IDEA CELLULAR LTD, MUMBAI V. THE ACIT 3(2), MUMBAI

ITA 3261/MUM/2008

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9280 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 29-12-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 09-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Assessee Lawyers: J D MISTRY; KRUPA R GANDHI
• Keywords: Capital receipt; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 37(1)

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER ./ I.T.A. NO.3261 /MUM/2008 ( / ASSESSMENT YEAR : 2003-2004 M/S IDEA CELLULAR LTD., WINDSOR, 5 TH FLOOR, OFF CST ROAD, NEAR VIDYA NAGARI, KALINA, SANTACRUZ (E), MUMBAI 400 098. / VS. ASSTT. COMMISSIONER OF INCOME TAX, RANGE 3(2), MUMBAI. ./ PAN : AAACB2100P ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.3568 /MUM/2008 ( / ASSESSMENT YEAR : 2003-2004 INCOME TAX OFFICER 3(2)(1), ROOM NO. 673, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 20. / VS. M/ S IDEA CELLULAR LTD., WINDSOR, 5 TH FLOOR, OFF CST ROAD, NEAR VIDYA NAGARI, KALINA, SANTACRUZ (E), MUMBAI 400 098. ./ PAN : AAACB2100P ( / APPELLANT ) .. ( / RESPONDENT ) A SSESSEE BY SHRI J.D. MISTRY & SHRI KRUPA R. GANDHI DEPARTMENT BY : SHRI KISHAN VYAS / DATE OF HEARING : 29-12-2014 / DATE OF PRONOUNCEMENT :11-03-2015 [ ITA 3261//M/08 & ITA 3568/M/08 2 !' / O R D E R PER R.C. SHARMA, A.M . : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND REVENUE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) -III, MUMB AI DATED 26-03-2008 FOR A.Y. 2003-04 IN THE MATTER OF ORDER U/S 143(3) OF T HE INCOME TAX ACT, 1961. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OR PROVIDING CELLULAR SERVICES IN TELECOM CIRCLES OF MAHARASHTRA, GUJARAT , ANDHRA PRADESH AND DELHI. THE COMPANY INITIALLY STARTED ITS OPERATION IN MAHARASHTRA AND GUJARAT AND THEREAFTER EXPANDED ITS SCOPE OF OPERATION IN 2 000-01 IN ANDHRA PRADESH BY ACQUIRING TATA CELLULAR LTD. FURTHER, IN THE YEA R 2002-03, THE COMPANY ACQUIRED A LICENCE FROM DOT THROUGH BIDDING TO OPER ATE IN DELHI. THUS, CURRENTLY THE COMPANY OPERATES IN FOUR TELECOM CIRC LES. THE COMPANY ALSO TRADES IN HANDSETS AND ACCESSORIES WHICH ARE INTEGR AL PART OF THE NATURE OF BUSINESS IN WHICH THE ASSESSEE IS OPERATING. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE A.O. OBSERVED THAT THE ASSESSEE HAS SHOWN CAPITAL WORK-IN- PROGRESS AT RS. 398.15 MILLION. IN THIS CONTEXT, TH E A.O. REFERRED PARA 11(A) OF PART-B, BEING NOTES TO ACCOUNTS OF SCHEDULE 19 FO RMING PART OF THE ACCOUNTS AND OBSERVED THAT THE AUDITORS IN THIS PARA HAVE PR OVIDED CERTAIN DETAILS OF WORK-IN-PROGRESS WHICH REVEAL THAT THE WORK-IN-PROG RESS HAS BEEN REDUCED BY THE INCOME DURING PRE-OPERATIVE PERIOD OF RS. 3.80. MILLION. A.O. FURTHER FOUND THAT UPTO 31.3 .2002 THERE WAS NO PRE-OPERATI VE INCOME. THEREFORE HE INFERRED ON THE BASIS OF THIS SCHEDULE THAT THE ENT IRE PRE-OPERATIVE INCOME HAS BEEN ACCRUED TO THE ASSESSEE DURING THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. AS PER THE A.O . IN VIEW OF SUPREME COURT DECISION IN THE CASE OF TUTICORIN ALKALI CHEM ICALS & FERTILIZERS LTD. VS. CIT (227 ITR 172) IT WAS OBLIGATORY ON THE PART OF THE ASSESSEE TO OFFER THIS INCOME FOR TAXATION. SINCE THE ASSESSEE HAS FAILED TO DO SO, THE SAME WAS ITA 3261//M/08 & ITA 3568/M/08 3 BROUGHT TO TAX IN THIS ASSESSMENT YEAR. AN ADDITION ON THIS ACCOUNT OF RS. 38,00,000/- WAS MADE BY A.O. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF A.O. AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND THAT ASSESSEE WAS IN RECEIPT OF RS. 38 LACS PRIOR TO COMMENCEMENT OF OPERATION WHICH WAS A DJUSTED AGAINST THE CAPITAL EXPENDITURE. BY APPLYING THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZER S LTD. (SUPRA), THE A.O. HAS TAXED THE SAME AS INCOME FROM OTHER SOURCES. THE LD. A.R. HAS RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF TRIVENI ENGINEERING WORKS LTD. VS. CIT, 232 ITR 639 (DEL), HONBLE SUPREME CO URT DECISION IN THE CASE OF CIT VS. BOKARO STEEL LTD. , 236 ITR 315 (SC) AND TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN OIL PANIPAT POWER CONSORTIUM LTD. VS. TO (2009) 315 ITR 255 (DEL) AND CONTENDED THAT SUCH PR E-OPERATIVE RECEIPT WAS LIABLE TO BE ADJUSTED AGAINST CAPITAL RECEIPT. HOW EVER, THE NATURE OF SUCH RECEIPT WHETHER INTRINSICALLY CONNECTED WITH THE AS SETS ACQUIRED FOR IMPLEMENTATION OF PROJECT HAS NOT BEEN EXPLAINED. I N THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE BACK TO THE FILE OF A.O. FOR DECIDING THE SAME AFRESH AFTER CONSIDERING THE NATURE OF RECEIPT VIS--VIS INTRINS IC CONNECTION WITH THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE IN THE LIGHT O F THE PRINCIPLES LAID DOWN IN THE CASE OF BOKARO STEEL LTD. (SUPRA). WE DIREC T ACCORDINGLY. 4. THE SECOND GRIEVANCE OF THE ASSESSEE RELATES TO TWO ADDITIONAL GROUNDS RAISED BEFORE THE LD. CIT(A) FOR ALLOWING REVENUE S HARE LICENCEE FEES U/S 37(1) OF THE ACT. 5. AT THE OUTSET, THE LD. A.R. INVITED OUR ATTENTIO N TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 3260/MUM /2008 DATED 29-04- ITA 3261//M/08 & ITA 3568/M/08 4 2014 FOR A.Y. 2001-02 WHEREIN BOTH THE ISSUES REGAR DING ACCEPTING THE ADDITIONAL GROUND AS WELL AS LICENCE FEES PAID UNDE R REVENUE SHARING WAS EXAMINED BY THE TRIBUNAL IN GREAT DETAIL AND ALLOWE D THE SAME IN FAVOUR OF ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND THAT EXACTLY SIMILAR ISSUE WITH REGARD TO ACCEPTING FRESH CLAIM FIRST TI ME BEFORE APPELLATE AUTHORITY AND CLAIM OF DEDUCTION OF LICENCE FEES PAID UNDER R EVENUES SHARING WAS HELD TO BE ALLOWABLE AS REVENUE EXPENDITURE. PRECISE OB SERVATION OF THE TRIBUNAL WAS AS UNDER:- 4.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS RELEVANT MATERIAL ON RECORD. SO FAR AS THE ADMISSIBILITY OF THE FRESH CLAIM FIRST TIME BEFORE THE APPELATE AUTHORITY IS CONCERNED, WE FIND THAT AN IDENTICAL ISSUE WAS BEFORE THE HONBLE SUPREME COURT IN THE C ASE OF NATIONAL THERMAL POWER CORPORATION LTD. VS. CIT (SUPRA). THE ISSUE IN THE SAID CASE EMERGED FROM THE FACT THAT THE ASSESSEE OFFERE D AN AMOUNT TO TAX IN THE RETURN OF INCOME WHICH WAS NOT TAXABLE AS INCO ME. THE INCLUSION OF THE SAID AMOUNT WAS NOT OBJECTED BY THE ASSESSEE EV EN BEFORE THE CIT(A) AND ONLY AFTER FILING APPEAL BEFORE THE TRIBUNAL TH E ASSESSEE RAISED A GROUND BY WAY OF FORWARDING A LETTER. IN THOSE FACT S, HONBLE SUPREME COURT HAS HELD THAT WHEN IT IS FOUND THAT NON TAXAB LE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUES TION BEFORE THE TRIBUNAL FIRST TIME SO LONG AS RELEVANT FACTS ARE O N RECORD IN RESPECT OF THAT ITEM. WE HAVE ALREADY REPRODUCED THE RELEVANT FINDING OF THE HONBLE SUPREME COURT IN THE FOREGOING PARAS WHILE DISCUSSI NG THE GROUND NO. 2. IT IS CLEAR FROM THE DECISION OF HONBLE SUPREME CO URT THAT WHEN A CLAIM WHICH IS OTHERWISE ALLOWABLE /PERMISSIBLE BUT WAS N OT ALLOWED AS THE ASSESSEE DID NOT CLAIM THE SAME IN THE RETURN OF IN COME, THERE IS NOTHING UNDER LAW TO PREVENT THE ASSESSEE TO RAISE SUCH CLA IM BEFORE THE APPELLATE AUTHORITIES IF THE FACTS RELATING TO SUCH NEW CLAIM ARE ALREADY ON RECORD AND DO NOT REQUIRE ANY INVESTIGATION. ACC ORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE DENIAL OF CL AIM BY CIT(A) IS NOT ON THE GROUND THAT IT IS NOT ALLOWABLE BUT FOR WANT OF SUCH CLAIM BEFORE THE AO AND FURTHER ON MERITS THIS ISSUE IS COVERED BY THE SERIES OF DECISIONS AS RELIED UPON BY THE ASSESSEE THEN WE AR E OF THE VIEW THAT THE CIT(A) HAS COMMITTED AN ERROR IN NOT ADMITTING THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. HENCE THIS GROUND STANDS AD MITTED. ON MERITS THERE ARE VARIOUS DECISIONS WHERE THIS ISSUE HAS BE EN DECIDED BY HOLDING THAT THE LICENSE FEE PAID UNDER REVENUE SHARING IS AN ALLOWABLE REVENUE EXPENDITURE. IN THE LATEST DECISION OF HONBLE HIGH COURT OF DELHI DATED ITA 3261//M/08 & ITA 3568/M/08 5 9 TH DECEMBER 2013 IN THE CASE OF CIT VS. BHARATI HEXA COM LTD. & OTHERS, ONE OF THE ISSUES BEFORE THE HONBLE HIGH COURT WAS REGARDING THE ALLOWABILITY OF VARIABLE LICENSE FEE ON REVENUE SHA RING BASIS PAID UNDER THE NEW TELECOM POLICY OF 1999. THE HONBLE HIGH CO URT HAS DISCUSSED THE ISSUE AND HELD IN PARA 42 AND 47 AS UNDER:- 42 THE NEXT OBVIOUS QUESTION IS, ON WHAT BASIS APP ORTIONMENT SHOULD BE DONE AND WHAT COULD BE THE PROPORTION OF APPORTIONMENT BETWEEN CAPITAL AND REVENUE EXPENDITURE. IN THIS RE GARD IT WOULD BE APPROPRIATE AND PROPER TO DIVIDE THE LICENCE FEE INTO TWO PERIODS I.E. BEFORE AND AFTER 31-7-1999. THE LICENCE FEE PA ID OR PAYABLE FOR THE PERIOD UPTO 31-7-1999 I.E. THE DATE SET OUT IN THE 1999 POLICY SHOULD BE TREATED AS CAPITAL AND THE BALANCE AMOUNT PAYABLE ON OR AFTER THE SAID DATE SHOULD BE TREATED AS REVENUE ------------------------------------------------- ------- ------------------------------------------------ -------- 47. IN VIEW OF THE AFORESAID FINDINGS, THE SUBSTANTIAL QUESTION MENTIONED ABOVE IN ITEM NOS.1 TO 9 IS ANSWERED IN T HE FOLLOWING MANNER: (I) THE EXPENDITURE INCURRED TOWARDS LICENCE FEE IS PAR TLY REVENUE AND PARTLY CAPITAL. LICENCE FEE PAYABLE UPTO 31ST JULY, 1999 S HOULD BE TREATED AS CAPITAL EXPENDITURE AND LICENCE FEE ON REVENUE SHARING BASIS AFTER 1ST AUGU ST, 1999 SHOULD BE TREATED AS REVENUE EXPENDITURE. (II) CAPITAL EXPENDITURE WILL QUALIFY FOR DEDUCTION AS P ER SECTION 35ABB OF THE ACT. 4.6 WE FURTHER NOTE THAT THIS TRIBUNAL IN THE CAE O F MAHANAGAR TELEPHONE NIGAM LTD. VS. ACIT(SUPRA) AS WELL AS IN THE CAE OF ACIT VS. VODAFONE ESSAR GUJARAT LTD. (SUPRA) ALONG WITH OTHER NO. OF DECISI ON HAS TAKEN A SIMILAR VIEW. FOLLOWING THE DECISIONS OF HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. BHARATI HEXACOM LTD. & OTHERS AS WELL AS OTHER DECI SIONS RELIED UPON BY THE ASSESSEE, WE ALLOW THE CLAIM OF THE ASSESSEE. 7. AS THE FACTS AND CIRCUMSTANCES OF THE CASE DURIN G THE YEAR UNDER CONSIDERATION ARE PARA MATERIA, RESPECTFULLY FOLLOW ING THE DECISION OF THE TRIBUNAL, WE DIRECT THE A.O. TO ALLOW THE ASSESSEE S CLAIM OF LICENCE FEES PAID UNDER REVENUE SHARING SCHEME TO TELEPHONE DEPARTMEN T. WE DIRECT ACCORDINGLY. ITA 3261//M/08 & ITA 3568/M/08 6 8. THE FIRST GRIEVANCE OF REVENUE RELATES TO ALLOWI NG PROVIDENT FUND DUES AMOUNTING TO RS. 1,70,388/-. WE FOUND THAT THE LD. CIT(A) HAS ALLOWED THE CLAIM BY APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT WHEREIN DEDUCTION N RESPECT OF PROVIDENT FUND WAS ALLOWED ON PAYMENT BASIS. THE LD. CIT(A) HELD THAT THE AMOUNT HAS BEEN PAID DURING THE YEAR UNDER CONSIDERATION AND THEREFORE DEDUCTION HAS TO BE ALLOWED DURING THE YE AR ITSELF. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) DELETING T HE ADDITION MADE BY THE A.O. 9. GROUND NO. 2 IS AGAINST DELETION OF DISALLOWANCE OF CLUB ENTRY FEE AMOUNTING TO RS.10,08,510/-. ACCORDING TO ASSESSING OFFICER THIS EXPENDITURE GOES TO BENEFIT ASSESSEE IN THE LONG RUN AND IS THE REFORE OF CAPITAL IN NATURE. AS PER THE A.O., THE ASSESSEE IS ACQUIRING A RIGHT TO ENJOY THE FACILITIES OF THE CLUB AND THAT RIGHT IS ENDURING IN NATURE. CONSEQUE NTLY IT CANNOT BE TREATED AS REVENUE. BY THE IMPUGNED ORDER, THE LD. CIT(A) H AD DELETED THE DISALLOWANCE AFTER OBSERVING AS UNDER:- 4.1 LEARNED COUNSEL HAS DRAWN MY ATTENTION TO THE DECISION OF HON'BLE MUMBAI HIGH COURT IN THE CASE OF OTIS ELEVA TORS & HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT ESTATE EX PORT CORPORATION LTD. REPORTED AT 209 ITR 649. IN THESE DECISIONS, I T IS CLAIMED THAT THE EXPENDITURE 'UNDER CONSIDERATION HAS BEEN HELD TO B E REVENUE EXPENSE SINCE IT DOES NOT BRING INTO EXISTENCE ANY ASSETS O R ADVANTAGE OF ENDURING NATURE. RESPECTFULLY, FOLLOWING THESE DECI SIONS, IT IS HELD THAT CLUB ENTRY FEE HAS TO BE ALLOWED AS REVENUE EXPENDI TURE. ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 10. WE HAVE CONSIDERED THE RIVAL CONTENTION AND WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) FOR ALLOWING C LUB FEES BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F OTIS ELEVATORS AND THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT ESTATE EXPORT CORPORATION LTD. REPORTED IN 209 ITR 649 (SUPRA). AS THE EXPENDITURE WAS INCURRED WAS REVENUE IN NATURE AS HELD BY THE HONB LE HIGH COURT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) DELET ING THE DISALLOWANCE OF CLUB FEES PAID BY THE ASSESSEE COMPANY. ITA 3261//M/08 & ITA 3568/M/08 7 11. GROUND NO. 3 IS WITH RESPECT TO THE DEPRECIATIO N ON LICENCE FEES AMOUNTING TO RS. 39,37,22,853/- DISALLOWED BY THE A .O. THIS GROUND HAS BECOME INFRUCTUOUS INSOFAR AS WE HAVE ALREADY ALLOW ED ASSESSEES CLAIM FOR LICENCE FEES PAID WHILE DECIDING GROUND NO. 2 OF AS SESSEES APPEAL, HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED AS INFRUCTU OUS. 12. GROUND NO. 4 OF REVENUES APPEAL PERTAINS TO DI SALLOWANCE OF BRAND SERVICE FEES TREATED AS CAPITAL EXPENDITURE. THE A. O. HAS DISALLOWED BRAND SERVICING FEE AMOUNTING TO RS. 86,70,OOO/- ON THE G ROUND THAT IT CONSTITUTES CAPITAL EXPENDITURE. WHILE MAKING THE DISALLOWANCE, ASSESSING OFFICER HAS ARGUED THAT THE NOMENCLATURE SUGGESTS THAT EXPENDIT URE HAS BEEN INCURRED FOR PROJECTION AND DEVELOPMENT OF THE BRAND AND THE REFORE IT IS OF CAPITAL NATURE. HE HAS, ACCORDINGLY, MADE THE DISALLOWANCE. BY THE IMPUGNED ORDER, THE LD. CIT(A) ALLOWED THE CLAIM AFTER HAVING THE F OLLOWING OBSERVATION:- 7.2 I HAVE PERUSED THE FACTS OF THE CASE AND I FIND THE ONLY BASIS FOR MAKING DISALLOWANCE IS NOMENCLATURE OF EXPENDITURE, THIS IS NOT A RATIONAL BASE FOR MAKING THIS DISALLOWANCE. IF ASSE SSING OFFICER WANTED TO DISALLOW EXPENDITURE, HE OUGHT TO HAVE GONE TO T HE NATURE OF THIS EXPENDITURE AND ANALYZED ITS ALLOWABILITY. THIS HAS NOT BEEN DONE AT ALL. I ALSO NOTICE THAT THE AMOUNT HAS BEEN CONSIDERED I N EARLIER ASSESSMENT YEARS AND HAS BEEN ALLOWED REVENUE EXPENDITURE TO T HE APPELLANT. THEREFORE, IT IS HELD THAT DISALLOWANCE OF AN EXPEN DITURE ONLY ON THE BASIS OF ITS NOMENCLATURE IS NOT JUSTIFIED AT ALL. ACCORDINGLY, ADDITION MADE IS DELETED. 13. IT WAS CONTENDED BY THE LD. SENIOR A.R. MR. J.D . MISTRY THAT THE PAYMENT IS RECURRING IN NATURE AND DOES NOT GIVE AN Y ENDURING BENEFIT TO THE ASSESSEE. THE ASSESSEE GETS ONLY RIGHT TO USE THE B RAND 'AT&T' ONLY TILL THE TIME IT PAID SUCH FEE. IN ANY CASE, 'IDEA' BRAND WA S USED BY THE ASSSSEE W.E.F. MAY 2002 AND SUBSEQUENTLY, AT&T EXITED. HENCE, THE QUESTION OF ANY ENDURING BENEFIT IN THE CAPTIONED YEAR DOES NOT ARI SE AT ALL. RELIANCE WAS ITA 3261//M/08 & ITA 3568/M/08 8 PLACED BY THE LD. A.R. ON THE FOLLOWING DECISIONS F OR THE PROPOSITION THAT A PAYMENT FOR BRAND USE IS ALLOWABLE REVENUE EXPENDIT URE:- ~ CIT VS. HINDUSTAN GENERAL ELECTRICAL CORPORATION LTD. (1971) (81 ITR 243) (CAL); ~ AGARWAL HARDWARE WORKS (P.) LTD. VS. CIT (1980) ( 121 ITR 510) (CAL); ~ CIT VS. TATA ENGINEERING & LOCOMOTIVE CO. P. LTD. (1980) (123 ITR 538) (BORN.); ~ TATA ROBINS FRAZER LTD. VS. CIT (1987) (165 ITR 3 47) (PATNA); ~ CIT VS. V.R.V. BREWERIES & BOTTLING INDUSTRIES LT D. [2011] (347 ITR 249) (201 TAXMAN 196) (DELHI); 14. WE HAVE CONSIDERED THE RIVAL CONTENTION AND FOU ND THAT DURING THE YEAR UNDER APPEAL, THE ASSESSEE HAD PAID BRAND SERVICING FEES AMOUNTING TO RS. 86,70,000/- TO AT&T COMMUNICATIONS SERVICES INDIA P RIVATE LIMITED ('AT&T') FOR USING THE BRAND 'AT&T' FOR THE MAHARASHTRA AND GUJARAT CIRCLES AND THE SAME WAS DEBITED TO PROFIT & LOSS ACCOUNT AND CLAIM ED AS REVENUE EXPENDITURE. AT&T CORPORATION - USA WAS ONE OF THE PROMOTERS OF THE ASSESSEE. THE ASSESSEE WAS EARLIER KNOWN BY THE NAM E 'BIRLA AT&T COMMUNICATION LIMITED'. AT&T - USA HAS BEEN IN TELE COM BUSINESS IN USA SINCE 1984. HOWEVER, THE ASSESSEE WAS A NEW ENTRANT IN THE INDUSTRY IN 1995. THE ASSESSEE USED TO PAY A BRAND SERVICE FEE ANNUAL LY TO AT&T FOR USING THE BRAND 'AT&T. 15. THERE IS NO DISPUTE TO THE FACT THAT AMOUNT SO PAID HELPED THE ASSESSEE TO PROMOTE ITS BUSINESS DUE TO THE NAME OF ITS JOIN T VENTURE PARTNER VIZ: AT&T CORPORATION - USA. HENCE, THE EXPENDITURE SO I NCURRED WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSIN ESS. 16. WE FIND THAT IN ALL EARLIER YEARS AS MENTIONED ABOVE, THE ASSESSEE PAID BRAND SERVICE FEES TO AT&T AND DEBITED THE SAME TO PROFIT & LOSS ACCOUNT AND ITA 3261//M/08 & ITA 3568/M/08 9 CLAIMED AS REVENUE EXPENDITURE IN THE RETURN OF INC OME. THE CLAIM WAS NEVER DISPUTED BY THE REVENUE IN ANY EARLIER ASSESSMENT Y EARS AND THE SAME WAS ALLOWED. DURING THE YEAR UNDER APPEAL, THE ASSESSEE PAID BRAND SERVICE FEES TO AT&T ONLY FOR THE MONTH OF APRIL 2002 AND AFTER THAT THE ASSESSEE IS USING ITS OWN BRAND 'IDEA'. 17. FROM THE RECORD WE FIND THAT THE BRAND SERVICIN G FEE WAS PAID BY THE ASSESSEE SINCE LAST SEVERAL YEARS AND IN THE EARLIE R ASSESSMENT ORDERS, THIS EXPENDITURE HAS BEEN HELD TO BE REVENUE IN NATURE B Y THE A.O. HIMSELF. NO DISTINGUISHING FEATURE WAS BROUGHT ON RECORD BY THE A.O. DURING THE YEAR UNDER CONSIDERATION TO JUSTIFY THE DISALLOWANCE OF ASSESSEES CLAIM. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF LD. CIT(A) DELETING THE DISALLOWANCE OF BRAND SERVICING FEE PAID BY THE ASS ESSEE INSOFAR AS FINDINGS RECORDED BY THE LD. CIT(A) HAD NOT BEEN CONTROVERTE D BY THE LD. CIT DR BY BRINGING ANY POSITIVE MATERIALS ON RECORD. 18. THE NEXT GRIEVANCE OF THE REVENUE I.E. GROUND N O. 5 RELATES TO DISALLOWANCE OF INTEREST FOR INTEREST FREE LOANS AD VANCED TO SUBSIDIARIES. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISA LLOWANCE OF INTEREST AFTER HAVING FOLLOWING OBSERVATION:- 9. GROUND NO.9 IS AGAINST DISALLOWANCE OF INTERES T AMOUNTING TO RS.32,34,00,000/- ON THE GROUND THAT INTEREST FREE LOANS HAVE BEEN ADVANCED TO SUBSIDIARIES. ACCORDING TO ASSESSING OF FICER, DURING THE YEAR UNDER CONSIDERATION, APPELLANT HAS PAID INTERE ST OF RS.1983.27 MILLION. IN CONTRAST APPELLANT HAS ADVANCED FUNDS T O SUBSIDIARIES AMOUNTING TO RS.3090.S7 MILLION, ON WHICH NO INTERE ST HAS BEEN CHARGED. HE HAS CONSEQUENTLY HELD THAT INTEREST BEA RING FUNDS BY APPELLANT HAVE BEEN DIVERTED FOR PURPOSE OTHER THAN BUSINESS. ASSESSING OFFICER HAS DISALLOWED INTEREST PAID BY A PPELLANT ATTRIBUTABLE TO INTEREST FREE ADVANCES MADE TO SUBSIDIARIES COMP ANY BY APPELLANT. ON THIS ISSUE DETAILED SUBMISSION HAVE BEEN FILED W HICH ARE ON RECORD. MY ATTENTION HAS BEEN DRAWN TO SCHEDULE 19 NOTE NO. B PARA NO.2(A), WHERE FACTS HAVE BEEN DETAILED. I HAVE PERUSED THE FACTS OF THE CASE AND I AM SATIS FIED THAT IN TH FACTS DETAILED ABOVE, THERE WAS DIRECT COMMERCIAL C ONSIDERATION IN ITA 3261//M/08 & ITA 3568/M/08 10 ADVANCING FUNDS TO SUBSIDIARIES. THEREFORE, DECISI ON OF HONBLE SUPREME COURT IS DIRECTLY APPLICABLE TO THE FACTS O F THE CASE. CONSEQUENTLY DISALLOWANCE OF INTEREST IS NOT JUSTIF IED. THIS GROUND OF APPEAL IS ALLOWED. 19. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND THAT TATA GROUP WERE PROMOTERS OF IDEA CELLULAR LTD. AND THEY WERE IN LAND LINE TELEPHONE SERVICE IN AREA OF MADHYA PRADESH. BECAUSE OF THIS OPERATION OF TATAS IN MADHYA PRADESH AND BECAUSE OF CONNECTION BETWEEN TA TAS AND ASSESSEE COMPANY, ASSESSEE COULD NOT HAVE ENTERED INTO MOBIL E TELEPHONE SERVICES IN THE AREA OF MADHYA PRADESH. HOWEVER, ASSESSEE WANTE D TO ENTER INTO MADHYA PRADESH FOR PROVIDING CELLULAR FACILITIES. THEY HA VE THEREFORE GIVEN FUNDS TO ITS OWN SUBSIDIARY. THUS THE ADVANCES TO SUBSIDIARI ES WERE OUT OF THIS COMMERCIAL CONSIDERATION. THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF S.A. BUILDERS IS APPLICABLE TO THE FACTS OF THE CASE. THE FINDINGS RECORDED BY THE LD. CIT(A) AT PARA 9.2 WITH REGARD TO THE FACT THAT THERE WAS DIRECT COMMERCIAL EXPEDIENCY IN ADVANCING FUNDS TO SUBSIDI ARIES HAVE NOT BEEN CONTROVERTED BY THE REVENUE BY BRINGING ANY POSITIV E MATERIAL ON RECORD. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE OF INTEREST ATTRIBUTABLE TO FUNDS ADVANCED TO SUBSIDIARIES 20. IN THE RESULT, ASSESSEES APPEAL AS WELL AS REV ENUES APPEAL ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 11-03-2015. !' # $% &! ' 11-03-2015 ( ) SD/- SD/- (VIJAY PAL RAO) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 11-03-2015 [ ITA 3261//M/08 & ITA 3568/M/08 11 .6../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 8,, MUMBAI 4. 7 / CIT -4, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI H BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI