DCIT, Circle-4, Kolkata, Kolkata V. M/S. New Town Telecom Infrastructure, Kolkata

ITA 2065/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1745 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 10-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SANJOY BHATTACHARYA
• Keywords: Business income; Business expenditure; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM & SHRI S.S. VISWANETHRA RAVI, JM] I.T.A. NO. 2065/KOL/2014 ASSESSMENT YEAR: 2009-10 DCIT, CIRCLE-4, KOLKATA.............................APPELLANT AAYAKAR BHAWAN P-7, CHOWRINGHEE SQUARE KOLKATA 700069. M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVELOPMENT CO. LTDRESPONDENT WBHIDCO OFFICE BUILDING, GATE-3, SECTOR-III, SALT LAKE KOLKATA 700 098. [PAN: AACCN3286C] APPEARANCES BY: SHRI SALLONG YADEN, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. SHRI SANJOY BHATTACHARYA, FCA APPEARING ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : JUNE 08, 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 04, 2017 ORDER PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT (APPEALS) IV, KOLKATA DATED 05.08.2014 AND THE SOLITARY ISSUE RAISED THEREIN RELATES TO THE DELETION BY THE LD. CIT (A) OF THE ADDITION OF RS. 5,24,28,666/- MADE BY THE AO ON ACCOUNT OF UPFRONT FEES. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF CREATING TELECOM INFRASTRUCTURE AND PROVIDING SERVICES RELATED TO SUCH INFRASTRUCTURE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 12.05.2010 DECLARING A TOTAL INCOME OF RS. 66,46,820/-. THE ASSESSEE COMPANY HAD LAID DOWN 2 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. UNDERGROUND DUCT AND THE SAME WAS MADE AVAILABLE TO DIFFERENT TELECOM SERVICE PROVIDERS FOR LAYING DOWN OPTICAL FIBRE CABLES IN ORDER TO FACILITATE PROVIDING TELECOM SERVICES TO THE PUBLIC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED FROM THE PERUSAL OF THE RELEVANT AGREEMENTS THAT THE ASSESSEE COMPANY WAS CHARGING ONE TIME UPFRONT FEE FROM THE TELECOM SERVICE PROVIDERS IN THE INITIAL YEAR FOR THE USE OF DUCT FOR 15 YEARS, BESIDES ANNUAL RENT CHARGED ON THE BASIS OF USAGE OF DUCT PER KM. LENGTH. IT WAS ALSO NOTICED BY THE AO THAT EVEN THOUGH THE ENTIRE AMOUNT OF ONE TIME UPFRONT FEE WAS COLLECTED BY THE ASSESSEE IN THE INITIAL YEAR, THE SAME WAS AMORTISED FOR A PERIOD OF 15 YEARS WITH 1/15 TH OF THE TOTAL UPFRONT FEE HAVING BEEN RECOGNISED IN THE RELEVANT YEAR AS REVENUE. WHEN THE ASSESSEE COMPANY WAS CALLED UPON BY THE AO TO EXPLAIN THIS SYSTEM OF REVENUE RECOGNITION, THE FOLLOWING SUBMISSION WAS MADE BY IT IN WRITING ON 07.09.2011. THE COMPANY HAS ADOPTED ACCOUNTING PRINCIPLES AS PER SCHEDULE 13, NOTES ON ACCOUNTS OF AUDITED BALANCE SHEET FOR THE YEAR ENDED 31.03.2009. 1.02. REVENUE, RECOGNITION 1.02.01. BUSINESS INCOME: REVENUE IS BEING RECOGNIZED ON RECEIPT OF LEASE RENTAL FROM RESPECTIVE SERVICE PROVIDERS ON THE FOLLOWING BASIS: 1.02.01.01. ANNUAL RENTAL : THE ANNUAL RENTALS HAVE BEEN RECOGNIZED ON THEIR ACCRUAL. 1.02.01.02. UPFRONT FEES: THE UPFRONT FEES RECEIVED FROM SERVICE PROVIDERS ARE ACCOUNTED FOR AND CONSIDERED AS INCOME IN 15 (FIFTEEN) EQUAL ANNUAL INSTALMENTS BEING THE TENURE OF THE LEASE AND ARE BEING RECOGNIZED FROM THE DATE OF RECEIPTS. IN THE INSTANT CASE, THE COMPANY HAS ACCOUNTED FOR THE UPFRONT FEES RECEIVED TOWARDS AGREEMENT FOR LEASE OF DUCTS AND PITS FOR A PERIOD OF 15 3 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. YEARS AND AS PER AGREEMENT MAINTENANCE TO BE PROVIDED BY THE COMPANY FOR 15 YEARS I.E. OVER THE LEASE PERIOD. AMOUNT RECEIVED TOWARDS UPFRONT FEES IS RECOGNIZED OVER THE PERIOD 15 YEARS AS PER THE ACCOUNTING STANDARD 9 REVENUE RECOGNITION AND ACCOUNTING STANDARD 19 LEASES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. AS PER PARA 12 OF AS-9 : IN AS TRANSACTION INVOLVING THE RENDERING OF SERVICES, PERFORMANCE SHOULD BE MEASURED EITHER UNDER THE COMPLETED SERVICE CONTRACT METHOD OR UNDER THE PROPORTIONATE COMPLETION METHOD, WHICHEVER RELATES THE REVENUE TO THE WORK ACCOMPLISHED. SUCH PERFORMANCE SHOULD BE REGARDED AS BEING ACHIEVED WHEN NO SIGNIFICANT UNCERTAINTY EXISTS REGARDING THE AMOUNT OF THE CONSIDERATION THAT WILL BE DERIVED FROM RENDERING THE SERVICE. 3. ACCORDING TO THE AO THE QUESTION OF PROPORTIONATE COMPLETION AS ENVISAGED IN AS-9, HOWEVER, DID NOT ARISE IN THE CASE OF THE ASSESSEE COMPANY AT ALL AS IT HAD GOT RIGHT TO FORFEIT THE ENTIRE UPFRONT FEES WITHOUT RESORTING TO ANY REFUND TO THE CONCERNED PARTY EVEN IF THE AGREEMENT WAS TERMINATED BY THE SAID PARTY. HE ALSO NOTED THAT OTHER CONDITIONS STIPULATED FOR APPLICATION OF AS-9 WERE NOT SATISFIED SINCE THE ENTIRE UPFRONT FEES HAD ALREADY BEEN RECEIVED BY THE ASSESSEE AND THE SAME WAS NOT EVEN ADJUSTABLE WITH ANY FUTURE RENT OR ANY OTHER RECEIVABLE. WHEN THIS POSITION WAS CONFRONTED BY THE AO TO THE ASSESSEE COMPANY, THE LATER MADE THE FOLLOWING FURTHER SUBMISSION IN WRITING ON 30.11.2011. NEW TOWN TELECOM INFRASTRUCTURE DEVELOPMENT COMPANY LTD. WAS INCORPORATED IN 2006 AS A VENTURE COMPANY BETWEEN WEST BENGAL HOUSING INFRASTRUCTURE DEVELOPMENT CORPORATION LTD. (51%) AND WEBFIL LTD. (49%) PRIMARILY TO BUILD UNDERGROUND INFRASTRUCTURE TO HOUSE FIBRE OPTIC AND OTHER CABLES TO PROVIDE TELECOM AND OTHER ALLIED SERVICES FOR NEW TOWN. THE COMPANY IS BUILDING UNDERGROUND INFRASTRUCTURE WITH HDPE PLP PIPES OF VARIOUS DIAMETERS RANGING FROM 40 MM DIAMETER ONWARDS TO VARIOUS SIZES TO CREATE SPACE TO DRAW FIBRE OPTIC AND OTHER CABLES FOR 4 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. TELECOMMUNICATION AND ALLIED USE. THE COMPANY IS BUILDING INFRASTRUCTURE WIDELY THROUGHOUT THE NEW TOWN AREA WITH HDPE PIPES AS MENTIONED ABOVE AND LEASING OUT THE SPACE TO VARIOUS SERVICE PROVIDERS AS VSNL., BSNL., RELIANCE COMMUNICATION LTD. BHARATI AIRTEL ETC. 4. IN ORDER TO EXAMINE THE CLAIM OF THE ASSESSEE, AGREEMENTS OF THE ASSESSEE WITH THE TELECOM SERVICE PROVIDERS WERE PERUSED BY THE AO. HE ALSO EXTRACTED THE RELEVANT PORTION OF ONE OF SUCH AGREEMENTS ENTERED INTO BY ASSESSEE COMPANY AND VODAFONE ESSAR EAST LT. DATED 14.01.2009 AS UNDER: PARA 2: THE LICENSEE HAS APPROACHED NTTIDCO FOR ALLOWING THE LICENSES TO LAY OUT FIBRE OPTIC OR OTHER CABLES INTO DUCTS OWNED AND / OR BUILD / TO BE BUILT BY NTTIDCO TO ENABLE THE LICENSEE TO PROVIDE TELECOMMUNICATION OR OTHER SERVICES IN THE DESIGNATED AREA. PARA 3: AT THE REQUEST OF THE LICENSEE, NTTIDCO HAS AGREED TO ALLOW THE LICENSEE TO LAY OUT CABLES THROUGH THE DUCTS BUILT / TO BE BY THE LICENSOR, SUBJECT TO THE PAYMENT OF THE LICENSE FES AND OTHER TERMS AND CONDITIONS HAS HEREINAFTER APPEARING. AGREEMENT WITNESSETH: PARA 2: RELYING ON THE REPRESENTATIONS OF THE LICENSEE AS AFORESAID IN LICENSOR, AT THE REQUEST OF THE LICENSEE, HEREBY AGREES TO ACCOMMODATE / ALLOW THE LICENSEE TO PUT UP CABLES IN THE UNDERGROUND TELECOM INFRASTRUCTURE BUILT BY THE LICENSOR AT THE DESIGNATED AREA MOREFULLY DESCRIBED IN ANNEXURE A HERETO AND THE LICENSEE AS A SERVICE OPERATOR / PROVIDER HAS AGREED TO LAY OUT CABLES THROUGH SUCH UNDERGROUND TELECOMMUNICATION INFRASTRUCTURE SUBJECT TO THE PAYMENT OF THE LICENSE FES AND OTHER CHARGES AS HEREINAFTER APPEARING. THE ANNEXURE A WOULD FORM A PART OF THIS AGREEMENT. PARA 3: IN CONSIDERATION OF THE LICENSOR HAVING AGREED TO PROVIDE DUCT SPACE AND/OR TELECOMMUNICATION INFRASTRUCTURE FACILITY TO THE LICENSEE MOREFULLY DESCRIBED IN ANNEXURE A HERETO TO LAY-OUT CABLES THROUGH SUCH DUCTS, THE LICENSEE HEREBY AGREES TO PAY TO THE LICENSOR DURING THE LICENSE PERIOD AS PER THE TARIFF STRUCTURE EFFECTIVE ON DATE, ENCLOSED AS ANNEXURE B. 5 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. PARA 4(A): THE LICENSEE SHALL NOT MAKE ANY DAMAGE OR STRUCTURAL ALTERATION AND/OR CHANGES OF PERMANENT NATURE OF THE DUCTS AND/OR TELECOMMUNICATION INFRASTRUCTURE TO BE PROVIDED TO THE LICENSEE BY THE LICENSOR DURING THE CONTINUANCE OF THIS AGREEMENT. PARA 5(A): SUBJECT TO THE PAYMENT OF ALL THE AMOUNTS WITHIN DUE DATA AS MENTIONED IN CLAUSE 3 ABOVE, THE LICENSEE SHALL BE ENTITLED TO USE THE DUCTS FOR LAYING OUT ITS CABLES THROUGH SUCH DUCTS AS ITS OWN COSTS & EXPENSES. (B) BY VIRTUE OF THIS AGREEMENT, THE USE OF THE DUCTS WILL BE ALLOWED ONLY AS A RIGHT IN LAYING OUT CABLES AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED IN ANY MANNER TO MEAN AGREEMENT FOR LAYING OUT THE CABLES THORUGH THE DUCTS EXCLUSIVELY BY THE LICENSEE. PARA 6(C): THE LICENSE HEREBY GRANTED SHALL CEASE TO EXIST IF THE LICENSEES LICENSE GRANTED UNDER THE SECTION 4 OF THE INDIAN TELEGRAPH ACT, 1885 OR ANY MODIFICATION AND/OR ENACTMENT THEREOF, IS WITHDRAWN AND/OR SUSPENDED AT ANY TIME DURING THE CONTINUANCE OF THE AGREEMENT OR ANY MODIFICATION/EXTENSION THEREOF AND IN SUCH EVEN THE LICENSOR SHALL WITHDRAW THE GRANT OF INFRASTRUCTURE FACILITY FROM THE LICENSEE FORTHWITH AND SHALL NOT BE LIABLE TO PAY ANY COMPENSATION THEREFORE. (F) THE LICENSOR SHALL HAVE THE RIGHT TO PROVIDE THE DUCT SPACE TO OTHER AUTHORIZED SERVICE OPERATORS CONSEQUENT UPON TERMINATION/CESSATION OF THE AGREEMENT FOR LAYING OUT THEIR CABLES AND THE LICENSEE SHALL NOT RAISE ANY OBJECTION FOR THE SAME. (G) BOTH THE PARTIES ON MUTUAL CONSENT WILL BE AT LIBERTY TO MODIFY / REVISE / UPGRADE THE TERMS AND CONDITIONS OF THIS AGREEMENT AS AND WHEN REQUIRED AND SUCH MODIFICATION MAY BE MADE BY EXECUTION OF SUPPLEMENTAL AGREEMENT ONLY. ANNEXURE B TARIFF STRUCTURE EFFECTIVE FROM 1 ST NOVEMBER, 2007 1. (A) ONE TIME UPFRONT PAYMENT OF RS. 5 LACS PER KILOMETRE FOR EACH 40/33 NON DUCT WITH A PROVISION OF 10% INCREASE EVERY YEAR FOR NEW DUCT EXTENSION. (B) ANNUAL LEASE RENTAL CHARGES WILL BE PAYABLE EACH YEAR IN ADVANCE AS PER THE FOLLOWING TABLE FOR EACH 40/33 MM DUCT WITH A PROVISION OF 10% INCREASE AFTER EVERY THREE YEARS TABLE FOR DRAWING EACH OFC WITH UP RS. 50,000/- PER 6 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. TO 24 STRANDS FIBER KILOMETRE PER ANNUM FOR DRAWING EACH OFC WITH ABOVE 24 UP TO 48 STRANDS FIBER RS. 70,000/- PER KILOMETRE PER ANNUM FOR DRAWING EACH OFC WITH UP ABOVE 48 UP TO 96 STRANDS FIBER RS. 1,25,000/- PER KILOMETRE PER ANNUM 2. IN ADDITION TO THE ABOVE, ANNUAL INFRASTRUCTURE UTILISATION CHARGES @ RS. 6500/- PER ACRE PER ANNUM FOR THE PLOTS TO BE CONNECTED, WILL BE CHARGED. NOTE : RESIDENTIAL PLOTS BELOW 10 ACRE AND RESIDENTIAL PLOTS FOR MIG, LIG & EWS WILL BE EXCLUDED FROM THE ABOVE MENTIONED ANNUAL INFRASTRUCTURE UTILIZATION CHARGES TILL FURTHER NOTIFICATION. ABOVE ANNUAL INFRASTRUCTURE UTILIZATION CHARGES WILL BE PAYABLE COMMENCING ON OR BEFORE THE COST OF NEAREST QUARTER ENDING ON 30 TH JUNE OR 30 TH SEPTEMBER OR 31 ST DECEMBER OR 31 ST MARCH, AS THE CASE MAY BE, AND WILL REMAIN PAYABLE EVERY YEAR BY THE SAME QUARTER END, WITH A PROVISION OF INCREASE ON THE CHARGES @F 10% P.A. 3. A SUM OF RS. 5000/- PER ANNUM AS LEASE RENTAL CHARGES PAYABLE EACH YEAR IN ADVANCE FOR EACH EXCLUSIVE MAINTENANCE PIT OF SIZE 1 SQ. METER OR BELOW WITH A PROVISION OF 10% INCREASE AFTER EVERY THREE YEARS. 4. A SUM OF RS. 1,000/- IS TO BE PAID FOR USE OF NTTIDCO PIT EACH TIME FOR EACH CALL OF A MAXIMUM DURATION OF 8 HOURS OF EACH PIT. 5. MINIMUM CHARGEABLE LENGTH OF DUCTS FOR ONE CONTINUOUS STRETCH WILL BE 1 KILOMETER OR MORE ROUNDED TO NEXT 200 METERS. 6. SERVICE CHARGES AND OTHER TAXES & DUTIES WILL BE CHARGED EXTRA AS APPLICABLE. 7. DELAY PAYMENT CHARGES MAY BE APPLICABLE AFTER THE DUE DATE @ 155 P.A. UPTO NEXT 180 DAYS BEYOND WHICH THE CONNECTIVITY WILL BE DEEMED AS UNAUTHORIZED. 8. THE ABOVE TARIFF WILL BE EFFECTIVE FROM 1 ST NOVEMBER, 207 AND WILL REMAIN VALID TILL FURTHER REVISION. 5. KEEPING IN VIEW THE RELEVANT TERMS AND CONDITIONS OF THE AGREEMENTS, THE STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY 7 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. THE AO. ACCORDING TO HIM, THE DUCTS HAVING ALREADY BEEN LAID BY THE ASSESSEE WHICH WERE TO BE USED BY THE TELECOM SERVICE PROVIDERS, THE ANNUAL RENT CHARGEABLE FROM THE TELECOM SERVICE PROVIDERS WAS SUFFICIENT TO TAKE CARE OF THE MAINTENANCE OF THE SAID DUCTS. HE HELD THAT THE UPFRONT FEES THUS WAS NOT REQUIRED TO BE UTILISED FOR THE MAINTENANCE OF THE DUCTS AND THE ASSESSEE COMPANY NOT BEING LIABLE TO REFUND THE AMOUNT OF UPFRONT FEES EVEN IN CASE OF THE SERVICE PROVIDERS DECIDING TO WITHDRAW FROM THE DUCTS, THE UPFRONT FEES RECEIVED BY THE ASSESSEE WAS ITS INCOME OF REVENUE NATURE. IN THIS REGARD, HE RELIED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS PRADESHIYA INDUSTRIAL & INVESTMENT CORPORATION OF U.P. LTD. 186 TAXMAN 131 WHEREIN IT WAS HELD THAT WHEN THE ENTIRE UPFRONT FEES RECEIVED HAS BEEN DISCLOSED IN THE P&L ACCOUNT, NO FURTHER ACCOUNT NEED BE TAKEN. HE ALSO RELIED ON THE DECISION OF BANGALORE BENCH OF ITAT IN THE CASE OF TRO VS BHARAT HOTELS LTD. 125 TTJ 679 WHEREIN IT WAS HELD THAT TAX AT SOURCE HAD TO BE DEDUCTED UNDER SECTION 194I FROM UPFRONT FEE PAID SINCE UPFRONT FEE WAS INCOME IN THE HANDS OF THE LESSOR THOUGH THAT IT WAS ONE TIME PAYMENT FOR LEASE PERIOD OF 30 YEARS. HE FURTHER RELIED ON THE DECISION OF PUNJAB AND HARYAN HIGH COURT IN THE CASE OF CIT VS VARDHMAN POLYTEX LTD. 167 TAXMAN 67, WHEREIN IT WAS HELD THAT UPFRONT FEE PAID IS REVENUE EXPENDITURE. RELYING ON THESE JUDICIAL PRONOUNCEMENT, THE ASSESSING OFFICER HELD THAT THE UPFRONT FEE RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF REVENUE INCOME AND THE SAME AMOUNTING TO RS. 5,80,49,333/- WAS ENTIRELY CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS AGAINST THE AMOUNT OF RS. 56,20,667/- OFFERED BY THE ASSESSEE ON PROPORTIONATE BASIS. ACCORDINGLY AN 8 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. ADDITION OF RS. 5,24,28,666/- WAS MADE BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ISSUE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 16.12.2011. 6. AGAINST THE ORDER PASSED BY THE AO UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT (A) DISPUTING THE ADDITION OF RS. 5,24,28,666/- MADE BY THE AO ON ACCOUNT OF UPFRONT FEE. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT (A) A DETAILED SUBMISSION WAS FILED BY THE ASSESSEE IN SUPPORT OF ITS CASE ON THIS ISSUE AND AFTER DISCUSSING THE SAME IN DETAIL, THE LD. CIT (A) DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF UPFRONT FEES VIDE PARAGRAPH NO 4.4 TO 4.9 OF HIS IMPUGNED ORDER WHICH ARE EXTRACTED BELOW. 4.