INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowable expenditure made towards provision for differential price - Allowability -

Assessee was engaged in business of generating power using natural gas as fuel. AO noticed that assessee-company had paid a sum for Ravva Satellite Gas to GAIL and provided a provision for Rs. 8,31,86,662 over and above the said sum paid by assessee to the credit of GAIL. AO completed assessment making addition of the aforesaid amount brushing aside the contention of assessee that it was bound to pay the differential amount as per contract entered into with GAIL. Held: As decided in assessee's own case [[ITA Nos. 2092, 2093 & 2094/Hyd/2018, dt. 19-11-2019] : 2019 TaxPub(DT) 7661 (Hyd-Trib) ] liability of assessee to pay at revised price was an ascertained liability and not a contingent liability as held by Revenue. Assessee was liable to pay revised charges w.e.f. 1.12.2008 but revised charges were not finalized though maximum price which could be revised or increased was mentioned in the communication from GAIL. From copy of the new domestic natural gas price of 2014, cost of price should be determined in accordance with formula given therein and it was also clarified that cost of price so determined under these guidelines was not to be applicable where prices have been fixed directly for a certain period of time. Therefore, claim of assessee under section 37(1) was allowable.

REFERRED : Rotork Controls India (P) Ltd. v. CIT (2009) 314 ITR 0062 (SC) : 2009 TaxPub(DT) 1730 (SC) A.P. Gas Power Corporation Ltd v. Dy. CIT [ITA Nos. 2092, 2093 & 2094/Hyd/2018, dt. 19-11-2019] : 2019 TaxPub(DT) 7661 (Hyd-Trib)

FAVOUR : In assessee's favour

A.Y. : 2010-11

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