Income Tax Appellate Tribunal Delhi Dakshin Haryana Bijli Vitran Nigam ... vs Department Of Income Tax on 6 November, 2009 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH "B" DELHI) BEFORE SHRI A.D. JAIN AND SHRI A.N. PAHUJA ITA NO. 4606(Del)2011 Assessment year: 200809 Dy. Commissioner of Income Tax, The Dakshin Haryana Bijli Hisar. V.Vitran Nigam Ltd., Hisar. (Appellant) (Respondent) Appellant by: Shri Krishna, CIT/DR Respondent by: S/Shri K. Sampath, Adv./V.Raj Kumar, Adv. ORDER PER A.D. JAIN, J.M. This is Department's appeal for assessment year 200809, taking the following grounds: "1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of ` 1,53,97,80,054/ made by the Assessing Officer on account of nonrealization of provisions of surcharge. 2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of ` 2,44,55,32,835/ made u/s 40(a)(ia) on account of payment made on account of SLDL & wheeling charges, which are made in the work of providing technical services, without deducting TDS as provided under section 194 J of the Income Tax Act, 1961." 2 ITA 4606(Del)2011 2. Apropos ground No.1, the AO observed that as per Notes to Schedule 10 of the Audited Report, a sum of ` 153.97 crores, being surcharge assessed but not realized, had been withdrawn from GH 62.240 (Income from Surcharge) and adjusted against GH 23.934 (Surcharge levied but not realized). On query, the assessee submitted that the assessee Nigam was accounting for income of surcharge on delayed payment on realization basis in pursuance of the decision of the Audit Committee of the Nigam, which was in conformity with the Accounting Standards 1&9 and the same had been recognized judicially, observing that income is required to be computed in terms of the Accounting Standards prescribed by the ICAI; that during assessment years 200607 and 200708, similar additions had been made, which were challenged before the ld. CIT(A) and the ld. CIT(A), vide order dated 6.11.2009, for assessment year 200607, had decided the issue in favour of the AO; that,so far as regards assessment year 200708, the order of the ld. CIT(A) was awaited; and that the amount of surcharge was billed for ` 1,74,45,62,158/ , against which, only ` 20,47,82,104/ had been realized, which had been taken as income during the year. The AO observed that the assessee was following the mercantile 3 ITA 4606(Del)2011 system of accounting and whenever the right to receive money in the course of a trading transaction accrues or arises, even though income is not realized, income embedded in the receipt is deemed to accrue or arise; that during the year, however, the income of surcharge levied on delayed payments was being accounted for on the basis of its actual realization/collections, which was inconsistent with the mercantile system of accounting and so, not allowable; that as soon as the surcharge is levied on the delayed payment, the assessee has a right to receive money from the customers, even though the income has not been realized from the customers; that during the year, an amount of ` 153.98 crores had been transferred to "provision for surcharge not realized"; and that this income had been reduced from the total income in the profit and loss account and also reduced from the debtors of the assessee company. The AO placed reliance on the following case laws: 1. "CIT vs. Govind Prasad Prabhu Nath", 171 ITR 147(All); 2. "CIT v. Bharat Petroleum Corporation Ltd.", 202 ITR 492(Cal); 3. "Morvi Industries Ltd. v. CIT", 82 ITR 835(SC); and 4. "CAG IT v. Raja Rajeswari Narikelly Estate", 199 ITR 383(Ker). 4 ITA 4606(Del)2011 3. The AO further observed that the assessee's submission was also not acceptable when it had been contended that the income by way of surcharge was a hypothetical income, since this was not borne out from the facts on record; that a part of the surcharge levied by the assessee during the year had been realized and accounted for as income, amounting to ` 20.48 crores; that the consumers subjected to levy of surcharge had accepted the surcharge in principle; that merely since the same had not been deposited by the consumers with the assessee company during the year could not defeat the right of the assessee to realize the surcharge levied; that the surcharge amount was also reflected in the debtors of the