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS AND SUPPLEMENTARY SUBMISSIONS FURNISHED BY THE A.R. OF THE APPELLANT. THE ASSESSING OFFICER OBSERVED IN HIS ORDER THAT THOUGH THE APPELLANT HAD RECEIVED ONE TIME UPFRONT YET IT DID NOT CREDIT THE RECEIPTED SUM ENTIRELY IN ITS PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER ALSO STATED THAT ON BEING ASKED, THE APPELLANT HAD SUBMITTED THAT IT I AMORTISED THE TOTAL UPFRONT FEE FOR A PERIOD OF 15 YEARS WITH 1/15TH OF THE TOTAL UPFRONT FEE HAVING BEEN TAKEN AS THE INCOME OF THE YEAR THROUGH ITS PROFIT AND LOSS ACCOUNT. IT HAD BEEN SUBMITTED BY THE APPELLANT BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS THAT THE UPFRONT FEES RECEIVED FROM THE SERVICE PROVIDERS WERE BEING ACCOUNTED FOR AND CONSIDERED AS INCOME IN 15 EQUAL ANNUAL INSTALMENTS DURING THE TENURE OF THE PERIOD OF THE LEASE. IT HAD ALSO BEEN SUBMITTED BY THE APPELLANT BEFORE THE ASSESSING OFFICER THAT THE UPFRONT FEES HAD BEEN RECEIVED TOWARDS AGREEMENT FOR LEASE OF DUCTS AND PITS FOR A PERIOD OF 15 YEARS AND AS PER THE AGREEMENT THE APPELLANT HAD THE RESPONSIBILITY TO MAINTAIN THE SAID DUCTS AND PITS FOR THE ENTIRE LEASE PERIOD OF 15 YEARS. IT WAS ALSO MENTIONED BY APPELLANT THAT IT HAD ACCOUNTED FOR THE UPFRONT FEE IN ACCORDANCE WITH THE ACCOUNTING STANDARDS AS-9 (REVENUE RECOGNITION) AND AS-19 (LEASES) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI). THE ASSESSING OFFICER OBSERVED THAT SINCE THE APPELLANT HAD GOT THE RIGHT TO 9 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. FORFEIT THE ENTIRE UPFRONT FEE WITHOUT RESORTING TO ANY REFUND TO THE CONCERNED PARTY IN THE EVENT OF TERMINATION OF THE AGREEMENT BY THE SAID PARTY, THERE COULD NOT BE ANY PROPORTIONATE RECOGNITION OF REVENUE. THE ASSESSING OFFICER MADE REFERENCES TO CERTAIN DECISIONS OF THE HIGH COURT/TRIBUNAL AND HE CAME TO THE CONCLUSION THAT UPFRONT FEE WAS OF THE NATURE OF REVENUE. THE ASSESSING OFFICER ALSO STATED THAT SINCE THE DUCTS WERE SHARED BY ALL THE TELECOM SERVICE PROVIDERS FOR THEIR OWN USE, ACCORDING TO HIM THE UPFRONT FEE COULD NOT BE STATED TO BE UTILISED FOR MAINTENANCE OF THE DUCTS. THE ASSESSING OFFICER WENT ON TO CONSIDER THE ENTIRE UPFRONT FEE AS ASSESSABLE INCOME FOR THE ASSESSMENT YEAR 2009-10 AND MADE AN ADDITION OF RS. 5,24,28,666/-. 4.5 THE A.R. OF THE APPELLANT THROUGH HIS WRITTEN SUBMISSIONS EXPLAINED THAT SINCE THE UPFRONT FEES HAD BEEN RECEIVED TOWARDS AGREEMENT FOR LEASE OF DUCTS AND PITS FOR A PERIOD OF 15 YEARS DURING WHICH IT WOULD BE THE APPELLANTS RESPONSIBILITY TO MAINTAIN THOSE DUCTS AND PITS FOR THE ENTIRE LEASE PERIOD OF 15 YEARS, IN ACCORDANCE WITH THE ACCOUNTING STANDARDS AS-9 AND AS-19 THE UPFRONT FEES WERE BEING RECOGNISED OVER THE LEASE PERIOD OF 15 YEARS. THE AR OF THE APPELLANT SUBMITTED THAT THE PARTICULAR THREE DECISIONS OF THE HIGH/TRIBUNALS THAT HAD BEEN REFERRED TO BY THE ASSESSING OFFICER, WERE NOT SIMILAR TO THE APPELLANTS CASE INVOLVING THE PROCEDURE OF RECOGNISING ONE TIME UPFRONT FEES OVER 15 YEAR PERIOD OF LEASE IN ACCORDANCE WITH THE ACCOUNTING STANDARD AS-19. THE AR OF THE APPELLANT SUBMITTED THAT IF THE UPFRONT FEE FOR THE 15 YEAR PERIOD WOULD NOT HAVE BEEN PROPORTIONATELY TAKEN INTO ACCOUNT. IN THE RELEVANT YEARS, THERE WOULD HAVE ARISEN CASES WHERE CERTAIN EXPENDITURE TOWARDS MAINTENANCE WOULD HAVE BEEN SHOWN IN SOME OF THE YEARS INCLUDED IN THE CONCERNED 15 YEAR PERIOD WITHOUT THERE BEING ANY CORRESPONDING UPFRONT FEE. THE AR OF THE APPELLANT SUBMITTED THAT THE APPELLANT HAD FOLLOWED THE ACCOUNTING STANDARD AS-19 FOR RECOGNISING THE UPFRONT FEES OVER THE 15 YEAR PERIOD AND THE SAID PROCEDURE SHOULD HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER AS PROPER AND, THEREFORE, THE ADDITION OF RS. 5,24,28,666/-. 4.6 THE AR OF THE APPELLANT FURTHER SUBMITTED THAT THOUGH NO DIRECT DECISION WAS AVAILABLE IN RELATION TO SPREADING OVER OF ANY INCOME OVER THE PERIOD TO WHICH THAT INCOME RELATED TO, YET SUPREME COURT AND JURISDICTIONAL CALCUTTA HIGH COURT DECISIONS IN RELATION TO SPREADING OVER OF REVENUE EXPENDITURE, COULD BE CONSIDERED FOR DECIDING THE APPELLANTS CASE. THE AR OF THE APPELLANT REFERRED TO THE FOLLOWING TWO DECISIONS: (III) MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT 10 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. [1997] 225 ITR 802 (SC), AND (IV) HINDUSTAN ALUMINIUM CORPORATION LTD. VS CIT [1983] 144 ITR 457 (CAL) 4.7 THE AR OF THE APPELLANT POINTED OUT THAT THE SUPREME COURT IN THE FIRST CASE HAD HELD THAT WHERE THERE WOULD BE A CONTINUING BENEFIT TO THE BUSINESS OF AN ASSESSEE OVER A PERIOD COMPRISING OF NUMBER OF YEARS IN RESPECT OF THE EXPENDITURE INCURRED, THE SPREADING OVER OF SUCH EXPENDITURE OVER THE PERIOD DURING WHICH THE BENEFIT WOULD ACCRUE, SHOULD BE CONSIDERED AS PROPER. THE AR OF THE APPELLANT ALSO STATED THAT IT HAD ALSO BEEN OBSERVED BY THE SUPREME COURT THAT ALLOWING THE ENTIRE EXPENDITURE IN ONE YEAR MIGHT GIVE A VERY DISTORTED PICTURE OF THE PROFIT FOR A PARTICULAR YEAR. THE AR OF THE APPELLANT POINTED OUT THAT THE JURISDICTIONAL CALCUTTA HIGH COURT HAD UPHELD THE CLAIM OF THE CONCERNED ASSESSEE TO SPREAD OUT A LUMP SUM PAYMENT TO SECURE A TECHNICAL ASSISTANCE AND TRAINING OVER A NUMBER OF YEARS AND ALLOWED PROPORTIONATE DEDUCTION IN THE RELEVANT ACCOUNTING YEARS. THE AR OF THE APPELLANT SUBMITTED THAT WHEN THE SUPREME COURT AS WELL AS THE JURISDICTIONAL CALCUTTA HIGH COURT HAD HELD THE SPREADING OF THE REVENUE EXPENDITURE OVER A NUMBER OF YEARS AS A PROPER PROCEDURE, THE SAME PRINCIPLE SHOULD ALSO BE APPLIED IN THE MATTER OF SPREADING OVER OF INCOME WHICH WOULD RELATE TO A NUMBER OF YEARS. THE AR OF THE APPELLANT FURTHER SUBMITTED THAT THOUGH THERE DID NOT EXIST ANY SPECIFIC PROVISION FOR SPREADING OF EXPENDITURE OR INCOME OVER THE RELEVANT YEARS, FOLLOWING THE SAME REASON AS CONSIDERED BY THE SUPREME COURT AND THE JURISDICTIONAL CALCUTTA HIGH COURT, IT SHOULD BE APPRECIATED THAT THE UPFRONT FEE RELATABLE TO A 15 YEAR PERIOD, IF SHOWN ONLY IN THE YEAR OF RECEIPT, IT WOULD PRESENT A VERY DISTORTED PICTURE OF THE PROFIT OF A PARTICULAR YEAR. ON THE BASIS OF HIS SUBMISSIONS AS SUPPORTED BY THE DECISIONS OF THE SUPREME COURT AND THE JURISDICTIONAL CALCUTTA HIGH COURT, THE A.R. OF THE APPELLANT SUBMITTED THAT THE ADDITION OF RS. 5,24,28,666/- - SHOULD BE DELETED. 4.8 ON GOING THROUGH THE DETAILS AVAILABLE AS REGARDS THE ACCOUNTS OF THE APPELLANT, IT IS OBSERVED THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT HAD BEEN MERCANTILE SYSTEM. ACCORDINGLY, IF THERE WOULD ARISE ANY INCOME WHICH RELATES TO A NUMBER OF YEARS, FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, SUCH INCOME SHOULD BE RECOGNISED PROPORTIONATELY IN THE YEARS TO WHICH THE INCOME RELATES TO. IT HAS BEEN OBSERVED THAT THE PARTICULAR THREE DECISIONS AS REFERRED TO BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER, HAD BEEN ON ISSUES DIFFERENT FROM THOSE OF THE APPELLANT 11 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. AND, ACCORDINGLY, THE SAID DECISIONS ARE NOT FOUND TO BE APPLICABLE FOR DECIDING THE APPELLANT'S ISSUE OF SPREADING OVER OF UPFRONT FEES TO VARIOUS RELEVANT YEARS. IT HAS BEEN OBSERVED THAT IN BOTH THE ABOVE-REFERRED DECISIONS AS QUOTED BY THE AR OF THE APPELLANT, THE SUPREME COURT AND THE JURISDICTIONAL CALCUTTA HIGH COURT HAD APPRECIATED THE FACT THAT IF ANY EXPENDITURE WHICH WOULD RELATE TO A NUMBER OF YEARS, WOULD BE CHARGED TO ONE PARTICULAR ACCOUNTING YEAR, THEN THERE WOULD APPEAR A VERY DISTORTED PICTURE OF THE PROFITS OF A PARTICULAR YEAR. IT APPEARS THAT THE SAME PRINCIPLE AS REGARDS THE SPREADING OVER OF EXPENDITURE SHOULD ALSO BE APPLIED TO THE SPREADING OVER OF INCOME OVER THE RELEVANT YEARS. AS AN EXAMPLE, IN THE CASE OF RENTAL INCOME, IF ONE LANDLORD RECEIVES RENT FOR THREE YEARS AT A TIME, FOR PROPER RECOGNITION OF THE INCOME SUCH RENT IS REQUIRED TO BE APPORTIONED IN BETWEEN THE THREE RELEVANT YEARS. IN THE APPELLANT'S CASE, THE UPFRONT FEES THAT HAD BEEN RECEIVED BY THE APPELLANT, HAD BEEN IN RELATION TO A PERIOD OF 15 YEARS. HENCE, SUCH UPFRONT FEES SHOULD BE CONSIDERED AS AN INCOME NOT ENTIRELY RECOGNISABLE ONLY IN THE YEAR OF RECEIPT BUT THE SAME SHOULD BE SPREAD OVER THE PARTICULARS YEARS TO WHICH THE CONCERNED UPFRONT FEES RELATE TO, IT IS FURTHER NOTED THAT THE APPELLANT HAS BEEN FOLLOWING THIS METHOD OF SPREADING OVER OF INCOME IN ALL THE YEARS AND SUCH A PROCEDURE IS IN ACCORDANCE WITH THE ACCOUNTING STANDARDS ISSUED BY THE ICAI. FURTHER, AS PER THE MERCANTILE SYSTEM OF ACCOUNTING THE SPREADING OVER OF INCOME TO THE RELEVANT YEARS, APPEARS TO BE A PROPER METHOD. 4.9 ON THE BASIS OF MY ABOVE OBSERVATIONS AND KEEPING IN MIND OF THE DECISIONS OF THE SUPREME COURT AS WELL AS THE JURISDICTIONAL HIGH COURT, I AM OF THE VIEW THAT THE METHOD ADOPTED BY THE APPELLANT OF SPREADING OVER OF THE UNFRONT FEES, IS AN ACCEPTABLE METHOD FOR THE PURPOSE OF COMPLIANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTING AND, ACCORDINGLY, THE SAID METHOD SHOULD BE ACCEPTED BY THE ASSESSING OFFICER FOR THE PURPOSE OF THE INCOME TAX ASSESSMENT. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE APPELLANTS METHOD OF SPREADING OVER OF THE UPFRONT FEES TO THE RELEVANT 15 YEARS AND CONSEQUENTLY THE ADDITION OF RS. 5,24,28,666/- IS DELETED. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 12 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. 7. THE LEARNED DR STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER IN SUPPORT OF THE REVENUES CASE ON THE ISSUE UNDER CONSIDERATION. HE INVITED OUR ATTENTION TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER TO SHOW THAT THE ACCOUNTING STANDARD 9 (AS-9) WAS NOT APPLICABLE IN THE FACTS OF THE ASSESSEES CASE AS CLEARLY POINTED OUT BY THE AO AND THE RELIANCE OF THE ASSESSEE ON AS-9 IN SUPPORT OF THE TREATMENT GIVEN TO THE UPFRONT FEES FOR THE PURPOSE OF REVENUE RECOGNITION WAS CLEARLY MISPLACED. HE CONTENDED THAT THE ACCOUNTING STANDARD IN ANY CASE IS NOT RELEVANT FOR THE PURPOSE OF DECIDING THE ISSUE UNDER CONSIDERATION WHICH IS TO BE DECIDED AS PER THE RELEVANT PROVISIONS OF THE INCOME TAX ACT AND THE PRINCIPLES LAID DOWN IN THE RELEVANT JUDICIAL PRONOUNCEMENT DEALING WITH THE ACCRUAL OF INCOME FOR THE PURPOSE OF INCOME TAX ACT. AS REGARDS THE CASE LAWS CITED BY THE ASSESSEE BEFORE THE LD. CIT (A) AND RELIED ON BY THE LD. CIT (A) TO GIVE RELIEF TO THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION, HE SUBMITTED THAT THE SAME ARE DISTINGUISHABLE ON FACT. HE ALSO SUBMITTED THAT THE DECISION IN THE SAID CASES WAS RENDERED IN DIFFERENT CONTEXT AND THE RELIANCE OF THE LD. CIT (A) THEREON TO GIVE RELIEF TO THE ASSESSEE IS CLEARLY MISPLACED. HE CONTENDED THAT THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE AO IN HIS ORDER, ON THE OTHER HAND ARE DIRECTLY ON THE ISSUE AND PLACED RELIANCE ON THE SAME IN SUPPORT OF THE REVENUES CASE. HE ALSO STRONGLY RELIED ON THE DECISION OF BANGALORE BENCH OF ITAT IN THE CASE OF NEW MANGALORE PORT TRUST 157 ITD 393 AND CONTENDED THAT THE ISSUE INVOLVED THEREIN AS WELL AS ALL THE MATERIAL FACT RELEVANT THERETO BEING SIMILAR TO THAT OF THE PRESENT CASE, THE SAME RENDERED IN FAVOUR OF THE REVENUE IS CLEARLY APPLICABLE IN THE PRESENT CASE. 13 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. 8. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND STRONGLY RELIED ON THE IMPUGNED ORDER OF THE LD. CIT (A) AND SUBMITTED THAT THE DECISION RENDERED BY THE LD. CIT (A) ON THE ISSUE UNDER CONSIDERATION IN FAVOUR OF THE ASSESSEE BEING WELL DISCUSSED AND WELL REASONED, DESERVES TO BE UPHELD. HE CONTENDED THAT THE LD. CIT (A) HAS TAKEN INTO CONSIDERATION ALL THE RELEVANT ASPECTS OF THE CASE AS WELL AS THE RELEVANT JUDICIAL PRONOUNCEMENTS ON THE POINT WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. HE ALSO CONTENDED THAT THERE IS NO SPECIFIC CLAUSE IN THE RELEVANT AGREEMENT ENTERED INTO BY THE ASSESSEE COMPANY WITH THE CONCERNED TELECOM SERVICE PROVIDERS FOR FORFEITURE OF UPFRONT FEES AND THE FORCE MAJURE CLAUSE CONTAINED IN THE SAID AGREEMENT MAKES THE ASSESSEE LIABLE TO ALLOW APPROPRIATE RELIEF TO THE SERVICE PROVIDERS ON PROPORTIONATE BASIS FOR ANY DELAY. 9. IN THE REJOINDER, THE LEARNED DR POINTED OUT THAT THE RELEVANT CLAUSE 6X(C) OF THE RELEVANT AGREEMENT PROVIDES IT SPECIFICALLY THAT THE ASSESSEE IS NOT LIABLE FOR ANY COMPENSATION. HE ALSO POINTED OUT THAT THE ANNUAL FEES CHARGED BY THE ASSESSEE TO THE TELECOM SERVICE PROVIDERS FOR USE OF DUCT ON KILOMETRE BASIS IS IN ADDITION TO THE UPFRONT FEES. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ASSESSEE COMPANY DURING THE RELEVANT PERIOD HAD LAID DOWN UNDERGROUND DUCT IN CERTAIN AREAS OF RAJARHAT TOWNSHIP AND THE SAID DUCT WAS ALLOWED TO BE USED AS A FACILITY TO DIFFERENT TELECOM SERVICE PROVIDERS FOR 14 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. LAYING DOWN OPTICAL FIBRE CABLES IN ORDER TO FACILITATE THEM TO GIVE TELECOM SERVICES TO THE PUBLIC. FOR THE SAID FACILITY, ONE TIME UPFRONT FEES WAS CHARGED BY THE ASSESSEE FROM THE TELECOM SERVICE PROVIDERS BESIDES ANNUAL RENT CHARGED ON THE BASIS OF USAGE OF DUCT PER KILOMETRE LENGTH WHICH WAS PAYABLE WITHIN THE FIRST 60 DAYS OF THE YEAR. SUCH UPFRONT FEES RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AMOUNTED TO RS. 5,80,49,333/- AND SINCE THE DUCT WAS PROVIDED TO THE TELECOM SERVICE PROVIDERS FOR A PERIOD OF 15 YEARS, THE SAME WAS OFFERED TO TAX BY THE ASSESSEE ONLY TO THE EXTENT OF 1/15 TH ON PROPORTIONATE BASIS. THIS CLAIM OF RECOGNISING THE REVENUE ON ACCOUNT OF UPFRONT FEES ON PROPORTIONATE BASIS WAS MADE BY THE ASSESSEE BY RELYING ON THE ACCOUNTING STANDARD-9 (AS-9). THE ASSESSING OFFICER HOWEVER DISALLOWED THIS CLAIM OF THE ASSESSEE AS, ACCORDING TO HIM, AS-9 WAS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. AS NOTED BY HIM IN THIS REGARD, THE ENTIRE UPFRONT FEES WAS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND IT WAS NOT LIABLE TO REFUND THE SAME TO THE CONCERNED PARTY EVEN IF THE AGREEMENT WAS TERMINATED BY THE SAID PARTY. HE ALSO NOTED THAT THE ANNUAL RENT SEPARATELY CHARGED / RECEIVED BY THE ASSESSEE COMPANY FROM THE TELECOM SERVICE PROVIDERS WAS SUFFICIENT TO TAKE CARE OF THE EXPENDITURE REQUIRED TO BE INCURRED ON MAINTENANCE OF THE DUCT AND THE UPFRONT FEES WAS NOT ADJUSTABLE WITH ANY FUTURE RENT OR ANY OTHER RECEIVABLE. HE ALSO REFERRED TO THE RELEVANT TERMS OF THE AGREEMENTS ENTERED INTO BY THE ASSESSEE COMPANY WITH THE TELECOM SERVICE PROVIDERS AND HELD THAT THE PERFORMANCE IN THE RELEVANT TRANSACTIONS INVOLVING THE RENDERING OF SERVICES HAVING BEEN ACHIEVED BY THE ASSESSEE COMPANY WITH NO SIGNIFICANT UNCERTAINTY EXISTING, THE 15 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. AMOUNT OF UPFRONT FEES ENTIRELY CONSTITUTED THE INCOME OF REVENUE NATURE EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 11. WHEN THE MATTER REACHED TO THE LD. CIT (A) ON AN APPEAL FILED BY THE ASSESSEE, THE LD. CIT (A) HOWEVER ACCEPTED THE CLAIM OF THE ASSESSEE OF RECOGNISING THE REVENUE ON ACCOUNT OF UPFRONT FEES ON PROPORTIONATE BASIS BY RELYING MAINLY ON THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF HINDUSTAN ALUMINIUM CORPORATION LTD. VS CIT (SUPRA) AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. (SUPRA) . THE CONTENTION RAISED BY THE LEARNED DR IN THIS REGARD IS THAT THE ISSUE INVOLVED IN BOTH THESE CASES WAS RELATED TO THE ALLOWABILITY OF ONE TIME PAYMENT MADE IN LUMP SUM ON ACCOUNT OF EXPENDITURE AND THE RATIO OF THE SAID DECISION CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE INVOLVING THE ISSUE RELATING TO THE CHARGEABILITY OF ONE TIME PAYMENT RECEIVED BY THE ASSESSEE IN LUMP SUM ON ACCOUNT OF INCOME. IN THE CASE OF HINDUSTAN ALUMINIUM CORPORATION LTD. (SUPRA), THE ISSUE WAS RELATING TO THE ALLOWABILITY OF LUMP SUM PAYMENT FOR GETTING TECHNICAL ASSISTANCE AND TRAINING OF PERSONS AND SINCE THE SAME REPRESENTED LUMP SUM PAYMENT MADE BY THE ASSESSEE TO GET RID OF RECURRING ANNUAL EXPENDITURE FOR EFFECTIVE RUNNING OF ITS BUSINESS AND WITH A VIEW TO PRODUCING PROFITS, IT WAS HELD BY THE HONBLE KOLKATA HIGH COURT THAT THE SAME COULD BE ALLOWED TO SPREAD OVER THE LIFE OF THE AGREEMENT AND DEDUCTED AS BUSINESS EXPENDITURE. IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD. (SUPRA) THE ISSUE INVOLVED WAS RELATING TO THE ALLOWABILITY OF DISCOUNT ON DEBENTURES AND SINCE THE 12 YEARS DEBENTURES WERE 16 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. ISSUED ON A DISCOUNT OF RS. 3,00,000/-, A PROPORTIONATE SUM OF RS. 12,500/- WAS HELD TO BE ALLOWABLE BY THE HONBLE SUPREME COURT AS BUSINESS EXPENDITURE AND NOT THE ENTIRE AMOUNT OF RS. 3,00,000/-. IT IS THUS CLEAR THAT BOTH THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LD. CIT (A) TO GIVE RELIEF TO THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION WERE RELATED TO THE ALLOWABILITY OF ONE TIME PAYMENT MADE BY THE ASSESSEE IN LUMP SUM ON ACCOUNT OF EXPENDITURE AND THIS POSITION WAS APPRECIATED AND ACCEPTED EVEN BY THE LD. CIT (A). HE HOWEVER HELD THAT THE SAME PRINCIPLES AS LAID DOWN IN RESPECT OF SPREADING OVER OF EXPENDITURE SHOULD ALSO BE APPLIED TO THE SPREADING OVER OF INCOME OVER THE RELEVANT YEARS. WE ARE UNABLE TO ENDORSE THIS VIEW OF THE LD. CIT (A). AS OBSERVED BY THE HONBLE SUPREME COURT IN ITS DECISION IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD. (SUPRA), THE CHARACTER OF PAYMENT IN RELATION TO THE PAYER CAN BE DIFFERENT FROM THE CHARACTER OF THAT PAYMENT IN THE HANDS OF THE RECIPIENT. 12. IT IS OBSERVED THAT IN THE CASE OF NEW MANGALORE PORT TRUST VS ACIT (SUPRA) CITED BY THE LEARNED DR, A SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE BANGALORE BENCH OF THIS TRIBUNAL. IN THAT CASE THE ASSESSEE HAD RECEIVED UPFRONT LUMP SUM PREMIUM FROM CONCESSIONAIRES FOR ALLOWING CERTAIN COMPANIES TO DEVELOP FACILITIES AND USE THE SAME FOR A PERIOD OF 30 YEARS. IN ADDITION TO THE SAID AMOUNT, THE CONCESSIONAIRES WERE ALSO REQUIRED TO PAY TO THE ASSESSEE REGULAR FACILITY CHARGES / ROYALTY FOR HANDLING OF CARGO IN DESIGNATED PORT AREA AT THE RATE FIXED/AGREED UPON BY PARTIES. IN COMPUTATION OF INCOME, THE ASSESSEE HAD OFFERED 1/30 TH OF THE UPFRONT PREMIUM AS INCOME FOR THE YEAR UNDER CONSIDERATION AND SHOWN BALANCE RECEIVED 17 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. AS LIABILITY BEING IN THE NATURE OF PRE PAID INCOME. THE AO HOWEVER TREATED THE ENTIRE AMOUNT OF UPFRONT PREMIUM RECEIVED BY THE ASSESSEE AS INCOME FOR THE YEAR UNDER CONSIDERATION BY HOLDING THAT THE SAID AMOUNT COULD NOT BE TAKEN AS INCOME ON PROPORTIONATE BASIS AS AGREEMENT DID NOT SPECIFY QUANTUM TO BE APPORTIONED OVER A PERIOD OF 30 YEARS. THE LD. CIT (A) UPHELD THE ORDER OF THE ASSESSING OFFICER HOLDING THAT ONE TIME PAYMENT RECEIVED BY THE ASSESSEE WAS HIS INCOME AND WHEN THE MATTER TRAVELLED TO THE TRIBUNAL ON FURTHER APPEAL BY THE ASSESSEE, THE ORDER OF THE LD. CIT (A) WAS UPHELD BY THE TRIBUNAL FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO 9.4 OF ITS ORDER. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NOT DISPUTE THAT THE ASSESSEE HAS GRANTED LEASE FOR 30 YEARS IN RESPECT OF THE PORT LAND TO THREE COMPANIES VIZ. UPCL., ABG INFRALOGISTICS AND M/S. AMBUJA CEMENTS LTD., VIDE RESPECTIVE CONCESSION AGREEMENT. THE ASSESSEE HAS RECEIVED UPFRONT PREMIUM FROM THESE THREE CONCESSIONARIES AT THE TIME OF EXECUTION OF THE AGREEMENTS. WE FIND THAT THE TRANSACTION OF LEASING OUT THE LAND TO THESE COMPANIES FOR 30 YEARS IS COMPLETED BY EXECUTION OF THE AGREEMENT AND THEREAFTER THE ASSESSEE WAS NOT REQUIRED TO DO OR PERFORM ANY ACT OR OBLIGATION UNDER THE AGREEMENT. THUS IN OTHER WORDS, THE ASSESSEE HAS RECEIVED CONSIDERATION FOR GRANT OF LICENSE/LEASE TO THESE THREE COMPANIES IN LUMP SUM APART FROM THE ANNUAL LICENSE FEE/ROYALTY WITHOUT ANY CORRESPONDING OBLIGATION TO BE REFUNDABLE AMOUNT IRRESPECTIVE OF THE PREMATURE TERMINATION OF THE CONCESSION/LEASE AGREEMENT. THE ASSESSEE HAS SUPPORTED ITS CLAIM BY MATCHING CONCEPT OF ACCOUNTING AS WELL AS ACCOUNTING STANDARD 19. HOWEVER, WHEN THERE IS NO CORRESPONDING LIABILITY OR OBLIGATION TO BE DISCHARGED BY THE ASSESSEE AFTER RECEIPT OF THIS AMOUNT AS UPFRONT, THEN THIS ARGUMENT OF THE ASSESSEE OF MATCHING CONCEPT GOES AGAINST THE CLAIM OF THE ASSESSEE. EVEN AS PER THE MATCHING CONCEPT OF RECOGNIZING THE INCOME THE AMOUNT RECEIVED BY THE ASSESSEE IS REQUIRED TO BE CONSIDERED AS INCOME OF THE CURRENT YEAR WHEN THE ASSESSEE HAS COMPLETED AND DISCHARGED ALL ITS OBLIGATION BY EXECUTING THE AGREEMENT AND NO FURTHER LIABILITY WAS TO BE DISCHARGED BY THE ASSESSEE FOR NEXT 30 YEARS UNDER THE CONCESSION AGREEMENT. THE CONSIDERATION 18 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. RECEIVED BY THE ASSESSEE DURING THE YEAR MATCHES WITH THE DISCHARGE OF LIABILITY OR OBLIGATION BY EXECUTION OF THE AGREEMENT AND HANDING OVER THE LAND IN QUESTION TO THE CONCESSIONAIRE FOR DEVELOPMENT OF FACILITY AND UTILIZATION OF THE SAME. ONCE THE ASSESSEE WAS NO LONGER LIABLE TO RENDER ANY SERVICE IN FUTURE BEING A CORRESPONDING DISCHARGE OF OBLIGATION OF RENDERING OF SERVICE CONSEQUENTLY, THERE WOULD BE NO QUESTION OF ACCRUAL OF INCOME IN FUTURE YEARS. 13. AS RIGHTLY SUBMITTED BY THE LEARNED DR, THE FACTS INVOLVED IN THE PRESENT CASE ARE MATERIALLY SIMILAR TO THAT OF THE CASE OF NEW MANGALORE PORT TRUST (SUPRA) DECIDED BY THE BANGALORE BENCH OF THIS TRIBUNAL IN AS MUCH AS THE ASSESSEE COMPANY WAS NOT REQUIRED TO DO OR PERFORM ANY ACT OR OBLIGATION AGAINST THE TRANSACTION INVOLVING THE RECEIPT OF UPFRONT FEES IN LUMP SUM AS CONSIDERATION FOR MAKING AVAILABLE THE DUCT ALREADY LAID DOWN BY IT TO THE CONCERNED TELECOM SERVICE PROVIDERS. THE ANNUAL CHARGES RECEIVED BY IT FROM THE SAID PROVIDERS SEPARATELY WERE SUFFICIENT TO TAKE CARE OF THE MAINTENANCE OF THE DUCT AND THE ENTIRE AMOUNT OF UPFRONT FEES RECEIVED BY THE ASSESSEE COMPANY WAS NOT REFUNDABLE OR ADJUSTABLE EVEN IF THE AGREEMENT WITH THE CONCERNED TELECOM SERVICE PROVIDERS WAS TO BE CANCELLED OR TERMINATED. ALTHOUGH THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SPECIFIC CLAUSE IN THE RELEVANT AGREEMENT IN RELATION TO FORFEITURE OF UPFRONT FEES, HE HAS NOT BEEN ABLE TO SHOW THAT THERE IS ANY CAUSE IN THE SAID AGREEMENTS MAKING THE ASSESSEE COMPANY LIABLE TO REFUND OR THE ADJUST AMOUNT OF UPFRONT FEES EVEN IN CASE OF TERMINATION OR CANCELLATION OF THE AGREEMENT BEFORE THE PERIOD OF 15 YEARS. EVEN THE FORCE MAJURE CLAUSE OF THE AGREEMENT RELIED UPON BY HIM IN THIS REGARD DOES NOT SHOW ANY OBLIGATION OR LIABILITY ON THE PART OF THE ASSESSEE TO REFUND OR ADJUST THE UPFRONT FEES. IT IS THUS CLEAR THAT THE UPFRONT FEES RECEIVED BY THE 19 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. ASSESSEE IS NON REFUNDABLE EVEN IN CASE OF PREMATURE TERMINATION OF THE AGREEMENT AND WHEN THERE IS NO CORRESPONDING LIABILITY OR OBLIGATION TO BE DISCHARGED BY THE ASSESSEE AFTER RECEIPT OF THE AMOUNT OF THE UPFRONT FEES, WE FIND THAT THE ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE AS WELL AS ALL THE MATERIAL FACT RELEVANT THERETO ARE SIMILAR TO THE CASE OF NEW MANGALORE PORT TRUST (SUPRA) AND THE DECISION RENDERED BY THE BANGALORE BENCH OF THIS TRIBUNAL IS SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. WE, THEREFORE, RESPECTFULLY FOLLOW THE SAID DECISION OF THE COORDINATE BENCH AND HOLD THAT THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF UPFRONT FEES IN LUMP SUM CONSTITUTED ITS INCOME OF REVENUE NATURE ACCRUED DURING THE YEAR UNDER CONSIDERATION AND THE SAME ACCORDINGLY WAS LIABLE TO TAX IN THE HAND OF THE ASSESSEE COMPANY AS RIGHTLY HELD BY THE ASSESSING OFFICER. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT (A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH AUGUST, 2017. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04/08/2017 BISWAJIT, SR. P.S. 20 I.T.A. NO. 2065 /KOL/2014 ASSESSMENT YEAR: 2009-10 M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVP. CO. LTD. COPY OF ORDER FORWARDED TO: 1. M/S. NEW TOWN TELECOM INFRASTRUCTURE DEVELOPMENT CO. LTD., WBHIDCO OFFICE BUILDING, GATE 3, SECTOR III, SALT LAKE, KOLKATA 700098 2. DCIT, CIRCLE 4, KOLKATA 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA