DCIT, New Delhi V. M/s. Hughes Communication India Ltd., New Delhi

ITA 2273/DEL/2014

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5967 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROCKTIM SAIKIA
• Keywords: Depreciation; Rule of consistency; Bad and doubtful debts; Capital expenditure
• Section: 143(3); 80IB; 10B; 250; 80IA; 80IC; 80IC

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI (THROUGH VIDEO CONFERENCING] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 2346/DEL/2014 [A.Y 2008-09] ITA NO. 4550/DEL/2018 [A.Y 2009-10] M/S HUGHES COMMUNICATIONS INDIA LTD VS. THE D.C. I.T 1, SHIVAJI MARG, WEST END GREENS NH-18 CIRCLE 12 (1) NEW DELHI NEW DELHI PAN : AAACH 0765 L ITA NO. 2273/DEL/2014 [A.Y 2008-09] ITA NO. 3906/DEL/2015 [A.Y 2009-10] THE I.T.O VS. M/S HUGHES COMMUNICATIONS INDIA LTD CIRCLE 12(1) 1, SHIVAJI MARG, WEST END GREENS NH- 18 NEW DELHI NEW DELHI - PAN : AAACH 0765 L [APPELLANT] [RESPONDENT] DATE OF HEARING : 08.09.2021 DATE OF PRONOUNCEMENT : 14.09.2021 ASSESSEE BY : SHRI AJAY VOHRA, SR. ADV SHRI SAKSHAM SINGHAL, ADV SHRI ANSHUL, ADV REVENUE BY : SHRI ROCKTIM SAIKIA, S R. DR 2 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THE ABOVE CAPTIONED CROSS APPEALS BY THE ASSESSEE P REFERRED AGAINST ORDER OF THE COMMISSIONER OF INCOME TAX [AP PEALS] - 11, NEW DELHI DATED 29.01.2014 AND BY THE REVENUE PREFERRED AGAINST ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 15, NEW DELHI DATED 03.03.2015 PERTAINING TO A.YS 2008-09 AND 2009-10 R ESPECTIVELY. 2. SINCE COMMON ISSUES ARE INVOLVED IN THE CAPTIONE D APPEALS THEY WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE COMMON GRIEVANCE IN ASSESSEES APPEAL RELATE S TO THE DISALLOWANCE OF DEDUCTION MADE BY THE ASSESSING OFF ICER UNDER SECTION 80-IA OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFE RRED TO AS 'THE ACT'] AT RS. 5,61,69,752/- AS AGAINST RS. 10,48,65,690/- IN ASSESSMENT YEAR 2008-09 AND UPHOLDING DISALLOWANCE OF DEDUCTION UND ER SECTION 80-IA OF THE ACT TO THE EXTENT OF RS. 3,27,57,034/- IN A. Y. 2009-10. 3 4. SINCE THE UNDERLYING FACTS IN ISSUE ARE IDENTICA L IN BOTH THE ASSESSMENT YEARS UNDER APPEAL, WE HAVE DECIDED TO P ROCEED WITH THE FACTS OF ASSESSMENT YEAR 2008-09. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING TELECOMMUNICATION SERV ICES, WHICH INTER-ALIA, PROVIDE BROADBAND AND INTERNET SERVICES. THE ASSES SEE CLAIMED INCOME FROM THE SAID SERVICES AS ELIGIBLE FOR DEDUCTION UN DER SECTION 80IA(4)(II) OF THE ACT AND ACCORDINGLY, IN ASSESSMENT YEAR 2008-09 CLAIMED DEDUCTION OF RS. 10,48,65,690/- U/S 80-IA OF THE ACT. 6. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CLAIM OF DEDUCT ION MAINLY FOR THE FOLLOWING REASONS: (I) THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR 80IA ELIGIBLE UNIT AND NON 80IA UNIT. (II) BOOKS OF ACCOUNTS WERE MAINTAINED AT CORPORATE OFFICE LEVEL AND THE ASSESSEE FAILED TO PRODUCE ACTUAL BIL LS AND VOUCHERS AND SEPARATE ACCOUNTS FOR 80IA AND NON 80I A UNITS. 4 (III ) ACCORDING TO THE ASSESSING OFFICER, APPORTIONMENT OF THE EXPENSES ARE NOT BASED ON THE REVENUE RATIO OF ELIG IBLE AND NON ELIGIBLE UNITS RESULTING INTO HIGHER PROFIT IN ELIGIBLE UNITS THAN THE PROFITS IN NON ELIGIBLE UNITS. (IV) THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS NOT APPORTIONED OTHER INCOME BETWEEN THE ELIGIB LE AND NON ELIGIBLE UNITS. THE CLAIM OF DEDUCTION OF RS. 10,48,65,690/- WAS RESTRICTED TO RS. 5,61,69,752/- THEREBY DISALLOWING RS. 4,86,95,938/-. 7. THE ASSESSEE AGITATED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT THE FINDINGS OF THE ASSESSING OFFICER THAT THE ASSE SSEE IS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT IS NOT CORRECT AS THE ASS ESSEE HAS MAINTAINED ERP BASED ACCOUNT HAVING SEPARATE CODE FOR EACH HEA D OF EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THA T THE ALLOCATION OF EXPENSES ARE BASED ON ACTUAL SCIENTIFIC PRINCIPLES AND DREW OUR ATTENTION TO THE CHART OF ALLOCATION OF EXPENSES AND POINTED OUT THE BASIS FOR 5 ALLOCATION OF EACH EXPEND ITURE. 9. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASS ESSEE THAT AS PER THE PROVISIONS OF SECTION 80IA(7) OF THE ACT, THERE IS NO REQUIREMENT TO MAINTAIN SEPARATE BOOKS OF ACCOUNT AND FURTHER STAT ED THAT IN THE INITIAL ASSESSMENT YEAR I.E. 2007-08, THE ASSESSING OFFICER HAD ALLOWED THE CLAIM OF DEDUCTION U/S 80IA OF THE ACT AND FOLLOWING THE SETTLED PRINCIPLES OF CONSISTENCY, NO ADVERSE VIEW SHOULD HAVE BEEN TAKEN BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT YEAR. 10. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT AS PER THE PROVISIONS OF SECTION 80IA(5) OF THE ACT, FOR THE P URPOSES OF DETERMINING THE QUANTUM OF DEDUCTION U/S 80IA OF THE ACT, UNDER THE SAID SECTION, THE DEDUCTION SHALL BE COMPUTED AS IF SUCH 80IA UNIT IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR. T HE LD. COUNSEL FOR THE ASSESSEE ALSO POINTED OUT THAT THE ASSESSING OFFICE R HAS INCORRECTLY HELD THAT OTHER INCOME TO THE EXTENT OF RS. 1,70,48,316/ - HAS NOT BEEN PROPERLY ALLOCATED BETWEEN ELIGIBLE AND NON ELIGIBL E UNIT. 11. PER CONTRA, THE LD. DR STRONGLY SUPPORTED T HE FINDINGS OF THE LOWER AUTHORITIES AND READ THE RELEVANT PORTION OF THE AS SESSMENT ORDER AND THE ORDER OF THE LD. CIT(A). 6 12. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO T HE ORDERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT THE ASSESSEE IS MAINTAINING ERP BASED ACCOUNT WHICH HAVE SEPARATE CODE FOR EACH HEAD OF E XPENSES AND THIS HAS BEEN ACCEPTED BY THIS TRIBUNAL IN THE CASE OF DCIT VS. N.I.I.T IN ITA NO. 1112/DEL/2012 WHEREIN THIS TRIBUNAL HAS HELD THAT E RP SOFTWARE ACCOUNTING SYSTEM WAS SUFFICIENT COMPLIANCE FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10B OF THE ACT. 13. APPEAL BY THE REVENUE AGAINST THIS ORDER OF THE TRIBUNAL WAS NOT ADMITTED BY THE HON'BLE HIGH COURT OF DELHI VIDE OR DER DATED 01.03.2016 IN ITA NO. 897/2015. SIMILAR VIEW WAS TAKEN BY THI S TRIBUNAL IN THE CASE OF RANBAXY LABORATORIES LTD IN ITA NO. 196/DEL/2013 WHEREIN THIS TRIBUNAL HAS HELD THAT MAINTAINING ACCOUNTS ON SAP BASIS ERP SYSTEM OF ACCOUNTING TANTAMOUNTS TO MAINTENANCE OF SEPARATE B OOKS OF ACCOUNT AND ACCORDINGLY, DEDUCTION U/S 80IB AND 80IC OF THE ACT CANNOT BE DENIED ON THE SAID GROUND. 14. IN SO FAR AS THE ALLOCATION OF EXPENSES ARE CONCERNED, THE SAME CAN BE SEEN FROM THE FOLLOWING CHART: 7 EXPENSE ALLOCATION BASIS AS PER AO ALLOCATION BASIS AS PER APPELLANT AND CERTIFIED BY THE CA IN FORM 10CCB ADVERTISEMENT REVENUE RATIO ON ACTUAL BASIS. THE EXPENSES NOT IDENTIFIABLE ARE ALLOCATED IN REVENUE RATIO PROVISION FOR DOUBTFUL ADVANCES ON ACTUAL BASIS. THE ADVANCES NOT IDENTIFIABLE ARE ALLOCATED IN REVENUE RATIO OTHER FEES ON BASIS OF REVENUE OF RESPECTIVE UNIT CONSUMABLES CONSUMABLES RELATED TO REPAIR COST CENTRE (ARC) AND CUSTOMER SUPPORT CENTRE (CS) HAVE BEEN ALLOCATED ON THE BASIS OF AMC REVENUE OF RESPECTIVE UNITS. OTHER CONSUMABLES NOT REALISTICALLY IDENTIFIABLE ARE ALLOCATED ON BASIS OF REVENUE TRAVELLING & CONVE YANCE ALLOCATED ON THE BASIS OF REVENUE OF RESPECTIVE UNI TS INSTALLATION CHARGES HAVE BEEN ALLOCATED ON THE BASIS OF ANNUAL MAINTENA NCE CONTRACT (AMC) REVENUE EARNED BY THE RESPECTIVE UNI TS BAD DEBTS ON ACTUAL BASIS PRINTING AND STATIONARY ALLOCATED ON THE BASIS OF REVENUE OF RESPECTIVE UNI TS LEGAL AND PROFESSIONAL ON ACTUAL BASIS. THE EXPENSES NOT IDENTIFIABLE ARE ALLOCATED IN REVENUE RATIO BANK CHARGES ON BASIS OF REVENUE OF RESPECTIVE UNIT AUDITOR REMUNERATION ON BASIS OF REVENUE OF RESPECTIVE UNIT REIMBURSEMENT OF EXPENSES ON BASIS OF REVENUE OF RESPECTIVE UNIT REPAIR AND MAINTENANCE REPAIR AND MAINTENANCE OF BUILDINGS HAVE BEEN ALLOCATED ON THE BASIS OF HEAD COUNT RATIO OF RESPE CTIVE UNIT 15. IN OUR CONSIDERED OPINION, THE AO HAS SIMPLY DISBELIEVED THE ALLOCATION MADE BY THE ASSESSEE ON THE GROUND THAT THE EXPENSES MUST HAVE BEEN ALLOCATED ON REVENUE RATIO OF ELIGIBLE AN D NON ELIGIBLE UNITS WHEREAS THE ALLOCATION OF EXPENSES EXHIBITED HEREIN ABOVE CLEARLY SHOWS THAT EITHER THEY ARE ON ACTUAL BASIS OR ON REVENUE RATIO BASIS AND SOME OF THE EXPENSES ARE DIRECTLY ATTRIBUTABLE TO THE UNITS . IN OUR CONSIDERED OPINION, ALLOCATION IS BASED ON ACTUAL SCIENTIFIC B ASIS DULY CERTIFIED BY THE 8 CA IN FORM NO. 10CCB AND THEREFO RE, THE SAME CANNOT BE FAULTED WITH. 16. WE FURTHER FIND THAT THIS CLAIM IS NOT FOR THE FIRST TIME BUT INITIAL ASSESSMENT YEAR OF CLAIM IS 2007-08 WHEREIN THE ASS ESSING OFFICER HAS ACCEPTED THE CLAIM OF DEDUCTION. IN OUR CONSIDERED VIEW, UNLESS THE CLAIM IS DISTURBED IN THE INITIAL ASSESSMENT YEAR, THE SAME CANNOT BE DISTURBED IN THE SUBSEQUENT ASSESSMENT YEARS OF THE BLOCK. 17. INTERESTINGLY, THE ASSESSING OFFICER HAD AL LOWED CLAIM OF DEDUCTION IN ASSESSMENT YEAR 2011-12 ONWARDS ALSO. THEREFORE , THE RULE OF CONSISTENCY SQUARELY APPLIES ON THE FACTS OF THE CA SE. 18. IN SO FAR AS THE ALLOCATION OF OTHER INCOME OF RS. 1,70,48,316/- IS CONCERNED, WE FIND THAT THE SAME WAS NEVER CLAIMED AS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THEREFORE, THE ACTI ON OF THE ASSESSING OFFICER IS WITHOUT ANY BASIS. CONSIDERING THE FACT S OF THE CASE IN TOTALITY, AS DISCUSSED HEREINABOVE, WE DIRECT THE ASSESSING O FFICER TO ALLOW THE CLAIM OF DEDUCTION U/S 80IA OF THE ACT AS CLAIMED B Y THE ASSESSEE. 19. GROUND NO. 1 WITH ALL ITS SUB-GROUNDS IS AL LOWED. 20. GROUND NOS. 2 AND 3 WERE NOT PRESSED. THE SAME ARE DISMISSED AS 9 NOT PRESSED. 21. THE COMMON GRIEVANCE IN REVENUES APPEAL RE LATES TO THE NON CONFIRMING OF THE ADDITION OF RS. 5,44,15,806/- ON ACCOUNT OF LICENCE FEE WHICH WAS HELD AS CAPITAL IN NATURE BY THE ASSESSIN G OFFICER. 22. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS PAID A SUM OF RS. 7,25,54,408/- BY WAY OF LICENCE FEE IN A SSESSMENT YEAR 2008- 09 TO THE DEPARTMENT OF TELECOMMUNICATION. THE ASS ESSING OFFICER WAS OF THE FIRM BELIEF THAT THE SAID PAYMENT WAS TOWARD S CAPITAL EXPENDITURE AND AFTER ALLOWING DEPRECIATION OF 25% DISALLOWED B ALANCE AMOUNT OF RS. 5,44,15,806/- IN ASSESSMENT YEAR 2008-09. 23. ON APPEAL, THE FIRST APPELLATE AUTHORITY DI RECTED THE ASSESSING OFFICER TO VERIFY WHETHER THE AMOUNT OF LICENCE FEE SO CLAIMED CONTAINS ANY ELEMENT OF CAPITAL EXPENDITURE IN TERMS OF DECI SION OF THE HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF B HARTI HEXACOM 221 TAXMAN 323. 24. AGAINST SUCH DIRECTION, THE REVENUE IS BEFO RE US. 10 25. AT THE VERY OUTSET, WE HAVE TO STATE THAT PURSUANT TO THE DIRECTIONS OF THE LD. CIT(A), THE ASSESSING OFFICER, VIDE ORDE R DATED 08.03,.2015 PASSED U/S 250 R.W.S 143(3) OF THE ACT, DELETED THE ADDITION MADE ON ACCOUNT OF LICENCE FEE PAID TO DOT BY FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF BHARTI HEXA COM [SUPRA]. SINCE THE QUARREL HAS NOW BEEN SETTLED, WE DO NOT FIND ANY ME RITS IN THE APPEALS OF THE REVENUE. THE SAME ARE ACCORDINGLY, DISMISSED. 13. IN THE RESULT, THE CAPTIONED APPEALS OF THE ASS ESSEE IN ITA NOS. 2346/DEL/14 AND ITA NO. 4550/DEL/2018 ARE PARTLY AL LOWED WHEREAS THE APPEALS OF THE REVENUE IN ITA NOS. 2273/DEL/2014 AN D 3906/DEL/2015 ARE DISMISSED. 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14.09. 2021 IN THE PRESENCE OF BOTH THE RIVAL REPRESENTATIVES. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14 TH SEPTEMBER, 2021 VL/ 11 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER