MILLENNIUM TELECOM LTD, MUMBAI V. ITO WD 5(2)(3), MUMBAI

ITA 1120/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56109 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 24-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Opportunity of being heard
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI B. RAMAKOTAI AH (AM) I.T.A. NO.1120/MUM/2010 (A.Y. 2005-06) M/S. MILLENNIUM TELECOM LTD., 10 TH FLOOR, TELEPHONE HOUSE, V.S. MARG, PRABHADEVI, MUMBAI-400 028. PAN: AADCM3056D VS. INCOME-TAX OFFICER, WARD, 5(2)(3), MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI VED JAIN. RESPONDENT BY SHRI D .S. SUNDER SINGH. DATE OF HEARING 29 - 11 - 2011 DATE OF PRONOUNCEMENT 09 - 12 - 2011 O R D E R PER D.K. AGARWAL, JM : THIS APPEAL PREFERRED BY THE ASSESEE IS DIRECTED A GAINST THE ORDER DATED 01-01-2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSM ENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY WAS INCORPORATED 17-2-2000 WITH THE PRIMARY OBJECT TO PROVIDE E-TENDERING SERVICES, CYBER CAFE SERVICES AND SALE OF INTERNET PACKS. DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS RENDERED TH E ABOVEMENTIONED SERVICES. DURING THE COURSE OF ASSESSMENT, THE AO OBSERVED TH AT THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S.80IA OF THE I.T. ACT, 196 1 (THE ACT), RS.97,29,026/-. ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 2 THE ASSESSEE WAS ASKED TO EXPLAIN AS TO HOW THE COM PANY IS ELIGIBLE FOR DEDUCTION U/S.80IA. IN RESPONSE, IT WAS SUBMITTED B Y THE ASSESSEE THAT : 1) MILLENNIUM TELECOM LIMITED HAS BEEN INCORPORATE D UNDER THE COMPANIES ACT AS A SEPARATE ENTITY FROM 17.10.2000 (SIC). 2) IT IS NOT FORMED BY TRANSFER OF OLD PLANT & MACH INERY. 3) THE UNDERTAKING WAS ENGAGED IN PROVIDING TELECOM MUNICATION SERVICES I.E. E-TENDERING SERVICES WHICH COMES UNDE R INTERNET SERVICES AND ELECTRONIC DATA INTER CHANGE SERVICES. (CATEGORY A LICENCE ATTACHED). 4) MILLENNIUM TELECOM HAS CLAIMED DEDUCTION UNDER 8 0IA FROM A.Y. 2003-04. 5) MILLENNIUM TELECOM LTD. WAS NOT CLAIMING ANY DED UCTION UNDER ANY OTHER SECTIONS. 6) THE UNDERTAKING HAS BEEN AUDITED BY THE STATUTOR Y AUDITORS APPOINTED BY CAG AND AUDIT REPORT HAS BEEN SUBMITTE D WITH THE RETURN OF INCOME. HENCE, THE UNDERTAKING IS ELIGIBLE FOR DEDUCT ION U/S. 80IA I.E. 100% OF PROFIT UPTO A.Y. 2007-08. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES SUBMI SSION. HE OBSERVED THAT THE ASSESSEE IS PROVIDING E-TENDERING SERVICES, CYBER C AFE SERVICES AND SALE OF INTERNET PACKS. HE FURTHER OBSERVED THAT SCRUTINY O F THE ACCOUNTS SHOWED THAT THE RECEIPT OF THE ASSESSEE IN THE CURRENT YEAR I.E . ASSESSMENT YEAR 2005-06 IS AS FOLLOWS : INCOME FROM E-TENDERING SERVICES RS.12,940,000 INCOME FROM SALE OF ISP PACKS RS. . INCOME FROM CYBER CAF RS. . OTHER INCOME RS. 271,447 TOTAL RS.13,211,447 FROM THE ABOVE RECEIPTS OF INCOME, THE AO OBSERVED THAT MAJORITY OF THE RECEIPT WAS FROM E-TENDERING SERVICES WHICH IS NOT ELIGIBLE FOR DEDUCTION AS IT IS NOT A RECEIPT FROM PROVIDING INFRASTRUCTURE SERVICES. THE RECEIPT WAS RECEIVED FROM ITS ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 3 PARENT COMPANY MTNL FOR PROVIDING E-TENDERING SER VICES AS PER SCHEDULE K NOTES TO ACCOUNT WHICH GOES TO PROVE THAT THE RECE IPTS WERE NOT FOR PROVIDING INTERNET SERVICES BUT ONLY A RECEIPT FOR PROVIDING E-TENDERING SERVICES TO ITS PARENT COMPANY. THE AO, FROM THE SCHEDULE TO THE FIXED ASSETS ANNEXED AS SCHEDULE D TO THE BALANCE-SHEET, FURTHER OBSERVED THAT THE ASSESSEE HAD NOT MADE ANY INVESTMENT EITHER IN THE BROADBAND NETWORK OR INTERNET SERVICES WHICH GOES ON TO PROVE THAT THE ASSESSEE WAS ONLY MAKING THE INTERNET SERVICES AND PROVIDING E-TENDERING SERVICES THROUGH ITS WEBSITE. HE FURTHER OBSERVED THAT, IN FACT, THE ASSESSEE COMPANY WAS USING THE INTERNET I NFRASTRUCTURE OF MTNL BY PAYING RENT OF RS.20.88 LAKHS PER ANNUM. HENCE, ACC ORDING TO THE AO, THE ASSESSEE WAS NOT PROVIDING INFRASTRUCTURE FACILITY BUT PROVIDING SERVICES OF E- TENDERING AND MARKETING OF INTERNET SERVICES. THERE FORE, THE ASSESSEE COMPANY IS NOT ENTITLED TO DEDUCTION U/S.80IA. THE AO, AFTE R DISALLOWING THE DEDUCTION U/S.80IA RS.97,29,026/-, COMPLETED THE ASSESSMENT A T AN INCOME OF RS.77,92,157/- VIDE ORDER DATED 14-11-2007 PASSED U /S.143(3) OF THE ACT. 3. ON APPEAL, THE LD. CIT(A) OBSERVED AND HELD AS U NDER :- (I) THE DEDUCTION UNDER SECTION 80IA(4)(II) IS AVAI LABLE ONLY IF TELECOMMUNICATION SERVICES PROVIDED ARE BASIC OR CE LLULAR. THE MEANING OF BASIC TELECOMMUNICATION SERVICE HAS TO BE UNDERSTOO D IN ITS NORMAL COMMERCIAL SENSE AS UNDERSTOOD BY AN ORDINARY USER OF TELECOMMUNICATION SERVICES. TRADITIONALLY SPEAKING, SUCH SERVICES CO ULD BE PROVIDED THROUGH THE CONNECTIVITY OF A LANDLINE. FURTHER, IT SHOULD SATISFY THE BASIC NEEDS OF AN ULTIMATE CUSTOMER IN TELECOMMUNICATION. (II) WHILE REFERRING TO THE DICTIONARY MEANING OF THE TERM BASIC WHICH MEANS CONFIRMING OR SERVING AS A BASE; FUNDAMENTA LLY; SIMPLEST OR LOWER IN LEVEL, THE LD. CIT(A) OBSERVED THAT BASIC TELEC OMMUNICATION SERVICES MEANS TELECOMMUNICATION SERVICES OF LOWEST LEVEL/FI RST LEVEL RENDERED TO AN ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 4 END CUSTOMER. HE FURTHER OBSERVED THAT THE FACTS OF THE PRESENT CASE DO NOT SHOW THAT THE ASSESSEE IS NOT PROVIDING BASIC O R CELLULAR TELECOMMUNICATION SERVICES. (III) FOR CARRYING OUT THE BUSINESS OF PROVIDING T ELECOMMUNICATION AND INTERNET SERVICES, LICENCE OF DEPARTMENT OF TELECOM MUNICATION IS REQUIRED. IT IS TRUE THAT THE LICENCE WAS GRANTED TO THE ASSE SSEE ON 06-10-2000 AND REVISED ON 13-08-2002 BUT THAT DOES NOT MEAN THAT T HE ASSESSEE IS CARRYING OUT THE BUSINESS OF TELECOMMUNICATION. FUR THER, AS PER SCHEDULE B OF THE LICENCE, THE ASSESSEE WAS REQUIRED TO PAY NO MINAL FEE OF RE.1/- PER ANNUM AND IN ADDITION TO THIS THE ASSESSEE WAS REQU IRED TO DEPOSIT AN AMOUNT OF RS.2 CRORES WITH THE DEPARTMENT OF TELECO MMUNICATION FOR CARRYING OUT BUSINESS OF TELECOMMUNICATION. THE BAL ANCE-SHEET OF THE ASSESSEE DOES NOT SHOW THAT IT HAS OFFERED ANY SUCH BANK GUARANTEE TO THE DEPARTMENT OF TELECOMMUNICATION. (IV) THE ASSESSEE HAS NOT MADE SUBSTANTIAL INVESTM ENT IN PLANT & MACHINERY TO CARRY OUT THE BUSINESS OF TELECOMMUNIC ATION AND INTERNET SERVICES. (V) AFTER EXTRACTING THE INVESTMENT MADE BY THE A SSESSEE TOWARDS PLANT & MACHINERY APPEARING AT PAGES 5 & 6 OF THE APPELLA TE ORDER, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT REQUIRED FOR CARRYING OUT THE BUSINESS OF TELECOMMUNICATION SERVICES. (VI) IN THE EARLIER YEARS THE ASSESSEE HAS PAID LE ASE CHARGES AND OTHER CHARGES. THE ASSESSEE HAS NOT INCURRED ANY EXPENSES UNDER THESE HEADS IN THE CURRENT YEAR. FURTHER, THE ASSESSEE HAS NOT SHO WN ANY APPRECIABLE INVESTMENT IN INFRASTRUCTURE IN THE CURRENT YEAR. T HE ASSESSEE HAS NOT EXPLAINED SATISFACTORILY HOW THE BUSINESS WAS CARRI ED OUT WITHOUT MAKING PAYMENT FOR ABOVEMENTIONED CHARGES IN THE CURRENT Y EAR. (VII) IN THIS CASE, THE LD. CIT FOR THE ASSESSMEN T YEAR 2003-04 HAS PASSED ORDER U/S.263 WHEREIN HE HAS HELD THAT THE ORDER PA SSED BY THE AO ALLOWING DEDUCTION IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 5 OF REVENUE AND HENCE HE SET ASIDE THE ASSESSMENT OR DER PASSED U/S. 143(3) DATED 28-10-2005. (VIII) THE ASSESSEE HAS NOT FILED PROPER APPEAL AN D HAS NOT RECTIFIED THE DEFECTS IN THE APPEAL BEFORE THE ITAT AND HENCE THE ITAT DISMISSED THE APPEAL. IN VIEW OF THE ABOVE, THE LD. CIT(A) HELD THAT IT CANNOT BE SAID THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF PROVIDING TELECOMMUNI CATION SERVICES OR PROVIDING BROADBAND INFRASTRUCTURE AND INTERNET SERVICES AND HENCE HE CONFIRMED THE ORDER OF THE AO IN DISALLOWING THE DEDUCTION U/S.80IA OF THE ACT. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SUSTEN ANCE OF DISALLOWANCE OF DEDUCTION U/S.80IA AND LEVY OF INTEREST UNDER SECTI ON 234B AND 234C. 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, REFERS TO THE OBSERVATION OF THE LD. CIT(A) THAT TH E ASSESSEE HAS PROVIDED ONLY E- SERVICES TO ITS PARENT COMPANY, M/S. MAHANAGAR TELE PHONE NIGAM LTD. AND THESE RECEIPTS ARE NOT FOR PROVIDING TELECOMMUNICATION SE RVICES. IT HAS BEEN FURTHER HELD THAT THE ASSESSEE IS ONLY MARKETING INTERNET S ERVICES AND IS NOT ITSELF PROVIDING ANY BASIC TELECOMMUNICATION SERVICES. HE FURTHER SUBMITS THAT IN THIS REGARD THE RELEVANT PROVISIONS OF SECTION 80IA(4)(I I) ARE AS UNDER : (II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS P ROVIDING TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLULA R, INCLUDING RADIO PAGING, DOMESTIC SATELLITE SERVICE, NETWORK OF TURNKING, BROADBAND NETWORK AND INTERNET SERVICE S ON OR AFTER THE 1 ST DAY OF APRIL, 1995, BUT ON OR BEFORE THE 31 ST DAY OF MARCH, 2003. ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 6 6. HE FURTHER SUBMITS THAT IT WILL BE IMPORTANT TO REFER TO THE DEVELOPMENTS WHICH HAVE TAKEN PLACE IN THIS SECTION 80IA(4)(II) SINCE ITS INTRODUCTION BY THE FINANCE ACT 1997, WHICH READS AS UNDER (WRITTEN SUB MISSIONS) : ON GOING THROUGH THE SCHEME OF THE SECTION 80IA I T MAY BE NOTED THAT SECTION 80IA PROVIDES FOR DEDUCTI ON OF PROFIT AND GAINS DERIVED FROM ANY BUSINESS OF INDUS TRIAL UNDERTAKING OR AN ELIGIBLE ENTERPRISE. INDUSTRIAL UNDERTAKING HAS BEEN REFERRED TO IN SUB-SECTION (3) AND CONDITI ONS FOR ITS ELIGIBILITY HAVE BEEN PRESCRIBED IN SUB-SECTION ARE AS UNDER- (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUC TION OF A BUSINESS ALREADY IN EXISTENCE. (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. ACCORDINGLY IN CASE EXEMPTION IS BEING CLAIMED AS A N INDUSTRIAL UNDERTAKING, BOTH THE ABOVE CONDITIONS N EED TO BE FULFILLED. ELIGIBLE ENTERPRISES HAVE BEEN ENUMERATED IN SUB-SE CTION (4). CLAUSE (I) OF SUB-SECTION (4) IS IN RESPECT OF AN E NTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY. TO BE ELIGI BLE UNDER THIS CLAUSE THE ENTERPRISE SHOULD BE (A) OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES; (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR STATE GOVERNMENT FOR TRANSFER OF NEW INFRASTRUCTURE FACILITY WITHIN THE PERIOD STIPULATE D IN THE AGREEMENT. THE INFRASTRUCTURE FACILITY IS DEFINED TO MEAN ROAD , BRIDGE, AIRPORT, PORT, ETC. CLAUSE (II) IS APPLICABLE IN RESPECT OF AN UNDERTAK ING WHICH HAS STARTED OR STARTS PROVIDING TELECOMMUNICATION S ERVICES. THE CLAUSE (II) READS AS UNDER:- (II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS P ROVIDING TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLULA R, INCLUDING RADIO PAGING, DOMESTIC SATELLITE SERVICE, NETWORK OF TURNKING, BROADBAND NETWORK AND INTERNET SERVICES O N OR AFTER THE 1 ST DAY OF APRIL, 1995, BUT ON OR BEFORE THE 31 ST DAY OF MARCH, 2003. ON GOING THROUGH THE ABOVE CLAUSE IT MAY NOTED THA T NO CONDITION IS PRESCRIBED SUCH AS SPLITTING UP, RECON STRUCTION OF ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 7 THE BUSINESS, TRANSFER OF PLANT AND MACHINERY, ETC. , WHICH ARE PRESCRIBED FOR INDUSTRIAL UNDERTAKING OR INFRASTRUC TURE FACILITY. THIS CLAUSE ONLY REQUIRES THAT THE UNDERTAKING SHOU LD START PROVIDING TELECOMMUNICATION SERVICES ON OR AFTER 1 ST APRIL, 1995. AT THE TIME OF ENACTMENT OF THIS CLAUSE BY THE FIN ANCE ACT, 1997, THIS CLAUSE WAS APPLICABLE TO TELECOMMUNICATI ON SERVICES WHETHER THE BASIC OR CELLULAR. SO, THE SC OPE WAS LIMITED TO BASIC OR CELLULAR. THE SCOPE WAS FURTHE R EXPANDED BY THE FINANCE ACT, 1999, BY INSERTING THE WORDS I NCLUDING RADIO PAGING, DOMESTIC SATELLITE SERVICE, NETWORKIN G TRUNKING AND ELECTRONIC DATA INTER-CHANGES. THE SCOPE OF T HIS CALUSE WAS FURTHER EXPANDED BY THE FINANCE ACT, 2001 BY AD DING BROADBAND NETWORK AND INTERNET SERVICES. THUS, THE TELECOMMUNICATION SERVICE IS NOT LIMITED TO BASIC OR CELLULAR AS IS BEING ALLEGED BY THE CIT(A) . THE SCOPE HAS BEEN EXPANDED TO INCLUDE VARIOUS VALUED ADDED S ERVICES INCLUDING INTERNET SERVICES. IN THIS REGARD, THE CONTENTION OF THE AO THAT THE A SSESEE HAS NOT MADE ANY INVESTMENT IN THE INFRASTRUCTURE IS NO T RELEVANT AS THIS SECTION NOWHERE REQUIRES THAT CERTAIN INVES TMENTS NEED TO BE MADE FOR THIS PURPOSE. FURTHER THE OBSE RVATION OF THE AO THAT THE ASSESSEE WAS USING THE INFRASTRUCTU RE OF MAHANAGAR TELEPHONE NIGAM LTD. IS ALSO NOT RELEVANT AS THERE IS NO SUCH CONDITION THAT THE ELIGIBLE COMPANY CANN OT USE THE INFRASTRUCTURE OF OTHER COMPANIES. THERE IS NO PRO VISION OF USING OLD PLANT AND MACHINERY AS IS THE CASE APPLIC ABLE IN THE CASE OF AN INDUSTRIAL UNDERTAKING UNDER SUB-SECTION (3). NOW, COMING TO THE OBSERVATION OF CIT(A), THE OBSER VATION OF THE CIT(A) ON PAGE 4 TO THE EFFECT THAT TELECOMMUNI CATION SERVICES WHICH ARE BASIC AND WHICH SHOULD SATISFY T HE BASIC NEEDS OF AN ULTIMATE CUSTOMER IS ONLY ELIGIBLE IS A LSO NOT CORRECT. THE SCOPE OF SECTION 80IA(4) CLAUSE (II) AS EXPLAINED ABOVE HAS BEEN EXPANDED FROM YEAR TO YEAR AND IS NO T LIMITED TO BASIC OR CELLULAR SERVICES. ACCORDINGLY, THE CI T(A)S OBSERVATION THAT THE APPELLANT IS NOT PROVIDING BAS IC OR CELLULAR TELECOMMUNICATION SERVICES IS NOT RELEVANT TO DECIDE THE ISSUE UNDER CONSIDERATION. THE OBSERVATION OF THE CIT(A) THAT THE APPELLANT HA S NOT FULFILLED THE CONDITION FOR STARTING THE TELECOMMUN ICATION SERVICES SINCE IT HAS NOT GIVEN THE BANK GUARANTEE IS ALSO FACTUALLY INCORRECT. THE APPELLANT COMPANY HAS PRO VIDED THE BANK GUARANTEE AS IS EVIDENT FROM PAGE 15 OF THE PA PER BOOK WHICH ARE NOTES TO THE ACCOUNTS WHEREBY UNDER NOTE 3 IT HAS BEEN STATED CONTINGENT LIABILITIES INCLUDING GUARA NTEE GIVEN ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 8 BY BANKS OF RS.2 CRORES. THIS BANK GUARANTEE OF R S. 2 CRORES HAS BEEN GIVEN TO MEET THE CONDITION OF THE LICENCE . THE OBSERVATION OF THE CIT(A) ON PAGE 6 THAT THE APPELL ANT HAS NOT MADE ANY INVESTMENT IN INFRASTRUCTURE IS ALSO TO RE LEVANT IN VIEW OF THE FACT THAT THE SECTION 80IA(4)(II) NOWHE RE REQUIRES SUBSTANTIAL INVESTMENT IN INFRASTRUCTURE. ALL THAT IT REQUIRES IS IT SHOULD START PROVIDING TELECOMMUNICATION SERVICE S FALLING WITHIN THE SCOPE OF CLAUSE (II). THE APPELLANT IS A SUBSIDIARY OF MAHANAGAR TELEPHON E NIGAM LTD.(MTNL). MTNL CAME INTO EXISTENCE IN THE YEAR 1 986 AS A PART OF THE PRIVATIZATION OF THE TELECOMMUNICATION SERVICES WHEREBY TELEPHONE SERVICES IN THE CITY OF DELHI AND MUMBAI WERE TRANSFERRED FROM DEPARTMENT OF TELECOM TO MAHA NAGAR TELEPHONE NIGAM LTD. IT CONTINUED TO PROVIDE SERV ICES IN THESE TWO CITIES. REALISING THE NEED TO REACH OUT AND TO MAKE TELECOMMUNICATION SERVICES TO THE MASSES AND INTERI OR PART OF THE COUNTRY A NEW TELECOM POLICY WAS UNVEILED IN TH E YEAR 1994. TO ENCOURAGE MORE AND MORE ENTREPRENEURS TO ENTER TELECOM SERVES, SECTION 80IA(4)(II) WAS INSERTED EX EMPTING THE INCOME OF THOSE ENTITIES WHICH START PROVIDING TELECOMMUNICATION SERVICES ON OR AFTER 1 ST APRIL, 1995. OVER A PERIOD, NEW DEVELOPMENTS TOOK PLACE IN THE TELECOMMUNICATION SERVICES AND REALIZING THIS FACT ALSO, THE SCOPE OF THIS CLAUSE WAS EXPANDED TO INCLUDE- (I) RADIO PAGING (II) DOMESTIC SATELLITE SERVICES (III) NETWORKING OF TRUNKING (IV) BROADBAND INTERNET NETWORK. (V) INTERNET SERVICES. CONSIDERING THE IMPORTANCE OF THESE NEW SERVICES, M TNL DECIDED TO HAVE A SEPARATE COMPANY IN THE NAME OF M ILLENNIM TELECOM LTD. I.E. ASSESSEE COMPANY TO START THESE VALUE ADDED SERVICES AND ACCORDINGLY THIS COMPANY WAS INCORPORA TED ON 17 TH FEBRUARY, 2000 AND IT STARTED PROVIDING ITS SERVIC ES IN THE YEAR 2002. THE OBJECT CLAUSE OF THE COMPANY WAS TO OPERATE AND MAINTAIN ALL TYPES OF VALUE ADDED SERVICES IN THE FIELD OF TELECOMMUNICATION INCLUDING BUT NOT LIMITED TO PROV IDING CELLULAR MOBILE SERVICES, ISB SERVICES, IN SERVICES , ISDN SERVICES, MULTI-MEDIA SERVICES, PAGING SERVICES, AN D OTHER VALUE ADDED SERVICES TO MEET THE DEMANDS OF THE CUS TOMERS OR OTHERWISE. THESE OBJECTS CLAUSES ARE PLACED AT PAP ER BOOK PAGE 25. THE LICENCE WAS GRANTED BY THE DEPARTMENT OF TELECOMMUNICATION ON 6 TH OCTOBER, 2000 TO PROVIDE THE ABOVE SERVICES AND THE SAME WAS EXTENDED ON 13 TH AUGUST, 2002. AS ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 9 A PART OF ITS FIRST BUSINESS STRATEGY, THE ASSESSEE COMPANY STARTED PROVIDING E-TENDERING SERVICES WHICH IS A V ALUED ADDED SERVICES AND IS AN INTERNET SERVICE COVERED BY CLAU SE (II) OF SUB-SECTION(4) OF 80IA. THIS WAS A NEW SERVICE. T HE FIRST CUSTOMER OF ITS SERVICES WAS ITS PARENT COMPANY I.E . MAHANAGAR TELEPHONE NIGAM LTD. ITSELF. IN THIS PRO CESS, THE ASSESSEE COMPANY SET UP THE COMPLETE BASE FOR PROVI DING E- TENDERING SERVICES TO THE VARIOUS CUSTOMERS. IN TH IS REGARD, IT WILL BE IMPORTANT TO ANALYZE THE MEANING OF THE WOR D TELECOMMUNICATION. THE TELECOMMUNICATION COMES OUT FROM TELE AND COMMUNICATION. TELE MEANS FAR OFF. COMMUNICATION MEANS TO COMMUNICATE WITH OTHER PER SON. IN THE INITIAL DAYS, THE COMMUNICATION WAS POSSIBLE BY SPEAKING TO ANOTHER PERSON. WITH THE ADVENT OF THE SCRIPT TH E COMMUNICATION BECAME POSSIBLE BY WRITING. ONE COUL D WRITE WHAT ONE COULD SPEAK AND SEND IT ACROSS TO THE OTHE R PERSON. WITH THE NEED OF THE COMMUNICATION BECAME POPULAR T HE POST SERVICES CAME INTO EXISTENCE. WITH ADVENT OF TELE PHONE THE COMMUNICATION BECAME POSSIBLE WHEREBY ONE COULD SPE AK TO THE OTHER PERSON AT A DISTANCE AND THIS COMMUNICATI ON WAS POSSIBLE THROUGH CABLE I.E. LANDLINES AND THAT IS W HY IT IS CALLED BASIC COMMUNICATION. WITH THE ADVENT OF WIR ELESS TECHNOLOGY TELECOMMUNICATION BECAME POSSIBLE WITHOU T WIRES AND IT BECAME CELLULAR TELECOMMUNICATION. HOWEVER, THE LATE 1980S SAW THE ADVENT OF THE COMPUTE AND TELECOMMUNI CATION BECAME POSSIBLE THROUGH COMPUTER IN VARIOUS MODES A ND INTERNET WAS ONE OF THE MODES OF COMMUNICATIONS. R EALISING THIS ONLY THE FINANCE ACT HAS ADDED THE WORD INTERN ET SERVICES SINCE INTERNET WAS ONE OF THE MEANS OF TELECOMMUNIC ATION. THROUGH INTERNET IT WAS POSSIBLE TO COMMUNICATE WIT H THE OTHER PERSONS AND THIS CAN BE IN VARIOUS FORMS, WRI TING, VERBAL OR OTHERWISE. NOW, IT IS POSSIBLE TO MAKE THE VERB AL COMMUNICATION WITH OTHER PERSON THROUGH INTERNET AN D IT WILL FALL IN THE CATEGORY OF INTERNET SERVICES. SIMILAR LY IT IS POSSIBLE TO MAKE COMMUNICATION WITH OTHER PERSONS IN WRITING THROUGH INTERNET AND IT WILL BE CALLED INTERNET SERVICE. SIMILAR IT IS POSSIBLE TO COMMUNICATE AND TO PROVIDE SERVICES IN WRITING, E- TENDING IS ONE OF SUCH SERVICES IN WRITING OF A SPE CIFIED CATEGORY. THE APPELLANT COMPANY HAVING STARTED PRO VIDING THIS E-TENDERING COMMUNICATION SERVICE IT IS A SPEC IFIC INTERNET SERVICES ELIGIBLE UNDER SECTION 80IA(4)(II). 7. IN SUPPORT, THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO FILED A DETAILED NOTE ON E-TENDERING INTERNET SERVICES RUNNING INTO 9 PAGES. HE, THEREFORE, SUBMITS THAT SINCE THE ASSESSEE HAS SATISFIED ALL THE CONDITIONS AS LAID DOWN U/S.80IA(4)(II), THE DEDUCTION CLAIMED BY THE ASSES SEE BE ALLOWED. IN THE ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 10 ALTERNATIVE, HE SUBMITS THAT SINCE THE TECHNICAL NO TE PROVIDING E-TENDERING INTERNET SERVICES WAS NOT SUBMITTED BEFORE THE AO A ND THE LD. CIT(A), THEREFORE, HE HAS NO OBJECTION IF THE ISSUE IS SET ASIDE TO THE FILE OF THE AO. 8. ON THE OTHER HAND, THE LD. D.R., WHILE RELYING O N THE ORDERS OF THE AO AND THE LD. CIT(A), SUBMITS THAT HE HAS NO OBJECTIO N IF THE ISSUE IS SET ASIDE TO THE FILE OF THE AO. 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THERE IS NO DISPUTE THAT BEFORE THE AO AND LD. CIT(A) THE ASSESSEE HAS NOT SUBMITTED ANY MATERIAL TO SHOW THE PROCESS, FUNCTION AND OPINION IN RESPECT OF ITS CLAIM THAT THE ASSESSEE COMPANY IS PROVIDING E-TENDERING INTERNET SERVICES ELIGIBLE FOR DEDUCTION U/S.80IA(4)(II). NOW, AT THI S STAGE, THE ASSESSEE HAS FILED A DETAILED NOTE ON E-TENDERING INTERNET SERVICES. T HE SAID NOTE WAS NOT BEFORE THE AO AND THE LD. CIT(A). 10. IN CIT VS. EMPTEE POLY-YARN PVT. LTD. (2010) 320 ITR 665 (SC),IT HAS BEEN OBSERVED BY THEIR LORDSHIPS (PLACITUM 5 AT PAG E 666 OF ITR) : REPEATEDLY THIS COURT HAS RECOMMENDED TO THE DEPARTMENT, BE IT UNDER EXCISE ACT, CUSTOMS ACT OR THE INCOME-TAX ACT, TO EXAMINE THE PROCESS APPLICABLE T O THE PRODUCT IN QUESTION AND NOT TO GO ONLY BY DICTIONAR Y MEANINGS. THIS RECOMMENDATION IS NOT BEING FOLLOWED OVER THE YEARS. EVEN WHEN THE ASSESSEE GIVES AN OPINION ON A GIVEN PROCESS, THE DEPARTMENT DOES NOT SUBMIT ANY COUNTER OPINION WHEREVER SUCH COUNTER OPINION IS PO SSIBLE. PRIMA FACIE, HOWEVER, IN THIS CASE, WE DO NOT SEE P OSSIBILITY OF ANY COUNTER OPINION TO THE OPINION GIVEN BY THE MUMBAI UNIVERSITY, VIDE LETTER DATED JULY 10, 1999. ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 11 11. RESPECTFULLY FOLLOWING THE ABOVE OBSERVATIONS O F THE HONBLE APEX COURT AND KEEPING IN VIEW THAT THE ASSESSEE AT THIS STAGE HAS FILED NEW EVIDENCE WHICH WAS NOT BEFORE THE AO AND LD. CIT( A) TO SHOW THAT PROVIDING E-TENDERING IS EQUIVALENT TO PROVIDING INTERNET SER VICE ELIGIBLE FOR DEDUCTION U/S.80IA(4)(II) OF THE ACT AND THE REVENUE AUTHORIT IES WITHOUT EXAMINING THE ISSUE AS TO WHETHER E-TENDERING IS ELIGIBLE FOR DE DUCTION U/S.80IA(4)(II), DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE, THERE FORE, WE, AFTER ADMITTING THE SAME, CONSIDER IT FAIR AND REASONABLE THAT IN T HE INTEREST OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE AO AND ACC ORDINGLY WE SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES AND SEND BACK THE MATTER TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH IN THE LIG HT OF OUR OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY T HE ASSESSEE ARE, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 09TH D AY OF DECEMBER, 2011. SD/- SD/- (B. RAMAKOTAIAH) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 09TH DECEMBER , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-9,MUMBAI. ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 12 4 CIT-5,MUMBAI. 5.DR,J BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.1120/M/10 MILLENNIUM TELECOM LTD. 13 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 29-11-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 01-12-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER