Business expenditure: Accrual of liability – A. Ys. 1988-89 to 1994-95 – Disputed enhanced power tariff – Amount not paid to electricity board – No acknowledgment of liability – No accrual of liability – Amount not deductible:

In the year 1988-89, the A. P. Electricity Board had revised the power tariff. The assessee challenged the revision of the power tariff by filing a writ petition which was dismissed. The assessee preferred an appeal before the Supreme Court. The assessee had not paid the enhanced tariff. In the A. Y. 1994-95, the assessee claimed a deduction of Rs. 4,53,83,917/-being the difference in tariff for the period from 1988-89 to A. Y. 1994-95. The Assessing Officer and the Tribunal disallowed the claim.

On appeal by the assessee, the Telangana and the Andhra Pradesh High Court upheld the decision of the Tribunal and held as under:

“i) The stand of the assessee was wavering throughout. In the three or four assessment years, for which the liability accrued, deduction was not even claimed. Except that the provision was made, it was neither stated that the amount was paid to the electricity supplier or that the liability had been acknowledged.

ii) It is only when the actual accrual takes place, that allowance can be permitted, irrespective of the actual payment. Such accrual would take place only when the matter is settled amicably between the parties to the contract or the adjudication has reached finality. Admittedly, nothing of that had taken place. Therefore, the appellate authorities had rightly rejected the claim of the assessee.”