Ascend Telecom Infrastructure Private Limited, Secunderabad V. Dy. Commissioner of Wealth Tax , Circle-1(1), Hyderabad

ITA 1097/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6629 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 08-04-2021
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Depreciation; Additional evidence; Bad and doubtful debts; Revised return; Capital expenditure; TDS; Set aside; FORM 26AS
• Section: 143(3); 143(1)

Judgement Text

ITA NOS 1097 AND 1098 OF 2018 ASCEND TELECOM INFRAS TRUCTURE P LTD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS.1097 & 1098/HYD/2018 ASSESSMENT YEARS: 2009-10 & 2011-12 ASCEND TELECOM INFRASTRUCTURE (P) LTD, SECUNDERABAD PAN:AAECA2381H VS. DY CIT CIRCLE 1(1) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI K.R. VASUDEVAN REVENUE BY : SRI SUNIL KUMAR PANDEY,DR DATE OF HEARING: 08/04/2021 DATE OF PRONOUNCEMENT: 15/04/2021 ORDER PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.YS 2009-10 & 2011-12 AGAINST THE ORDERS OF THE CIT (A)-11, HYDER ABAD, BOTH DATED 26.2.2018. ITA NO.1097/HYD/2018 A.Y 2009-10 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY FORMERLY KNOWN AS M/S. ASTER INFRASTRUCTURE (P) LTD , FILED ITS ORIGINAL RETURN OF INCOME ON 29.9.2009 FOR THE A.Y 2009-10 DECLARING A TOTAL LOSS OF RS.(-)14,70,29,974/-. THE REAFTER, A REVISED RETURN OF INCOME WAS FILED ON 13.2.2011 ADMITTING T HE LOSS OF RS.14,90,56,533/-. THE RETURN WAS INITIALLY PROCESS ED U/S 143(1) AND SUBSEQUENTLY WAS TAKEN UP FOR SCRUTINY U/S 143( 3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY ADMITTED GROSS ITA NOS 1097 AND 1098 OF 2018 ASCEND TELECOM INFRAS TRUCTURE P LTD PAGE 2 OF 7 RECEIPTS OF RS.38.67 CRORES AND CLAIMED CREDIT FOR TDS OF RS.3,83,13,255/-. THE ASSESSING OFFICER ALSO OBSERV ED FROM FORM NO.26AS THAT AS PER THE TDS CERTIFICATES, THE GROSS RECEIPTS WORKED OUT AT RS.46.51 CRORES AND THEREFORE, THERE WAS A DIFFERENCE OF RS.7.84 CRORES IN THE TURNOVER. WHEN ASKED TO EXPLAIN THE DIFFERENCE, THE ASSESSEE EXPLAINED THAT IT HAD RENDERED CERTAIN SERVICES TO ITS CLIENTS SUCH AS BHARATI AIR TEL, IDEA CELLULAR ETC., WHO STATED TO HAVE REIMBURSED SUCH EXPENDITUR E AND DEDUCTED TDS THEREON. IT WAS CLAIMED THAT SINCE IT WAS A PURE REIMBURSEMENT OF EXPENDITURE, THE ASSESSEE NEED NOT CONSIDER IT AS ITS RECEIPT. THE ASSESSING OFFICER WAS, HOWEVER, NOT CONVINCED WITH THE ASSESSEES CONTENTIONS AND THEREFORE, THE DIFFERENCE IN TURNOVER OF RS.7,83,89,119/- WAS TREATED AS UNACCOU NTED RECEIPTS OF THE ASSESSEE AND THE RESULTANT INCREASED LOSS OF RS.20,26,559/- WAS ALSO DISALLOWED. FURTHER, HE ALSO DISALLOWED IN TEREST EXPENDITURE OF RS.58,15,000 U/S 36(1)(III) OF THE I T ACT TREATING IT AS INTEREST ATTRIBUTABLE TO ACQUISITION OF FIXED AS SETS. 3. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE CIT (A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. TH E CIT (A) CONFIRMED THE ADDITION ON ACCOUNT OF DIFFERENCE IN THE GROSS TURNOVER REPORTED BY THE ASSESSEE AND AS FOUND IN F ORM -26AS. AS REGARDS THE INTEREST WHICH IS CAPITALIZED, THE C IT (A) HELD THAT THE EXPENDITURE IS FOR EXPANSION OF BUSINESS AND TH EREFORE, IT IS CAPITAL IN NATURE. HOWEVER, HE ALLOWED DEPRECIATION ON SUCH CAPITAL EXPENDITURE. THUS, AGAINST THE ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US BY RAISING THE FOLL OWING GROUNDS OF APPEAL: 1. ADDITION ON ACCOUNT OF DIFFERENCE BETWEEN GROSS RECEIPTS AS PER FORM 26AS VIS--VIS TURNOVER AS PER PROFIT A ND LOSS A/C RS.8,04,15,678/- ITA NOS 1097 AND 1098 OF 2018 ASCEND TELECOM INFRAS TRUCTURE P LTD PAGE 3 OF 7 A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN AFFIRMING THE ADDITION MADE BY THE LEARNED ASSE SSING OFFICER (AO) ON ACCOUNT OF DIFFERENCE BETWEEN GROSS RECEIPTS AS PER FORM 26AS VIS-A-VIS TURNOVER AS PER PROFIT A ND LOSS ACCOUNT. B) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DIFFERENCE REPRESENTS THE REIMBURSEMENT OF EXPENDITURE RECOVER ED ON COST TO COST BASIS BY THE APPELLANT, AND HENCE SHAL L NOT FORM PART OF THE TURNOVER. C) THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THA T RECOVERY OF EXPENDITURE ON A COST TO COST BASIS CANNOT PARTA KE THE NATURE OF INCOME TO BE CHARGED TO TAX. NOTWITHSTANDING AND WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE A PPELLANT FILED REVISED RETURN OF INCOME CONSIDERING THE REIMBURSEMENTS RECOVERED FROM THE CUSTOMERS AS PART OF ITS TURNOVER AND SUBSEQUENTLY CLAIMING THE AMOUNT EXPEN DED AS DEDUCTION. D) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APP ELLANT HAS NOT PROVIDED ANY CONFIRMATION FROM TELECOM OPER ATORS. E) THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE STATEMENT OF ACCOUNTS FROM SUCH OPERATORS, THE DEBIT NOTES AN D THE DETAILED WORKING FOR SUCH DEBIT NOTES FURNISHED BY THE APPELLANT TO SUBSTANTIATE THE RECOVERY OF DIESEL AN D ELECTRICITY EXPENDITURE FROM THE CELLULAR OPERATORS . F) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION MADE BY THE LEARNED AO MERELY ON THE BASIS OF NON-FURNIS HING OF CROSS VERIFICATION FROM THE CUSTOMERS AND IGNORING THE AGREEMENTS, LEDGERS, DEBIT NOTES FURNISHED FOR VERI FICATION BY THE APPELLANT. 2. DISALLOWANCE OF INTEREST EXPENDITURE CLAIMED UND ER SECTION 36(1)(III) OF THE . INCOME-TAX ACT, 1961 (' THE ACT')- RS.58,15,000/- A) THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF THE INTEREST EXPENDITURE MADE BY THE LEARNED AO BY CONSIDERING THE ACQUISITION OF ASSETS BY THE APPELL ANT AS FOR THE PURPOSE OF EXTENSION OF EXISTING BUSINESS'. B) THE LEARNED CIT(A) ERRED IN CONCLUDING THAT THE INSTALLATION OF NEW TOWER IS EXPANSION OF BUSINESS BY WAY OF ENTERING NEW AREAS FOR SERVICE. C) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE ACQUISITION OF ASSETS AND CONSTRUCTION OF TOWER BY THE APPELLANT DOES NOT TANTAMOUNT TO 'EXTENSION' OF EXI STING BUSINESS AS PROVIDED UNDER SECTION 36(1)(III) OF TH E ACT. ITA NOS 1097 AND 1098 OF 2018 ASCEND TELECOM INFRAS TRUCTURE P LTD PAGE 4 OF 7 D) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE CONSTRUCTION OF TOWERS WAS FOR THE PURPOSE OF FACIL ITATING THE ONGOING BUSINESS OF THE APPELLANT AND THERE WAS NO EXTENSION OF EXISTING BUSINESS. E) THE LEARNED CIT(A) ERRED IN NOT PLACING RELIANCE ON THE JUDICIAL PRECEDENTS QUOTED BY THE APPELLANT WHEREIN THE COURTS HAD HELD THAT INTEREST PAID ON CAPITAL BORRO WED FOR ACQUIRING BUSINESS ASSET IS AN ADMISSIBLE EXPENDITU RE UNDER SECTION 36(1)(III) OF THE ACT. F) NOTWITHSTANDING THE ABOVE, THE LEARNED CIT(A) OU GHT TO HAVE APPRECIATED THAT THE ACQUISITION OF THE ASSETS WERE IN THE NATURE OF REPLACEMENT OR UPGRADATION OF ASSETS ALREADY HELD BY THE APPELLANT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND MODIFY THE ABOVE GROUNDS DURING THE COURSE OF THE APPEAL. FOR THE ABOVE AND ANY OTHER GROUNDS WHICH MAY BE RA ISED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED AO BE SET ASIDE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE VERY SAME ISSUE OF THE DIFFERENCE BETWEEN THE G ROSS TURNOVER AND THE TDS CERTIFICATES HAD COME UP BEFORE THE TRI BUNAL IN ASSESSEES OWN CASE FOR THE A.Y 2008-09 AND VIDE IT S ORDER DATED 11.8.2017, THE COORDINATE BENCH OF THE TRIBUNAL HAD REMANDED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO CONSIDERATION. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING GONE THROUGH THE ADDITIONAL EVIDENCE FILE D BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS TRIED T O RECONCILE THE DIFFERENCE BETWEEN THE GROSS RECEIPTS AND THE TDS C ERTIFICATES AND IN SUPPORT THEREOF, HAS FILED THE RELEVANT DOCUMENT S BEFORE US. WE THEREFORE, DEEM IT FIT AND PROPER TO ADMIT THE SAME AND SET ASIDE ITA NOS 1097 AND 1098 OF 2018 ASCEND TELECOM INFRAS TRUCTURE P LTD PAGE 5 OF 7 THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO CONSIDERATION IN ACCORDANCE WITH LAW. THIS GROUND O F APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES. 7. AS REGARDS GROUND NO.2, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE CIT (A) HAS ALREA DY GRANTED RELIEF OF DEPRECIATION ON THE INTEREST CAPITALIZED, THIS GROUND BECOMES ACADEMIC. IT IS AND ACCORDINGLY REJECTED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1098/HYD/2018 A.Y 2011-12 9. BRIEF FACTS OF THE CASE FOR THIS A.Y ARE THAT TH E ASSESSEE COMPANY FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.35,11,950/- UNDER THE NORMAL PROVISIONS OF THE I .T. ACT AND BOOK PROFIT OF RS.2,91,64,033/-. THEREAFTER, IT FIL ED ITS REVISED RETURN OF INCOME ON 29.03.2013 DECLARING TOTAL INCO ME AT LOSS OF (-)RS.139,15,27,900/- AND BOOK PROFIT DECLARED AT ( -) RS.81,58,03,104/-. DURING THE ASSESSMENT PROCEEDING S U/S 143(3) OF THE ACT, THE ASSESSING OFFICER OBSERVED T HAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.1,01,34,066/- TOWARDS ADVANCE AND DEBIT BALANCE WRITTEN OFF TO ITS P&L A/C. SINCE T HE ASSESSEE COULD NOT FURNISH RELEVANT DOCUMENTS AND OTHER DETAILS EX PLAINING THE NATURE OF EXPENSE DEBITED, ASSESSING OFFICER DISALL OWED THE SAME AND BROUGHT IT TO TAX. 10. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT (A) WHO GRANTED PARTIAL RELIEF OF RS.65,32,918/ - I.E.,TO THE EXTENT OF DETAILS SUBMITTED BY THE ASSESSEE AND THE BALANCE WAS ITA NOS 1097 AND 1098 OF 2018 ASCEND TELECOM INFRAS TRUCTURE P LTD PAGE 6 OF 7 DISALLOWED. AGGRIEVED, THE ASSESSEE IS IN APPEAL BE FORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. DISALLOWANCE OF DEDUCTION CLAIMED IN RESPECT OF WRITE OFF OF ADVANCES AND DEBIT BALANCES UNDER SECTION 36(1)( VII) OF THE INCOME-TAX ACT,1961 ('THE ACT')RS.36,0L,148/-. A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ['CIT(A)'] ERRED IN RESTRICTING THE CLAIM OF DEDUCTION UNDER S ECTION 36(1)(VII) OF THE ACT IN RESPECT OF WRITE OFF OF AD VANCES AND DEBIT BALANCES TO RS.65,32,918 AND DISALLOWING BALA NCE RS.36,OL,148 BY HOLDING THAT THE APPELLANT DID NOT PROVIDE DETAILS OF SUCH WRITE-OFF. B) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T AS PER THE JUDICIAL POSITIONS HELD BY VARIOUS COURTS, THE APPELLANT IS ENTITLED FOR DEDUCTION OF BAD DEBTS UNDER SECTION 3 6(1)(VII) BY MERE WRITING OFF OF A DEBT IN THE BOOKS OF ACCOUNTS AND IS NOT REQUIRED TO DEMONSTRATE BY PROVIDING THE DETAILS OF SUCH DEBT TO ESTABLISH THE SAME AS IRRECOVERABLE. C) THE LEARNED CIT(A) ERRED IN NOT PLACING RELIANCE ON THE AUDITED PROFIT AND LOSS ACCOUNT SUBMITTED BY THE AP PELLANT WHICH REFLECTS THAT THE ADVANCES AND DEBIT BALANCES WRITTEN OFF WERE DEBITED TO THE PROFIT AND LOSS ACCOUNT THU S SATISFYING THE REQUIREMENT OF SECTION 36(1)(VII) FOR CLAIMING DEDUCTION THEREUNDER. D) THE LEARNED CIT(A) OUGHT TO HAVE PLACED RELIANCE ON CIRCULAR N0.12/2016 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES PROVIDING THAT CLAIM FOR ANY DEBT OR PART THE REOF IN ANY PREVIOUS YEAR SHALL BE ADMISSIBLE UNDER SECTION 36( 1)(VII) OF THE ACT, IF IT IS WRITTEN OFF AS IRRECOVERABLE IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THAT PREVIOUS YEAR AND ON THAT BASIS SHOULD HAVE ALLOWED THE CLAIM OF DEDUCTION OF THE APPELLANT IN ITS ENTIRETY. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND MODIFY THE ABOVE GROUNDS DURING THE COURSE OF THE APPEAL. FOR THE ABOVE AND ANY OTHER GROUNDS WHICH MAY BE RA ISED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED AO BE SET ASIDE. 11. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ASSESSEE IS PRODUCING THE DETAIL S FOR THE BALANCE OF THE BAD DEBTS WRITTEN OFF IN THE FORM OF ADDITIONAL EVIDENCE. THEREFORE, HE SOUGHT ADMISSION OF THE ADD ITIONAL ITA NOS 1097 AND 1098 OF 2018 ASCEND TELECOM INFRAS TRUCTURE P LTD PAGE 7 OF 7 EVIDENCE AND REMAND OF THE ISSUE TO THE FILE OF THE ASSESSING OFFICER OR THE CIT(A) FOR RECONSIDERATION. 12. THE LEARNED DR WAS ALSO HEARD. 13. SINCE THE ADDITIONAL EVIDENCE FILED IS IN SUPPO RT OF ASSESSEES CONTENTIONS AND IS LIKELY TO PROVE THAT THE DEBITS HAVE BEEN WRITTEN OFF, WE DEEM IT FIT AND PROPER TO ADMI T THE SAME AND REMAND THE ISSUE TO THE FILE OF THE ASSESSING OFFIC ER FOR DENOVO CONSIDERATION IN ACCORDANCE WITH LAW. NEEDLESS TO M ENTION THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF H EARING. 14. IN THE RESULT, ASSESSEES APPEALS ARE PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH APRIL, 2021. SD/- S D/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 15 TH APRIL, 2021. VINODAN/SPS COPY TO: S.NO ADDRESSES 1 ASCEND TELECOM INFRASTRUCTURE (P) LTD,NO.37/2 PLOT NO.332, MANI MANSION, DEFENCE COLONY, SAINIKPURI, SECUNDERABAD 500094 2 DY.CIT, CIRCLE 1(1) HYDERABAD 3 CIT (A) - 11, HYDERABAD 4 PR. CIT - 2, HYDERABAD 5 DR, ITAT HYDERABAD BENCHES 6 GUARD FILE BY ORDER