The ACIT, Circle-6, Ahmedabad V. Shri Himanshu V.Shah, Ahmedabad

ITA 1952/AHD/2012

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3388 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-11-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 03-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SPECIAL BENCH, AHMEDABAD !' # . . $% , &', # , ( ' )* # + ,'*, - ' '' ITA NO.1952/AHD/2012 (. / // ASSTT. YEAR: 2009-10 ACIT, CIR.6 AMBAWADI AHMEDABAD. VS. SHRI HIMANSHU V. SHAH A/25, C-1, 1 ST FLOOR SURYA COMPLEX OPP: NAVNEET HOUSE GURUKUL ROAD AHMEDABAD. PAN : ACZPS 3768 E ( APPLICANT ) ( RESPONENT ) REVENUE BY : SHRI O.P. SHARMA, CIT-DR ASSESSEE BY : MS.URVASHI SHODHAN, AR / DATE OF HEARING : 22/01/2019 / DATE OF PRONOUNCEMENT: 25/02/2019 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT SPECIAL BENCH IS CONSTITUTED BY THE HONBLE PRESIDENT TO ANSWER THE FOLLOWING QUESTION: WHETHER DEDUCTION UNDER SECTION 80IA(4)(II) WHICH IS AVAILABLE TO BASIC TELECOM SERVICES PROVIDERS IS ALSO AVAILABLE TO FRANCHISEES OF SUCH BASIC SERVICE PROVIDERS ALSO, WHICH IS ONLY PU TTING EPEX SYSTEM WITHOUT CREATING INFRASTRUCTURE IN THE FIELD OF TELECOM ? 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME ELECTRONICALLY ON 11.9.2009 DECLARING TOTAL INCOME AT RS.1,07,79,550/-. THIS RETURN WAS PROCESSED UNDER SECTION 143(3) OF THE IN COME TAX ACT, 1961 ON 8.2.2011 AND RETURNED INCOME WAS ACCEPTED. SUBSEQU ENTLY, THE CASE OF THE ITA NO.1952/AHD/2012 2 ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED ON 26.8.2010 UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASS ESSEE HAS CLAIMED DEDUCTION OF RS.2,07,91,043/- UNDER SECTION 80IA OF THE ACT. ACCORDING TO THE ASSESSEE, IT HAS SHOWN INCOME FROM TELECOMMUNICATIO N. IT WAS SUBMITTED BEFORE THE AO THAT IN EARLIER YEARS ALSO SUCH DEDUC TION WAS CLAIMED BY THE ASSESSEE, IT WAS DISALLOWED BY THE AO. HOWEVER, WH EN DISPUTE TRAVELLED TO THE TRIBUNAL DEDUCTION WAS GRANTED TO THE ASSESSEE. THE LD.AO HAS OBSERVED THAT RIGHT FROM THE ASSTT.YEARS 1997-98 TO 2001-02 SUCH DEDUCTION WAS DISALLOWED TO THE ASSESSEE, THOUGH LD.CIT(A) AND IT AT HAS ALLOWED THE DEDUCTION TO THE ASSESSEE, BUT DEPARTMENT HAS NOT A CCEPTED THE ORDER OF THE TRIBUNAL AND CARRIED THE MATTER BEFORE THE HONBLE GUJARAT HIGH COURT. THE AO HAS NOT POINTED ANY DISPARITY OF FACTS, RATHER H E DID NOT ACCEPT THE CLAIM OF THE ASSESSEE, BECAUSE IN EARLIER YEAR, DEPARTMENT W ENT IN APPEAL BEFORE THE HONBLE HIGH COURT. ACCORDINGLY, THE LD.AO DISALLO WED THE CLAIM OF THE ASSESSEE. 3. DISSATISFIED WITH THE DISALLOWANCE, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) AFTER P UTTING RELIANCE UPON THE ORDER OF THE ITAT PASSED IN THE ASSTT.YEAR 2007-08 ALLOWED THE CLAIM. DISSATISFIED WITH THE ORDER OF THE LD.CIT(A), REVEN UE HAS COME IN APPEAL BEFORE THE TRIBUNAL. IT HAS TAKEN THREE GROUNDS OF APPEAL, OUT OF WHICH, GROUND NOS.2 AND 3 ARE GENERAL GROUNDS OF APPEAL WH ICH DOES NOT CALL FOR RECORDING OF ANY FINDING. IN GROUND NO.1, REVENUE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS DELETING TH E DISALLOWANCE OF RS.2,07,91,043/-. WHEN THIS MATTER WAS CALLED FOR HEARING, THEN IT WAS CONTENDED ON BEHALF OF THE DEPARTMENT THAT SECTION 80IA OF THE ACT PROVIDES FOR DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKING OR ITA NO.1952/AHD/2012 3 ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT. ACCORDING TO THE REVENUE, THE ASSESSEE HAS ONLY ERECTED AN EPABX SYS TEM WHICH COULD NOT BE CONSTRUED AS CREATION OF INFRASTRUCTURE DEVELOPMENT . IT WAS CONTENDED THAT ITAT, CHENNAI BENCH IN THE CASE OF ITO VS. SMT. A. JAYALAXMI, 50 SOT 57 TOOK A VIEW THAT ESTABLISHMENT OF EPABX SYSTEM DOES NOT AMOUNT TO CREATION OF AN INFRASTRUCTURE WHICH CAN ENABLE AN ASSESSEE T O CLAIM DEDUCTION UNDER SECTION 80IA. SINCE THERE WERE CONFLICTING OPINION AT THE END OF THE ITAT ONE INVOLVED IN THE ASSESSEES OWN CASE AND OTHER R ENDERED BY THE ITAT, CHENNAI BENCH, THE BENCH WHICH HEARD THIS APPEAL MA DE A REFERENCE TO THE HONBLE PRESIDENT FOR CONSTITUTION OF THE SPECIAL B ENCH. IN THIS WAY, A SPECIAL BENCH HAS BEEN CONSTITUTED AND ABOVE QUESTI ON WAS FORMULATED FOR ADJUDICATION. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE AT TH E OUTSET CONTENDED THAT DEDUCTION UNDER SECTION 80IA WAS ALLOWED TO THE ASS ESSEE BY THE TRIBUNAL RIGHT FROM THE ASSTT.YEAR 1997-98 UPTO 2007-08. OR DERS OF THE TRIBUNAL HAVE BEEN CHALLENGED BY THE REVENUE BEFORE THE HONBLE H IGH COURT, AND THE HONBLE HIGH COURT HAS DECIDED ALL THESE APPEALS VI DE ORDER/JUDGMENT DATED 16.12.2014. HE HAS PLACED ON RECORD COPY OF THE HO NBLE HIGH COURTS DECISION RENDERED IN TAX APPEAL NOS.1098 OF 2005 AN D OTHERS. THE QUESTION FORMULATED BY THE HONBLE HIGH COURT IN ASSESSEES OWN CASE IS, WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEES WHO ARE FRANCHISEES OF B SNL AND WHO HAVE BEEN PERMITTED TO INSTALL, MAINTAIN AND OPERAT E IN DIALING EPABX UNDER FRANCHISEE TO SUPPORT THE DEPARTMENT, C AN BE TREATED TO HAVE PROVIDED BASIC TELEPHONE SERVICES ENTITLING THEM FOR DEDUCTION UNDER SECTION 80IA ?. HE HAS PLACED ON RECORD COPY OF THE JUDGMENT OF THE HONBLE HIGH COURT. THE HONBLE HIGH COURT HAS REPLIED THE ABOV E QUESTION IN FAVOUR OF ITA NO.1952/AHD/2012 4 THE ASSESSEE, AND AGAINST THE REVENUE. THE RELEVAN T DISCUSSION MADE IN THE JUDGMENT READS AS UNDER: 7. HAVING HEARD LEARNED ADVOCATES APPEARING ON BE HALF OF THE ASSESSEES AND THE REVENUE AND THE QUESTION POSED FO R CONSIDERATION BEFORE US, WE ARE OF THE OPINION THAT THE TRIBUNAL IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IA OF THE ACT. THE TRIBUNAL HAS RELIED UPON THE DECISION OF I TAT, MUMBAI BENCH IN ITA NO. 4355/MUM/03 FOR THE ASSESSMENT YEA R 1998-99 RENDERED ON 12.09.2003 AS THE TERMS AND CONDITIONS OF THE ASSESSEES IN THE CASES BEFORE IT AS WELL AS THAT OF THE ASSES SEE IN ITA NO. 4355/MUM/03 WERE IDENTICAL. THE RELEVANT PORTION OF THE ORDER DATED 12.09.2003 RELIED UPON THE TRIBUNAL IS REPRODUCED H EREUNDER: 'FROM THE PERUSAL OF CLAUSE-1, IT IS EVIDENT THAT T HE EPABX OWNED BY THE ASSESSEE WILL PROVIDE DIRECT IN DIALI NG SERVICES THROUGH THE PSTN OF THE MTNL. THUS, THE SERVICES PR OVIDED BY THE ASSESSEE WOULD COME WITHIN THE PURVIEW OF BASIC TELECOMMUNICATION SERVICES AS PER THE DEFINITION U/ S. 2(C) OF THE TELECOMMUNICATION TARIFF ORDER, 1999. FROM THE READ ING OF ABOVE CLAUSES OF THE AGREEMENT, IT IS 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 PR OVIDED BY THE ASSESSEE I.E. ONE OF THE CUSTOMERS OF THE ASSES SEE, WHO CAN RUN THE STD/PCO AND TO SUCH STD/PCO COMMISSION WILL BE PAID BY THE ASSESSEE. SIMILARLY, IT IS CLEAR THAT THE SERVICES PROVIDED B Y THE ASSESSEE ARE NOT ONLY THE NETWORK OF TRUNKING AS ME NTIONED BY THE LD. CIT(A). AS PER CLAUSE 3 OF THE AGREEMENT, THE ASSESSEE IS RESPONSIBLE FOR INSTALLATION, NETWORKIN G OPERATION AND MAINTENANCE OF EPBX EQUIPMENTS, USER TERMINAL EQUIPMENTS, CONNECTED CABLES ETC. AS PER C LAUSE, 4, THE ASSESSEE IS ALSO RESPONSIBLE FOR TREATMENT O F 5 ITA NO. 726/AHD/2010 A.YR. 2007-08 COMPLIANCES, ISSUE O F BILLS, COLLECTION OF BILLS ETC. THEREFORE, IN OUR O PINION THE ASSESSEE IS PROVIDING BASIC TELEPHONE SERVICES THRO UGH IN ASSOCIATION WITH MTNL. HOWEVER, MERELY BECAUSE THE SERVICES ARE BEING PROVIDED IN ASSOCIATION WITH MT NL DOES NOT MEAN THE ASSESSEE IS NOT PROVIDING THE BAS IC TELECOMMUNICATION SERVICES. IN VIEW OF THE ABOVE, W E HOLD ITA NO.1952/AHD/2012 5 THAT THE ASSESSEE IS PROVIDING THE BASIC TELECOMMUN ICATION SERVICES LAND ACCORDINGLY, WE DIRECT THE A.O. TO AL LOW DEDUCTION U/S. 80IA. 7.1 WE ARE IN COMPLETE AGREEMENT WITH THE FINDIN GS OF FACT ARRIVED AT BY THE TRIBUNAL. THE TRIBUNAL HAS RIGHTLY RELIED UP ON THE ORDER DATED 12.09.2003 PASSED BY THE MUMBAI BENCH. THE ASSESSEE S HAVE MADE HUGE INVESTMENT IN SETTING UP AND MAINTAINING THE E NTIRE PABX. IN VIEW OF THE AGREEMENT BETWEEN THE PARTIES WHICH HAS BEEN MINUTELY CONSIDERED BY THIS COURT, THE SERVICES PROVIDED BY THE ASSESSEES SHALL FALL WITHIN THE DEFINITION OF 'BASIC TELEPHONE SERV ICE' AND THEREFORE THEY SHALL BE ENTITLED TO DEDUCTION U/S 80IA OF THE ACT. THE TRIBUNAL HAS NOT COMMITTED ANY ERROR IN REVERSING THE ORDERS PASSED BY THE ASSESSING OFFICER. THE TRIBUNAL HAD EXAMINED ALL THE ASPECTS OF THE CASE A ND CONCLUDED THAT THE ASSESSEES WERE PROVIDING BASIC TELECOMMUNICATION SERVICE AND WERE ENTITLED TO DEDU CTION UNDER SECTION 80IA(4)(II). 8. IN VIEW OF THE ABOVE, WE ANSWER THE QUESTION RA ISED IN THE PRESENT APPEALS IN THE AFFIRMATIVE I.E. IN FAVOUR O F THE ASSESSEES AND AGAINST THE REVENUE. WE HOLD THAT THE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEES WHO ARE FRANCHISEES OF BSNL AND WHO HAVE BEEN PERMITTED TO INSTALL, MAINTA IN AND OPERATE, IN-DIALING PABX UNDER FRANCHISEE TO SUPPOR T THE DEPARTMENT, CAN BE TREATED TO HAVE PROVIDED 'BASIC TELEPHONE SERVICES' ENTITLING THEM FOR DEDUCTION U/S 80IA. CONSEQUENTLY, THE IMPUGNED ORDERS PASSED BY THE TRIBUNAL ARE CONFIRME D. TAX APPEALS ARE ACCORDINGLY DISMISSED. 5. HONBLE JURISDICTIONAL HIGH COURT HAS ADJUDICATE D THIS ISSUE IN FAVOUR OF THE ASSESSEE, WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE WHO ARE FRANCHISEES OF BSNL AND WHO HAVE BEEN PERMITTED TO INSTALL, MAI NTAIN AND OPERATE IN DIALING EPABX UNDER THE FRANCHISEES TO SUPPORT THE DEPARTMENT CAN BE TREATED TO HAVE PROVIDED BASIC TELEPHONE SERVICES. THIS W OULD AMOUNT TO CREATION OF INFRASTRUCTURE ENTITLING THEM FOR DEDUCTION UNDER S ECTION 80IA. RELYING ON AUTHORITATIVE PRONOUNCEMENT OF THE HONBLE JURISDIC TIONAL HIGH COURT IN THE ITA NO.1952/AHD/2012 6 ASSESSEES OWN CASE, WE ARE OF THE VIEW THAT QUESTI ON REFERRED TO THIS BENCH DESERVES TO BE ANSWERED IN FAVOUR OF THE ASSESSEE, AND AGAINST REVENUE. 6. IT IS PERTINENT TO OBSERVE THAT THE APPEAL HAS A LSO BEEN TRANSFERRED TO THE SPECIAL BENCH, THEREFORE, WE PROCEED TO DEAL WITH T HE APPEAL ON MERITS. ON PERUSAL OF THE RECORD WOULD INDICATE THAT ONLY SUBS TANTIAL ISSUE INVOLVED IN THIS APPEAL IS, WHETHER DEDUCTION UNDER SECTION 80I A(4)(II) IS AVAILABLE TO THE ASSESSEE OR NOT. CONSIDERING THE OPINION OF SPECIA L BENCH COUPLED WITH RATIO LAID DOWN BY THE HONBLE HIGH COURT IN ASSESSEES O WN CASE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UN DER SECTION 80IA(4)(II) OF THE ACT. THE LD.CIT(A) HAS RIGHTLY GRANTED THE SAME TO THE ASSESSEE. WE DO NOT FIND ANY MERIT IN THIS APPEAL OF THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 25 TH FEBRUARY, 2019 AT AHMEDABAD. SD/- AMARJIT SINGH (ACCOUNTANT MEMBER) SD/- JUSTICE (SHRI) P.P.BHATT (PRESIDENT) SD/- RAJPAL YADAV (JUDICIAL MEMBER) AHMEDABAD; DATED 25/02/2019