DCIT- 9(1)(2), MUMBAI V. ATC INDIA TOWER CORPORATION PVT. LTD., MUMBAI

ITA 2621/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1271 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANADI VARMA
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI MANOJ KUMARAGGARWAL, ACCOUNTANT MEMBER ITA NO. 2621/MUM/2016 ASSESSMENT YEAR : 2009-10 DY. COMMISSIONER OF INCOME TAX-9(1)(2), MUMBAI VS. M/S. ATC INDIA TOWER CORPORATION PVT. LTD., 404, 4 TH FLOOR, SKYLINE ICON, ANDHERI KURLA ROAD, MUMBAI [PAN : AAJCS 7669 HH] ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI ANADI VARMA, CIT - D R RESPONDENT BY : SHRI S ATYEN SETHI, A R DATE OF HEARING : 2 7 - 11 - 201 8 DATE OF PRONOUNCEMENT : - 28 - 11 - 201 8 O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 6, MUMBAI, IN APPEAL NO. CIT(A)-16/IT-341/DCIT 8(1)/2011-12, D ATED 22-01-2016. THE ASSESSMENT WAS FRAMED BY THE ACIT, CIRCLE- 5(3), MUMBAI U/S. 143(3) OF THE INCOME TAX ACT, 196 1 [HEREIN AFTER REFERRED TO AS ACT] VIDE HIS ORDER DATED 28 -12-2011. ITA NO. 2621/MUM/2016 2 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A), DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DEFERRED TAX LIABILITY. FOR THIS, REVENUE HAS R AISED THE FOLLOWING TWO GROUNDS: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, WHETHER THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DEFERRED TAX LIABILITY OF 11,69,70,172/-; (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, WHETHER THE LD.CIT(A) WASCORRECT IN DELETING THE AD DITION MADE BY THE AO, IGNORING THE FACT THAT THE ASSESSEE WAS FOLLOWI NG MERCANTILE SYSTEM, WHEREIN THE ASSESSEE WAS REQUIRED TO OFFER THE INCOME/EXPENSE ON ACCRUAL BASIS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS IN TO THE BUSINESS OF POWER CUM TELECOM COMPANY FOCUSING ON S HARE TELECOM INFRASTRUCTURE SERVICES FOR CELLULAR OPERAT IONS IN INDIA. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE AUDITED BOOKS OF ACCOUNT THAT THE ASSESSEE HAS DEFERRED TAX LIABILITY OF 13,92,61,014/-, WHICH INCLUDES DEPRECIATION OF 7,24,79,838/- AND INCOME ON ACCOUNT OF STRAIGHT LI NE OF ACCOUNT OF 6,67,81,176/-. THE AO NOTED THAT THE ASSESSEE AS PER ACCOUNTING STANDARD 22 ON RESPECTIVE DATES, BAL ANCE OF NET DEFERRED TAX ASSETS, COMPUTED THE TOTAL INCOME AND DOES NOT INCLUDE DEFERRED TAX LIABILITY OF 13,92,61,014/-. ACCORDING TO AO, ASSESSEE ONLY ADDED BACK A SUM OF 2,22,90,842/- FOR ITA NO. 2621/MUM/2016 3 PROVISION OF STRAIGHT LINING EXPENDITURE, IN ITS TO TAL INCOME. THE AO HAS ISSUED SHOW CAUSE NOTICE AS TO WHY THIS DEFE RRED TAX LIABILITY SHOULD NOT BE ADDED TO THE TOTAL INCOME O F ASSESSEE ON ACCOUNT OF OPERATING LEASE. ASSESSEE REPLIED VIDE LETTER DATED 27-12-2011 THAT THE ASSESSEE-COMPANY HAS CREATED A PROVISION UNDER STRAIGHT LINE ACCOUNTING AND THE PROVISION RE FLECTS THE EXCESS OF EXPENSES/INCOME IN THE BOOKS OF CURRENT Y EAR AS A RESULT OF AS-19. THE AO WITHOUT GIVING ANY REASON, MADE ADDITION ON DEFERRED TAX LIABILITY AMOUNTING TO 11,69,70,172/- OUT OF THE TOTAL PROVISION MADE AT 13,92,61,014/-. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING IN PARA 6.3.2, AS UN DER: 6.3.2. DURING APPELLATE PROCEEDINGS A WRITTEN SUBM ISSION WAS FILED WHICH HAS BEEN CONSIDERED. FROM THE COMPUTATION OF INCOME FILED AT PAGE 1 OF THE PAPER BOOK IT IS EVIDENT THAT THE NET PROFIT TAKEN TO COMPUTE THE TOTAL INCOME FOR THE ASSESSMENT YEAR IN QUESTION WAS NET LOSS OF 64,54,46,121/-. THIS FIGURE TALLIES WITH THE P&L A/C APPEARING AT PAGE 10 OF THE PAPER BOOKS. FROM PERUSAL OF THE P&L A/C PLACED AT PAGE 10 OF THE PAPER BOOK IT IS EVIDENCE THAT THE P ROVISION FOR DEFERRED TAX LIABILITY FOR THE RELEVANT PREVIOUS YEAR WAS 51,62,788/-. IN VIEW OF ABOVE MENTIONED FACTUAL FINDING, THE AO WAS NOT JUS TIFIED IN MAKING THE ADDITION OF 11,69,70,172/- ON ACCOUNT OF DEFERRED TAX LIABILIT Y. THE PROVISION FOR DEFERRED TAX LIABILITY FOR THE PREVIO US YEAR WAS 51,62,788/- AND NOT 13,92,61,014/- AS IT HAD BEEN TAKEN BY THE ASSESSING OFFICER. THE LATTER AMOUNT WAS THE CUMUL ATIVE AMOUNT OF DEFERRED TAX LIABILITY APPEARING IN THE BALANCE SHE ET. IN VIEW OF THESE FACTUAL FINDING, VARIOUS CONTENTIONS RAISED BY THE APPELLANT NEED NOT BE DEALT. THE LEGAL POSITION IS WELL SETTLED THAT INC OME TAX IS LEVIED ON THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. HEN CE, ADDITION OF 11,69,70,172/- MADE BY THE AO ON ACCOUNT OF DEFERRE D TAX LIABILITY IS DELETED AND APPEAL OF THE APPELLANT ON THIS GROUND IS ALLOWED. ITA NO. 2621/MUM/2016 4 AGGRIEVED, NOW REVENUE IS IN SECOND APPEAL BEFORE T HE TRIBUNAL. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE AC COUNTS OF ASSESSEE THAT THE PROVISION FOR DEFERRED TAX LIABIL ITY IS BELOW THE LINE OF ADJUSTMENT, WHICH IS HAVING NO EFFECT ON CO MPUTATION OF TOTAL INCOME AS THE ASSESSEE HAS TAKEN NET PROFIT W HILE COMPUTING INCOME WHICH WAS BEFORE TAX I.E., LOSS OF 64,54,46,121/-, WHICH WAS PRIOR TO PROVISION FOR D EFERRED TAX. 4.1. LD. COUNSEL FOR THE ASSESSEE ALTERNATIVELY ALS O EXPLAINED BEFORE US THAT DEFERRED TAX LIABILITY OF 13,92,61,014/- WAS TAKEN INTO CONSIDERATION BY THE AO, WHICH WAS AGGREGATE P ROVISION AS ON 31-03-2009 BUT DEFERRED TAX LIABILITY FOR THE YE AR UNDER CONSIDERATION WAS ONLY TO THE TUNE OF 51,62,788/-. WE ALSO FIND THAT THE DEFERRED TAX LIABILITY OF 13,92,61,014/- WAS EQUIVALENT TO DEFERRED TAX ASSET AND THE NET EFFECT OF DEFERRED TAX LIABILITY AND DEFERRED TAX ASSET WAS NIL. ASSESSEE HAS ALREADY ACCOUNTED FOR A SUM OF 2,22,90,842/- BEING PROVISION FOR STRAIGHT LINE EXPENDITURE IN ITS TOTAL INCOME, WHIC H WAS FOR THE CURRENT ASSESSMENT YEAR. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW ITA NO. 2621/MUM/2016 5 THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AN D WE CONFIRM THE SAME. 5. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF NOVEMBER, 2018 SD/- SD/- (MANOJ KUMAR AGGARWAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIA L MEMBER MUMBAI; DATED: 28 TH NOVEMBER, 2018 TNMM ITA NO. 2621/MUM/2016 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A),MUMBAI 4. THE CIT 5. DR, A BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI