF ASSESSEES CASE KEEPING IN MIND FOLLOWING PREPOSITIONS: (I) ASSESSEES METHOD OF ACCOUNTING HAS BEEN ACCEPTED B Y THE DEPARTMENT. (II) SINCE THE ASSESSEE COULD DEFER THE PAYMENT OF SUR-C HARGE UNDER CONSUMER PROTEST THE TAXING OF SUCH CONTINGENT REC EIPT IS A HYPOTHETICAL INCOME. 5.5. IN CASE OF UCO BANK (SUPRA) IN CASE OF STICKY ADVANCES THE INTEREST INCOME THOUGH PROVIDED IN THE BOOKS OF ACCOUNTS WE RE NOT ASSESSABLE. 5.6. IN CASE OF GODHARA ELECTRICITY CO. LTD. (SUPRA ) THOUGH THE TARIFF WAS REVISED AND WAS ENFORCEABLE BY RULES ITS DEFERMENT BY STATE OF GUJARAT WAS HELD TO BE RESULTING INTO NON-ACCRUAL OF DEFERRED P ORTION ON THE BASIS OF REAL INCOME CONCEPT. 5.7. IN THE CASE OF POONA ELECTRIC SUPPLY CO. (SUPR A) ALSO THE HONBLE SUPREME COURT HELD THAT PORTION EXCEEDS OVER CLEAR PROFITS RETURNED AS REBATE TO THE CONSUMERS WAS NOT PART OF TAXABLE INC OME OF THE ASSESSEE. THUS THOUGH THE AMOUNT FROM CONSUMERS ACCRUED TO T HE ASSESSEE DUE TO THE RETURN ON ACCOUNT OF STIPULATION PROVIDED REBATE W AS HELD TO BE NON-TAXABLE ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 19 REBATE. 5.8. IN CASE OF MODI RUBBER LTD. (SUPRA) THE HONB LE DELHI HIGH COURT AFFIRMED THE ORDER OF ITAT HOLDING THAT MERE UNILAT ERAL ACT OF THE ASSESSEE DEBITING THE BOOKS OF ACCOUNT WITH THE AMOUNT OF IN TEREST WHICH WAS DISPUTED BY THE DEBTOR DID NOT AMOUNT TO ACCRUAL O F INCOME TO THE ASSESSEE. 5.9. THERE IS NO DISPUTE ON THE ISSUE RAISED BY THE LEARNED DR THAT PRINCIPLES OF RES-JUDICATA ARE NOT APPLICABLE TO IN COME-TAX PROCEEDINGS. HOWEVER IN VIEW OF HONBLE SUPREME COURT JUDGMENT IN THE CASE OF RADHA SWAMI SATSANG (SUPRA) HAS LAID DOWN RULE OF CONSIS TENCY WHICH HAS BEEN FOLLOWED IN FACTS OF VARIOUS CASES IN SUBSEQUENT JU DGMENTS. BY NOW IT IS A SETTLED PRINCIPLE THAT UNLESS FACTS AND CIRCUMSTANC ES HAVE DRASTICALLY CHANGED THE PRINCIPLE OF CONSISTENCY IS TO BE MAIN TAINED IN DEPARTMENTAL ACTION. IN VIEW THEREOF WE ARE OF THE VIEW THAT DE PARTMENT HAVING ACCEPTED A CLEAR CUT AMENDMENT OF METHOD OF ACCOUNTING AS P ER THE PROVISIONS OF INCOME-TAX ACT IN THE ABOVE MENTIONED FACTS IT WI LL NOT BE DESIROUS THAT THE COURSE OF ACTION ACCEPTED BY THE DEPARTMENT IS SUBJ ECT TO VARIATION BY ADOPTING DIFFERENT INTERPRETATION ON ANY SETTLED I SSUE. 5.10. IN OUR VIEW THE WOODWARD GOVERNOR CASE (SUPR A) RELIED ON BY LD. ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 20 D.R. IS OF NO AVAIL TO REVENUE AS ITSELF LAYS DOWN THAT PROFITS AND GAINS OF ANY PREVIOUS YEAR ARE REQUIRED TO BE COMPUTED IN AC CORDANCE WITH RELEVANT ACCOUNTING STANDARDS. SIMILARLY THE CASE OF G.R. K ARTHIKEYAN (SUPRA) ALSO WILL NOT BENEFIT THE REVENUE AS IT DID NOT DECIDE A NY CONTROVERSY OF ACCRUAL OR MERCANTILE SYSTEM OF ACCOUNTING. THE JUDGMENT DE ALS WITH WINNING FROM GAMBLING AND BATTING INCOME THERE IS NO ISSUE ABOU T ACCOUNTS OR ACCRUAL IN THIS CASE. 5.11. COMING TO LEARNED DR RELIANCE ON THE CASE OF TUTICORIN ALKALI CHEMICALS (SUPRA) THE SAME DEALS WITH THE RECEIPTS BEING IN THE NATURE OF CAPITAL OR REVENUE. THE FACTUM OF RECEIPT WAS NOT D ISPUTED AND WHETHER THE RECEIPT WAS CAPITAL OR REVENUE HONBLE SUPREME COU RT HELD THAT WHILE DECIDING THE QUESTION THE SAME HAS TO BE ON THE B ASIS OF PRINCIPLE OF LAW AND NOT IN ACCORDANCE WITH THE ACCOUNTANCY PRACTICE . IN OUR VIE THE CASE BEFORE US PAUSES A PICTURE ON DIFFERENT FACTS WHICH HAVE BEEN MENTIONED IN DETAIL ABOVE. 5.12. IN OUR CONSIDERED OPINION ALL THE ABOVE JUDG MENTS CLEARLY FAVOUR THE STAND TAKEN BY THE ASSESSEE. WE MAY HASTEN TO MENTI ON THAT LOOKING AT THE INTRICACIES THE FACTS MAY VARY THEREFORE BASIC PRINCIPLES OF ACCRUAL OR MERCANTILE SYSTEM AS LAID DOWN BY VARIOUS AUTHORITI ES ARE TO BE APPLIED IN A ITA NO. 250/DEL/10 DCIT VS. DAKSHIN HARYANA BIJLI VITRAN NIGAM 21 CAREFUL MANNER. THE ASSESSEE BEING A STATE PSU; THE SUR-CHARGE ON DELAYED PAYMENT BEING DISPUTABLE ITEM; WAS NOT MANDATORILY PAYABLE AT THE TIME OF PAYMENT OF ELECTRICITY CONSUMPTION BILL; WAS NOT AN ACCRUED RECEIPT IN VIEW OF THE ACCOUNTING POLICY ACCEPTED BY THE REVENUE. THEREFORE SUCH AMOUNT OF SURCHARGE CANNOT BE HELD TO BE TAXABLE AS IT IS NOT THE REAL INCOME OF THE ASSESSEE AND IS HYPOTHETICAL BY NATURE IN GIVEN FAC TS AND CIRCUMSTANCES. 5.13. IN VIEW OF THE FOREGOINGS WE ARE OF THE VIEW THAT THE AMOUNT OF SUR- CHARGE NOT REALIZED BY THE ASSESSEE DOES NOT AMOUN T TO ACCRUED OF RECEIPT TAXABLE AS INCOME. CIT(A) HAS RIGHTLY DELETED THE A DDITION WHICH WE UPHOLD. 6. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30-11-2011. SD/- SD/- (K.D. RANJAN ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30-11-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR