ITO 16(3)(1), MUMBAI V. SAMVED TELECOM, MUMBAI

ITA 1626/MUM/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 6262 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M.JAGTAP, AM & SMT. P.MADHAVI DEVI, JM. I.T.A.NO.1626/MUM/2009 - A.Y 2005-06 INCOME TAX OFFICER 16(3)(1) MUMBAI VS. M/S SAMVAD TELECOM ROOM NO.2 GARDI MANSION 9/15 OPERA HOUSE MUMBAI 400 004 PAN NO.AADES1587L AND I.T.A.NO.1627/MUM/2009 - A.Y 2005-06 INCOME TAX OFFICER 16(3)(1) MUMBAI M/S SAMVAD NETWORKS ROOM NO.2 GARDI MANSION OPERA HOUSE MUMBAI 400 004 PAN NO.AAWF56630C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.K.SINGH. ASSESSEES BY : SHRI DHARMESH SHAH. O R D E R PER P.MADHAVI DEVI, JM: THESE APPEAL ARE DIRECTED AGAINST CIT[A] S SEPARA TE ORDERS DATED 31-12-2008. SINCE ISSUE INVOLVED IS COMMON TH E APPEALS ARE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED COMMON ORDER. 2. THE ONLY GRIEVANCE OF THE REVENUE IN THESE APPEA LS IS THAT THE CIT[A] HAS ERRED IN LAW AND ON FACTS IN ALLOWING D EDUCTION U/S.80IA(4)(II) OF THE I.T.ACT TO THE ASSESSEE TREA TING THE ASSESSEE ENGAGED IN THE BUSINESS OF PROVIDING BASIC TELECOM SERVICES UNDER FRANCHISE SCHEME OF MTNL AND THAT FOR THE IDENTICAL ISSUE IN THE CASE OF M/S KANSAN COMMUNICATION P. LTD. VS. DCIT IN I.T .A.NO.4355/M/02 2 DATED 12-9-2003 FOR THE A.Y 1998-99 THE DEPARTMENT HAS FILED APPEAL BEFORE THE BOMBAY HIGH COURT AND THE DECISION IS ST ILL AWAITED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF PROVIDING BASIC TEL ECOM SERVICES UNDER D.I.D. FRANCHISE SCHEME BY MTNL. IT FILED ITS RETUR N OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING TOTAL INCOME AT RS.NIL AFTER CLAIMING DEDUCTION U/S.80IA(4)(II) OF THE ACT. THE ASSESSEE S EXPLANATION AS TO HOW IT IS ELIGIBLE FOR DEDUCTION U/S.80IA(4)(II) WA S CALLED FOR AND THE ASSESSEE VIDE LETTER DATED 10-9-2007 SUBMITTED THAT ITAT A BENCH IN THE CASE OF M/S KANSAN COMMUNICATION P. LTD. [CITED SUPRA], HAS HELD THAT WHERE THE ASSESSEE WAS PROVIDING BASIC TELECOM SERVICES, WAS ENTITLED TO CLAIM DEDUCTION U/S.80IA, EVEN THOUGH T HE SERVICES ARE PROVIDED IN ASSOCIATION IN MTNL. HOWEVER, THE AO PL ACED RELIANCE UPON THE ORDER OF HIS PREDECESSOR FOR A.Y 2003-04 FOR CO MING TO THE CONCLUSION THAT DEDUCTION U/S.80IA(4)(II) IS NOT AL LOWABLE AS THE ASSESSEE FIRM IS NOT IN A POSITION TO PROVIDE ANY O F THE SERVICES LISTED IN CLAUSE (II) OF SUB-SEC.(4) OF SEC.80IA. 4. AGGRIEVED BY THE SAME, ASSESSEE FILED AN APPEAL BEFORE THE CIT[A] AND ALSO PLACED RELIANCE UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S KANSAN COMMUNICATION P. LTD. [CITED SUPRA]. THE CIT[A] ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE ITAT A BENCH IN THE CASE OF M/S KANSAN COMMUNICATION P. LT D. [CITED SUPRA]. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 5. WHILE THE LD. DR PLACED RELIANCE UPON THE ORDER OF THE AO, THE LD. COUNSEL FOR THE ASSESSEE PLACED BEFORE US A COP Y OF THE TRIBUNALS ORDER DATED 4/2/2009 IN THE ASSESSEES OWN CASE FOR THE A.Y 2004-05 3 WHEREIN AFTER REFERRING TO THE DECISION OF THE TRIB UNAL IN THE CASE OF M/S KANSAN COMMUNICATION P. LTD. [CITED SUPRA, REVE NUES APPEAL WAS DISMISSED. 6. AFTER HEARING BOTH THE PARTIES, WE FIND THAT IN THE ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR THE TRIBUNAL H AS FOLLOWED THE DECISION OF THE ITAT IN THE CASE OF M/S KANSAN COMM UNICATION P. LTD. [CITED SUPRA] AND AT PARA-3 AND 4 OF ITS ORDER, HAS HELD AS UNDER- 3. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE RAISED IS AS TO WHETHER THE ASSESSEE IS A BASIC TELECOMMUNICATION SERVICE PROVIDER AND THUS ENTITLE D FOR DEDUCTION UNDER SECTION 80IA(4)(II). WE FIND THAT THE SAME IS SUE IN IDENTICALLY WORDED GROUNDS HAD BEEN RAISED IN CASE OF M/S. QUIC K TELEPHONE IN ASSESSMENT YEAR 2003-04 IN ITA NO. 5121/MUM/2006 AN D THE TRIBUNAL FOLLOWING THE DECISION IN THE CASE OF M/S. KANSAN TELECOMMUNICATION PVT. LTD. (SUPRA) HAD ALLOWED THE CLAIM OF THE ASSESSEE. THE TRIBUNAL HAD EXTENSIVELY REFERRED TO THE DECISION IN CASE OF KANSAN TELECOMMUNICATION PVT. LTD. IN THE S AID CASE THE TRIBUNAL AFTER NOTING THE DEFINITION OF BASIC COMMU NICATION SERVICE UNDER SECTION 2(C) OF TELECOM REGULATORY AUTHORITY ORDER AND AFTER REFERRING TO THE VARIOUS CLAUSES OF AGREEMENT HELD AS UNDER: FROM THE PERUSAL OF CLAUSE 1, IT IS EVIDENT THAT T HE EPABX OWNED BY THE ASSESSEE WILL PROVIDE DIRECT INDIALING SERVICES THROUGH THE PSTN OF THE MTNL. THUS THE SERVICES PRO VIDED BY THE ASSESSEE WOULD COME WITHIN THE PURVIEW OF BASIC TELECOMMUNICATION SERVICES AS PER THE DEFINITION UN DER SECTION 2(C) OF THE TELECOMMUNICATION TARIFF ORDER, 1999. F ROM THE READING OF THE ABOVE CLAUSES OF THE AGREEMENT, IT I S EVIDENT THAT THE ASSESSEE IS NOT PROVIDING THE SERVICES AS A PCO. FROM CLAUSE 24 OF THE AGREEMENT, IT IS EVIDENT THAT THE STD/ PCO CAN BE PROVIDED BY THE ASSESSEE I.E. ONE OF THE CUSTOMERS OF THE ASSESSEE, WHO CAN RUN THE STD/ PCO AND TO SUCH STD/ PCO COMMISSION WILL BE PAID BY THE ASSESS EE. SIMILARLY, IT IS CLEAR THAT THE SERVICES PROVIDED B Y THE ASSESSEE IS NOT ONLY THE NETWORK OF TRUNKING AS MENTIONED BY THE LEARNED CIT(A). AS PER CLAUSE 3 OF THE AGREEMENT, THE ASSES SEE IS RESPONSIBLE FOR INSTALLATION, NET WORKING, OPERATIO N AND 4 MAINTENANCE OF EPABX EQUIPMENTS, USER TERMINAL EQUI PMENT, CONNECTED CABLES, ETC. AS PER CLAUSE 4, THE ASSESSE E IS ALSO RESPONSIBLE FOR TREATMENT OF COMPLAINTS, ISSUE OF B ILLS, COLLECTION OF BILLS, ETC. THEREFORE, IN OUR OPINION , THE ASSESSEE IS PROVIDING BASIC TELEPHONE SERVICES THOUGH IN ASS OCIATION WITH MTNL. HOWEVER, MERELY BECAUSE THE SERVICES ARE EBBING PROVIDED IN ASSOCIATION WITH MTNL, DOES NOT MEAN TH AT THE ASSESSEE IS NOT PROVIDING THE BASIC TELECOMMUNICATI ON SERVICES AND ACCORDINGLY, WE DIRECT THE ASSESSING O FFICER TO ALLOW DEDUCTION UNDER SECTION 80IA. 4. THUS, THE TRIBUNAL IN CASE OF M/S. KANSAN COMMUN ICATIONS PVT. LTD. HAD EXAMINED ALL THE ASPECTS OF THE CASE AND CONCLUDED THAT THE ASSESSEE WAS PROVIDING BASIC TELECOMMUNICATION SERVICE AND WAS ENTITLED TO DEDUCTION UNDER SECTION 80IA(4)(II). TH E DECISION HAS BEEN FOLLOWED IN THE ASSESSEES OWN CASE IN ASSESSMENT Y EAR 2003-04 (SUPRA) AND IN THESE CASES UNDER APPEAL THE GROUND RAISED ARE IDENTICAL TO THAT IN CASE OF ASSESSMENT YEAR 2003-0 4. THEREFORE, THE CASES OF THESE ASSESSEES ARE SQUARELY COVERED BY TH E DECISION OF THE TRIBUNAL (SUPRA). RESPECTFULLY, FOLLOWING THE SAID DECISION, WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) ALLOWING RELIEF AN D THE SAME ARE THEREFORE UPHELD. AS FACTS AND CIRCUMSTANCES ARE SIMILAR AND AO HAS A LSO PLACED RELIANCE UPON THE ORDER OF HIS PREDECESSOR FOR THE EARLIER A .Y 2004-05, WE DO NOT SEE ANY REASON TO TAKE A DIFFERENT VIEW. IN VIE W OF THE SAME, WE REJECT THE GROUND OF APPEAL RAISED BY THE REVENUE. 7. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED ON THIS 12TH DAY OF FEBRUARY, 2010 . SD/- SD/- (P.M.JAGTAP) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 12 TH FEBRUARY, 2010. P/-* 5 COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. SR.NO. PARTICULARS DATE INITIALS 1 DRAFT DICTATED ON 3-2-10 P 2 DRAFT PLACED BEFORE AUTHOR 4-2-10 P 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO SR.PS/PS 6 ORDER KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER