ADDL CIT 7(2), MUMBAI V. RELIANCE COMMUNICAITON INFRASTRUCTURE LTD, NAVI MUMBAI

ITA 3615/MUM/2010

• Counselvise Citation: 361519914 RSA 2010
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SHRI SENTHIL KUMAR
• Assessee Lawyers: VIKRAM S HOSKOTE
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 3615/MUM/2010 ASSESSMENT YEAR-2005-06 THE ACIT - 7(2), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. RELIANCE COMMUNICATION INFRASTRUCTURE LTD., DHIRUBHAI AMBHANI KNOWLEDGE CITY, KOPERKHAIRANE, NAVI MUMBAI-400 709 PAN-AACCS 2157H (APPELLANT) (RESPONDENT) APPELLANT BY: DR.SHRI SENTHIL KUMAR RESPONDENT BY: SHRI VIKRAM S. HOSKOTE O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 22.01.2010 PASSED BY THE LD. CIT(A)-13 FOR TH E ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROV IDING OF INTERNET SERVICES AND TELECOMMUNICATIONS INFRASTRUCTURE FACI LITIES TO VARIOUS TELECOM COMPANIES. THE ASSESSING OFFICER WHILE CO MPLETING THE ASSESSMENT U/S. 143(3) HELD THAT ADDITIONS AMOUNTIN G TO RS. 1093.27 CRORES TOWARDS GRANT OF IRC AS THE INCOME OF THE AS SESSEE FOR THE YEAR UNDER APPEAL. THE AO ALSO MADE CERTAIN DISALLOWANC ES U/S. 14A. ITA NO. 3615/M/2010 2 3. ON FURTHER APPEAL BEFORE THE LD. CIT(A), THE LD. AR SUBMITTED AS FOLLOWS: SIMILAR ISSUE HAS ARISEN IN THE COURSE OF ASSESSME NT PROCEEDING FOR A.Y. 2004-05. INITIALLY, THE LEARNED CIT(A) ADDL. COMM. OF INCOME TAX IN HIS ORDER U/S.143(3) OF THE ACT DATED 22/12/06 HAD ACCEPTED THE PRINCIPLE OF SPREAD OVER AFTER CONSIDERING VARIOUS QUERIES RAISED BY HIM ON THE SU BJECT AND THE EXPLANATION GIVEN BY THE APPELLANT. SUBSEQUENTLY, T HE HON'BLE COMM. OF INCOME TAX ISSUED NOTICE U/S.263 DATED 24/ 07/08 FOR A.Y. 2004-05 AND ONE OF THE ISSUE RELATED TO IRC FE ES WHICH IS A SUBJECT MATTER OF APPEAL FOR THE YEAR UNDER REVIEW. THE HON'BLE COMM. OF INCOME TAX AFTER CONSIDERING THE ISSUE RAI SED BY THE A.O. FOR THE YEAR UNDER REVIEW I.E. A.Y. 2005-06, SET AS IDE THE ORDER FOR A.Y. 2004-05 VIDE ORDER DATED 09/03/09. THE SAID OR DER OF HON'BLE COMM. OF INCOME TAX WAS CHALLENGED BY THE APPELLANT BEFORE HON'BLE ITAT, MUMBAI. THE HON'BLE ITAT CONSIDERED THE ISSUE ON MERIT APA RT FROM THE JURISDICTION OF HON'BLE COMM. OF INCOME TAX FOR ISS UING NOTICE U/S.263 OF THE ACT. THE HON'BLE ITAT IN ITS DETAILE D ORDER DATED 21.08.09 CONSIDERED VARIOUS CLAUSES OF THE AGREEMEN T WHICH ARE RELEVANT FOR THE PURPOSE OF DECIDING THE ISSUE ON M ERIT AND CONCLUDED IN PARA 36 OF ITS ORDER AS UNDER: IN RESPECT OF THE ISSUE I.E. THE TAXABILITY OF RIL FEES, WHETHER THE ENTIRE IRC FEES IS TO BE TREATED AS INC OME FOR THE ASSESSEE IN THE A.Y. 2004-05, IN OUR OPINION, THERE IS NO ABSOLUTE RIGHT TO THE ASSESSEE TO TREAT THE ENTIRE LICENSE FEES OF THE 20 YEAR AS AN INCOME ACCRUED DURING THE F.Y. 20 03-04. MOREOVER ON THE THEORY OF THE MATCHING PRINCIPLE, I F THE ENTIRE IRC FEES WHICH IS UNDISPUTEDLY RECEIVED FOR THE PER IOD OF 20 YEARS FOR USE OF THE COMMUNICATION NETWORK IS TO BE TREATED AS AN INCOME OF THE A.Y. 2004-05, THEN IT WILL GIVE DI STORTED PICTURE OF PROFIT. THE APPELLANTS STRONGLY ARGUED THAT THE ISSUE IS SQ UARELY COVERED BY THE DECISION OF HON'BLE TRIBUNAL ORDER DATED 21/ 08/09 IN THE APPELLANTS OWN CASE REFERRED TO ABOVE IT WAS CON TENTED THAT THE ADDITION OF RS.1093.28 CRORES MADE BY THE AO WAS UN WARRANTED AND BE DELETED. ITA NO. 3615/M/2010 3 4. THE LD. CIT(A) PASSED A DETAILED ORDER AT PAGES 4 TO 16. THE LD. CIT(A) HELD AS FOLLOWS: I. THERE IS NO ABSOLUTE RIGHT TO THE ASSESSEE TO TREA T THE ENTIRE LICENSE FEES OF THE 20 YEARS AS AN INCOME ACCRUED DURING TH E A.Y. 2005-06. II. MOREOVER, ON THE THEORY OF MATCHING PRINCIPLES, IF THE ENTIRE FEES WHICH IS UNDISPUTEDLY RECEIVED FOR THE PERIOD OF 20 YEARS FOR THE USE OF THE COMMUNICATION NETWORK/IRC RIGHTS , IS TO BE TREATED AS INCOME OF A.Y. 2005-06, THEN IT WILL GIV E THE DISTORTED PICTURE OF THE PROFIT. III. THE ENTIRE IRC FEES WILL THEREFORE, HAVE TO BE SPRE AD OVER AS INCOME OF THE ENTIRE TERM OF AGREEMENT OF 20 YEARS. IV. ACCORDINGLY, ADDITION OF RS.1093.28 CR ON ACCOUNT O F IRC FEES IS DELETED AND THE ADDITION IS RESTRICTED TO RS.16, 34,200/- I.E. IRC FEES ACCRUING FOR ONE DAY (CALCULATED ON PRO-RA TA BASIS (RS.1093,28,00,000 /223 /30 (RELATING TO ONE DAY IE . 31.03.05) AS THE FINAL ACCEPTANCE OF THE CUSTOMER ( SYSTEM HAS TAKEN PLACE ON 31.03.05). THIS GROUND OF APPEAL IS PARTIALLY ALLOWED WITH AFO RESAID DIRECTIONS. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US AND HA S RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS.16,34,200/- AND DELETING THE ADDITION OF RS.10,93,11,65,800/- IGNOR ING THAT RIGHTS OF CONNECTIVITY WAS GRANTED AND MADE AVAILABLE FOR USE ON 31.03.2005 AND THE SISTER CONCERN HAS PAID AND THE ASSESSEE RE CEIVED THE SAID SUM AS CONSIDERATION FOR THE GRANT OF EXCLUSIVE IRC IN THE NETWORK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS. 16,34,200/- AND DELETING THE ADDITION OF RS.10,93,11,65,800/- IGNOR ING THAT THERE IS NO QUESTION OF IRC FEE ON PHASE II DARK FIBER CONNE CTIVITY NOT ACCRUING DURING THE YEAR WHEN THE TERMS OF THE AGREEMENT POI NT IN THAT DIRECTION. ITA NO. 3615/M/2010 4 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS. 16,34,200/- AND DELETING THE ADDITION OF RS.10,93,11,65,800/- IGNOR ING THAT THE DECISION OF THE HON'BLE ITAT AGAINST THE ORDER U/S. 263 OF THE ACT IN ASSESSEES OWN CASE FOR A.Y. 2004-05 HAS NOT BEEN A CCEPTED BY THE DEPARTMENT AND FURTHER APPEAL U/S.263 OF THE ACT HA S BEEN FILED BEFORE THE HON'BLE BOMBAY HIGH COURT ON 12.01.2010 VIDE INCOME TAX APPEAL LODGING NO.134 OF 2010. 6. WE FIND THAT THE ITAT BY ITS ORDER DT. 21.8.2009 IN ITA NO. 2319/M/09 FOR A.Y. 2004-05 IN ASSESSEES OWN CASE C ONSIDERED VARIOUS CLAUSES OF THE AGREEMENT WHICH ARE RELEVANT FOR DEC IDING THE ISSUE ON MERIT AND HAS GIVEN ITS FINDING AT PARA 36 AS FOLLO WS: 36. IN RESPECT OF THE ISSUE NO.2, I.E. THE TAXABIL ITY OF RIL FEES, WHETHER THE ENTIRE ITC FEES IS TO BE TREATED AS INC OME FOR THE ASSESSEE IN THE A.Y. 2004-05, IN OUR OPINION, THERE IS NO ABSOLUTE RIGHT TO THE ASSESEEE TO TREAT THE ENTIRE LICENSE F EES OF THE 20 YEARS AS AN INCOME ACCRUED DURING THE F.Y> 2003-04. MOREO VER, ON THE THEORY OF THE MATCHING PRINCIPLES, IF THE ENTIRE IT R FEES WHICH IS UNDISPUTEDLY RECEIVED FOR THE PERIOD OF 20 YEARS FO R USE OF THE COMMUNICATION NETWORK IS TO BE TREATED AS AN INCOME OF THE A.Y. 2004-05, THEN IT WILL BE GIVE THE DISTORTED PICTURE OF THE PROFIT. 7. THE FACTS FOR THE PRESENT YEAR UNDER APPEAL VIZ. , 2005-06 IS SIMILAR TO THAT OF THE ASSESSMENT YEAR 2004-05. HENCE RESP ECTFULLY FOLLOWING THE DECISION OF THE MUMBAI TRIBUNAL IN ASSESSEES OWN C ASE, WE DISMISS THE REVENUES APPEAL. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2011 SD/- SD/- (P.M. JAGTAP) (ASH A VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 25 TH MAY, 2011 RJ ITA NO. 3615/M/2010 5 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 3615/M/2010 6 DATE INITIALS 1 DRAFT DICTATED ON: 20 . 0 5 . 201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 23 .05 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______