MP Power Management Co Ltd v Asstt CIT

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The Tax PublishersITA No 36/JAB/2017 And ITA No 39/JAB/2017 2022 TaxPub(DT) 4281 (Jab-Trib) IN THE ITAT, JABALPUR BENCH SANJAY ARORA, A.M. & MANOMOHAN DAS, J.M. MP Power Management Co. Ltd. v. Asstt. CIT I.T.A. No. 36/JAB/2017 And I.T.A. No. 39/JAB/2017 17 June, 2022 Appellant by : Sukesh Kumar, FCA Respondent by : Shravan Kumar Gotra, CIT-DR, ORDER *Per Bench* These are cross appeals by the Assessee and the Revenue directed against the order by the Commissioner of Income Tax (Appeals)-2, Jabalpur (CIT(A) for short) dated 19-6-2017, partly allowing the assessees appeal contesting it's assessment under section 143(3) of the Income Tax Act, 1961 (the Act hereinafter) dated 20-12-2016 for assessment year (AY) 2011-12. 2. The Appeals raise two issues, which we shall take up in seriatim. The assessee, a power trading company, sources power from power generating companies, also public sector companies, for supply primarily to power distribution companies (DISCOMs), again public sector companies. It entered into a power sale agreement (PSA) for sale of power on 28-4-2010 with Lanco Power Trading Ltd. (LANCO) (now National Energy Trading and Services Ltd.), agreeing to sell 150 kwh of power each month from May, 2010 to March 2011, save for the month of January, 2011. As per clause-2(f) of the said agreement (PB pgs. 4-11), a failure on the part of the purchasing company (LANCO) to schedule at least 80% of the agreed power purchase would make it liable for compensation to the assessee @ Rs. 2 per kwh (of short supply). On account of shortfall in sourcing power during the period of the agreement, the assessee company raised a compensation for Rs. 86.56 crores on the buyer-company in terms of clause-2(f) of the agreement. The same was disputed by the latter, even as the assessee-company appropriated Rs. 5 cr. by realising a letter of credit (LC) opened by LANCO in it's favour for that amount. The assessee admitting the income of Rs. 5 crore for the relevant year, i.e., assessment year 2011-12, the issue arose as to the accrual of income, if any, qua the balance, unrealized claim of Rs. 81.56 cr. The assessing officer regarded the same as the assessees income for the current year, at Rs. 72.50 cr. This, as explained by Shri Kumar, the ld. counsel for the assessee, during hearing, was as the dispute had attained resolution through an award by the Madhya Pradesh Electricity Regulatory Commission (MPERC), which vide its Order, dated 31-12-2013 arrived at a total compensation of Rs. 14.06 crore., which had accordingly been disclosed as income at Rs. 5 crore and Rs. 9.06 crore for assessment year 2011-12 and assessment year 2014-15 respectively. In appeal, the learned Commissioner (Appeals) allowed relief for Rs. 63.44 crore by deducting Rs. 9.06 cr. on the ground that the amount in excess of Rs. 14.06 crore (of which Rs. 5 crore stood already added suo motu by the assessee) could not be regarded as accrued. Reliance was placed by him on the decision in CIT v. Chunilal V. Mehta & Sons P. Ltd. (1971) 82 ITR 54 (SC) : 1971 TaxPub(DT) 0360 (SC). Aggrieved, both the assessee and the Revenue are in appeal, i.e., for Rs. 9.06 crore (confirmed for addition) and Rs. 72.50 crore (deleted in appeal) respectively, raising the following grounds of appeal: SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No 36/JAB/2017 And ITA No 39/JAB/2017
2022 TaxPub(DT) 4281 (Jab-Trib)

IN THE ITAT, JABALPUR BENCH

SANJAY ARORA, A.M. & MANOMOHAN DAS, J.M.

MP Power Management Co. Ltd. v. Asstt. CIT

I.T.A. No. 36/JAB/2017 And I.T.A. No. 39/JAB/2017

17 June, 2022

Appellant by : Sukesh Kumar, FCA

Respondent by : Shravan Kumar Gotra, CIT-DR,

ORDER

Per Bench

These are cross appeals by the Assessee and the Revenue directed against the order by the Commissioner of Income Tax (Appeals)-2, Jabalpur (CIT(A) for short) dated 19-6-2017, partly allowing the assessees appeal contesting it's assessment under section 143(3) of the Income Tax Act, 1961 (the Act hereinafter) dated 20-12-2016 for assessment year (AY) 2011-12.

2. The Appeals raise two issues, which we shall take up in seriatim. The assessee, a power trading company, sources power from power generating companies, also public sector companies, for supply primarily to power distribution companies (DISCOMs), again public sector companies. It entered into a power sale agreement (PSA) for sale of power on 28-4-2010 with Lanco Power Trading Ltd. (LANCO) (now National Energy Trading and Services Ltd.), agreeing to sell 150 kwh of power each month from May, 2010 to March 2011, save for the month of January, 2011. As per clause-2(f) of the said agreement (PB pgs. 4-11), a failure on the part of the purchasing company (LANCO) to schedule at least 80% of the agreed power purchase would make it liable for compensation to the assessee @ Rs. 2 per kwh (of short supply). On account of shortfall in sourcing power during the period of the agreement, the assessee company raised a compensation for Rs. 86.56 crores on the buyer-company in terms of clause-2(f) of the agreement. The same was disputed by the latter, even as the assessee-company appropriated Rs. 5 cr. by realising a letter of credit (LC) opened by LANCO in it's favour for that amount. The assessee admitting the income of Rs. 5 crore for the relevant year, i.e., assessment year 2011-12, the issue arose as to the accrual of income, if any, qua the balance, unrealized claim of Rs. 81.56 cr. The assessing officer regarded the same as the assessees income for the current year, at Rs. 72.50 cr. This, as explained by Shri Kumar, the ld. counsel for the assessee, during hearing, was as the dispute had attained resolution through an award by the Madhya Pradesh Electricity Regulatory Commission (MPERC), which vide its Order, dated 31-12-2013 arrived at a total compensation of Rs. 14.06 crore., which had accordingly been disclosed as income at Rs. 5 crore and Rs. 9.06 crore for assessment year 2011-12 and assessment year 2014-15 respectively. In appeal, the learned Commissioner (Appeals) allowed relief for Rs. 63.44 crore by deducting Rs. 9.06 cr. on the ground that the amount in excess of Rs. 14.06 crore (of which Rs. 5 crore stood already added suo motu by the assessee) could not be regarded as accrued. Reliance was placed by him on the decision in CIT v. Chunilal V. Mehta & Sons P. Ltd. (1971) 82 ITR 54 (SC) : 1971 TaxPub(DT) 0360 (SC). Aggrieved, both the assessee and the Revenue are in appeal, i.e., for Rs. 9.06 crore (confirmed for addition) and Rs. 72.50 crore (deleted in appeal) respectively, raising the following grounds of appeal: