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Income Tax Appellate Tribunal, “D”, BENCH KOLKATA
Before: SHRI S. S. GODARA, JM & DR. A.L.SAINI, AM
Appellant by : R. Choudhury, Addl. CIT Respondent by : None सुनवाई क� तार�ख / Date of Hearing : 16/08/2018 घोषणा क� तार�ख/Date of Pronouncement: 25/10/2018 आदेश / O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the Revenue, pertaining to Assessment Year 2004-2005, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-4, Kolkata, dated 27.07.2017, which in turn arises out of an order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 12.12.2006.
At the time of hearing none appeared on behalf of assessee in spite of issuance of notice for hearing more than one occasion and Ld. Departmental Representative (DR), was present for the appellant Revenue. In the absence of any appearance by the assessee, the appeal is being disposed of ex parte qua the assessee, after hearing Ld. DR for the Revenue on merits in terms of Rule 24 of the Income Tax Appellate, Tribunal, Rules 1963.
The brief facts qua the issue are that during the assessment year, the assessee has debited electricity arrear amount to the tune of Rs. 4,48,31,493/-. The Note No.5 of schedule 18, of financial statements of the company, provides the following details about the arrear amount to the tune of Rs. 4,48,31,493/-, which is given below :
“Pursuant to the scheme introduced for revival of closed Ferrow Alloys Units in the State of Chattisgarh, the competent authority of the Chattisgarh State Electricity
M/s. Standard Chrome Ltd. A.Y: 2004-05 Board (CSEB) has approved the revival of the closed Ferro Alloys Units of the company. The company has accepted the approval given by the CSEB and on the basis of the said proposal the company has to pay a sum of Rs.4,38,61,713/- towards arrear electricity charges billed by the CSEB up to March, 1997. Accordingly said sum of Rs.4,38,61,713/- has been included in the amount of power and fuel account. In accordance with the scheme, the security deposit held with the CSEB has been adjusted from the amount payable to the CSEWB and an initial payment of Rs.15,64,467/- has been made to the CSEB before releasing the power connection to the Ferro Alloys Units. Balance amount of Rs.2,97,24,876/- is payable in 60 equal monthly installments of Rs.4,95,415/-. However, the assessing officer, having gone through the submissions of the assessee, rejected the contention of the assessee and disallowed electricity charges to the tune of Rs.4,48,31,493/-
Aggrieved by the stand taken by the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the addition. Aggrieved, the Revenue is in appeal before us.
After hearing ld DR for the Revenue, we note that merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. In each case where the accounts are maintained on the mercantile basis it has to be found in respect of any claim, whether such liability was crystallized and quantified during there previous year so as to be required to be adjusted in the books of account of that previous year. If any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years it cannot be disallowed as deduction merely on the basis the accounts are maintained on mercantile basis and that it relates to a transaction of the previous year. For that we rely on the judgment of Hon`ble Gujarat High Court in the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT 213 ITR 523 (Guj). We note that the assessee is a loss making concern and due to continuous losses company has become sick. In the instant case liability for electricity dues was disputed and was settled at Rs.4,48,31,493/-, during the year. We note that where liability for electricity is disputed, it crystallizes in the year in which agreement is reached between the payer and the payee. Therefore, the assessee has rightly
M/s. Standard Chrome Ltd. A.Y: 2004-05 debited electricity charges of Rs.4,48,31,493/- in the assessment year 2004-05. That being so, we decline to interfere in the order passed by the ld CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.