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| The Tax Publishers2020 TaxPub(DT) 4596 (Karn-HC) : (2021) 276 TAXMAN 0439 INCOME TAX ACT, 1961
Section 5
Since the amount of transmission charges (wheeling charges) never accrued to the assessee and was, in fact, an hypothetical income, and not a real income, it could not be subjected to tax.
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Income - Accrual - Wheeling charges - Real or hypothetical income
Revenue was in appeal against the order of Tribunal holding that, in view of the uncertainty of recovering the transmission charges (wheeling charges), though it was accrued the same is not liable to tax in the current assessment year without taking into consideration the mercantile system of accounting being followed by the assessee. Held: Aforesaid income never accrued to the assessee and was, in fact, an hypothetical income, and not a real income which could be subjected to tax and also in view of Accounting Standard-9, the assessee rightly decided not to recognize the revenue for wheeling charges for relevant assessment year.
REFERRED : J.K. Industries Ltd. v. UOI (2007) 297 ITR 176 (SC), Morvi Industries Ltd. v. CIT (Central) (1971) 82 ITR 835 (SC) : 1971 TaxPub(DT) 397 (SC), CIT v. A. Gajapathy Naidu (1964) 53 ITR 114 (SC) : 1964 TaxPub(DT) 323 (SC), Keshav Mills Ltd. v. CIT (1953) 23 ITR 230 (SC) : 1953 TaxPub(DT) 46 (SC) and Industrial Linings v. CIT (2003) 263 ITR 315 (Guj) : 2003 TaxPub(DT) 706 (Guj-HC).
FAVOUR : In favour of assessee.
A.Y. : 2001-02
IN THE KARNATAKA HIGH COURT
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