ITO, New Delhi V. M/s. Bharti Hexacom (P) Ltd., New Delhi

ITA 3798/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4135 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GEETMALA MOHNAI
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE G.E. VEERABHADRAPPA, HON'BLE VICE-PRESIDENT AND SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER ITA NO. 3798/DEL/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, VS. BHARTI HEXACOM (P) LTD., WARD 2(4), H-5/12, QUTAB AMBIENCE NEW DELHI. MEHRAULI ROAD, NEW DELHI-1100 30 (PAN: AAACH1766P) (APPELLANT) (RESPONDENT) C.O. NO. 316/DEL/2010 ( IN ITA NO. 3798/DEL/ 2010 ) ASSESSMENT YEAR: 2006-07 BHARTI HEXACOM (P) LTD., VS. INCOME-TAX OFFICER, H-5/12, QUTAB AMBIENCE WARD 2(4), MEHRAULI ROAD, NEW DELHI. NEW DELHI-1100 30 (CROSS-OBJECTOR) (RESPONDENT) APPELLANT BY: MS. GEETMALA MOHNAI, CIT(DR) RESPONDENT BY: SHRI ANIL BHALLA, CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER PER RAJPAL YADAV: JUDICIAL MEMBER PER RAJPAL YADAV: JUDICIAL MEMBER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LEARNED CIT(APPEALS) DATED 04.05.2010 PASSED FOR ASSESSMENT YEAR 2006-07. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, ASSESSEE HAS FILED CROSS-OBJECTION BEARING NO. 316/DEL/10. THE SOLITARY GRIEVANCE OF T HE REVENUE IN ITS APPEAL 2 IS THAT THE LEARNED CIT(APPEALS) HAS ERRED IN DELET ING THE ADDITION OF RS.27,60,30,300. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ON 30 TH NOVEMBER 2006 DECLARING NIL INCOME. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS DEBITED A SUM OF RS.30,67,07,000 IN ITS P & L ACCOUNT UNDER THE H EAD LICENSE FEE AND SPECTRUM CHARGES. IT CLAIMED IT AS REVENUE EXPENS ES. ASSESSING OFFICER HAS OBSERVED THAT LICENSE FEE AND SPECTRUM CHARGES IS T O BE AMORTIZED OVER THE REMAINING PERIOD OF LICENSE I.E. 12 YEARS. HE ALLOW ED A DEDUCTION OF RS.3,06,70,700 UNDER SEC. 35ABB OF THE ACT AND REMA INING AMOUNT OF RS.27,60,36,300 HAS BEEN DISALLOWED. 3. ON APPEAL, LEARNED CIT(APPEALS) HAS DELETED THIS DISALLOWANCE ON THE GROUND THAT A SIMILAR DISALLOWANCE WAS MADE IN EARL IER YEARS. I.E. 2003-04 AND 2004-05 BUT DELETED BY THE LEARNED CIT(APPEALS) AND THE ORDERS OF THE LEARNED CIT(APPEALS) HAVE BEEN CONFIRMED BY THE ITA T. 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE 3 ORDERS OF THE ITAT PASSED IN ITA NOS. 150 & 455/DEL /07 FOR ASSESSMENT YEARS 2003-04 AND 2004-05. SIMILARLY, THE DISALLOWA NCE WAS DELETED BY THE LEARNED CIT(APPEALS) IN ASSESSMENT YEAR 2007-08 ALS O AND THE APPEAL OF THE REVENUE I.E. ITA NO.3786/DEL/10 HAS BEEN DISMISSED BY THE ITAT VIDE ITS ORDER DATED 12.1.2011. HE PLACED ON RECORD COPIES O F BOTH THESE ORDERS. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. ASSESSING OFFICER HAS NOT ASSIGNE D ANY OTHER INDEPENDENT REASON IN THE PRESENT ASSESSMENT YEAR. HE MADE THE DISALLOWANCE BY OBSERVING THE PAST HISTORY AND CONSISTENT STAND OF THE ASSESSING OFFICER IN EARLIER YEARS. THUS, THERE IS NO DISPARITY ON FACTS . ITAT IN ASSESSMENT YEAR 2007-08 WHILE AFFIRMING THE DELETION HAS TAKEN INTO COGNIZANCE THE ORDERS OF THE ITAT IN ASSESSMENT YEARS 2003-04 AND 2004-05. T HIS FINDING READS AS UNDER: 3. AT THE OUTSET, LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT THE ISSUE IS COVERED BY THIS TRIBUNALS ORDER IN ITA NO. 150 AND 4522 FOR ASSESSMENT YEARS 2003-04 AND 2004-05 IN ASSESSEES OWN CASE VIDE ORDER DATED 24.7.2009. IN THE AFORESAID TRIBUNALS ORDER RELIED BY THE ASSESSEE, TRIBUNAL HAS RELIED UPON TRIBUNALS ORDER IN THE CASE OF BHARTI CELLULAR LTD. FOR ASSESSMENT YEAR 2000-01 IN ITA NO. 4 5335/DEL/2003 DATED 25.9.2009 WAS RELIED UPON. TH E TRIBUNAL HELD AS UNDER:- 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RI VAL SUBMISSIONS. THE OPERATIVE PORTION OF THE ORDER OF T HE TRIBUNAL IS CONTAINED IN PARAGRAPHS 9 AND 10, WHICH A RE REPRODUCED BELOW FOR READY REFERENCE:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE ORDER OF THIS TRIBUNAL IN THE CASE OF MTNL HAS AFTER CONSIDERING THE VARIOUS DETAILS AND SUBMI SSIONS OF THE ASSESSEE AND THE REVENUE THEREIN, HAS HELD T HAT THE LICENSE FEE WAS PAID ONLY FOR THE USE OF THE RIGHT TO DO THE BUSINESS OF TELECOM PROVIDER. THE SAID RIGHT DID N OT GIVE RISE TO ANY CAPITAL ASSET. FURTHER THE BOMBAY BEN CH OF THIS TRIBUNAL HAS HELD AS FOLLOWS:- 8. REVOCATION OF LICENCES THE CENTRAL GOVERNMENT MAY, AT ANY TIME, REVOKE ANY LICENCE GRANTED U/S 4, ON THE BREACH OF ANY OF THE CONDITIO NS THEREIN CONTAINED, OR IN DEFAULT OF PAYMENT OF ANY CONSIDERATION PAYABLE THEREUNDER: FROM PERUSAL OF S.8 OF THAT ACT, IT IS NOW EVIDEN T THAT UNDER THE CIRCUMSTANCES THE LICENCE IS REVOKED, THE APPELLANT SHALL NOT BE ABLE TO CARRY ON ITS BUSINES S OF TELEPHONE SERVICES, UNLESS IT HAD PAID SUCH A LICEN CE FEE TO THE GOVERNMENT. THE IRRESISTIBLE CONCLUSION, THE REFORE, WOULD BE THAT PAYMENT OF LICENCE FEE IS WHOLLY AND 5 EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINES S CARRIED ON BY IT. THE SAME IS, THEREFORE, AN ALLOWABLE DEDUCTION U/S 37 OF THE ACT. SINCE THE LIABILITY STANDS PAID DURING THE YEAR UNDER CONSIDERATION, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTIO N TO THE APPELLANT. 10. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH OF THIS TRIBUNAL IN THE CASE OF MTNL, REFERRE D TO SUPRA, WE ASSESSEE OF THE VIEW THAT THE VARIABLE RE VENUE SHARE LICENCE FEE PAID PURSUANT TO THE MIGRATION OF THE AASSESSEE TO THE NEW TELECOM POLICY OF 1999 IS LIABL E TO BE ALLOWED AS REVENUE EXPENDITURE AND WE DO SO. IN THE CIRCUMSTANCES, ASSESSING OFFICER IS DIRECTED TO DE LETE THE ADDITION MADE BY HOLDING THE VARIABLE REVENUE SHARE FEE PAID TO BE CAPITAL EXPENDITURE. IN THE CIRCUMSTANC ES, GROUND NO. 3 IN THE ASSESSEES APPEAL STANDS ALLOWE D. AS IT IS ACCEPTED POSITION OF BOTH THE PARTIES THAT THE FACTS OF THIS CASE ARE IN PARI MATERIAL WITH THE FACTS OF THE CASE, THE AFORESAID ORDER IS FOLLOWED AND IT IS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS OF REVENUE NATURE. 3.1 AS THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE EARLIER YEARS FOR ASSESSEES OWN CASE, BOTH THE COUNSEL AGREED T HAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE UPHOLD THE ORDER 6 OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND D ECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 6. IN VIEW OF THE ABOVE DISCUSSION AND RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE REVENUE. ACCORDINGLY, IT IS REJECTED. NO OTHER GROUND WAS RA ISED BY THE REVENUE, HENCE THE APPEAL OF THE REVENUE IS DISMISSED. C.O. NO.316/DEL/2010: 7. IN THE CROSS-OBJECTION, THE ASSESSEE IS IMPUGNIN G THE ADDITION OF RS.4,85,906. FOR MAKING THIS ADDITION, ASSESSING OF FICER HAS MADE A VERY BRIEF DISCUSSION WHICH IS AVAILABLE IN PARAGRAPH 5 OF THE IMPUGNED ORDER. THE OBSERVATIONS OF THE ASSESSING OFFICER READ AS U NDER: 5. AIR INFORMATION REGARDING TDS DEDUCTED ON THE R ECEIPT BY THE ASSESSEE COMPANY WAS AVAILABLE THE ASSESSEE COMPANY WAS ASKED TO RECONCILE THE SAME FROM THE BOOKS. THE ASSESSEE COM PANY SUBMITTED THAT AS PER ITS DETAILS SOME OF THE RECEIPT COULD N OT BE MATCHED. THIS AMOUNTED TO RS.4,85,906. MOSTLY FROM IDBI. THE SAME ARE ADDED BACK TO THE INCOME OF THE ASSESSEE COMPANY. 8. DISSATISFIED WITH THE ACTION OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS ). IT CONTENDED THAT THE ASSESSING OFFICER WAS NOT POSSESSING ANY CONCLUSIVE EVIDENCE INDICATING THE 7 FACT THAT ASSESSEE HAS ANY UNDISCLOSED RECEIPT. IT ALSO POINTED OUT THAT ITS ACCOUNTS ARE COMPLETE IN TERMS OF SEC. 145, THEY AR E DULY AUDITED UNDER SEC. 44AB AND THE AUDIT REPORT WAS SUBMITTED TO THE ASSE SSING OFFICER. LEARNED CIT(APPEALS) FAILED TO DISCUSS THE ISSUE IN DETAIL. HE CONFIRMED THE DISALLOWANCE BY MAKING FOLLOWING OBSERVATIONS: 11. I HAVE GONE THROUGH THE SUBMISSIONS OF THE ASS ESSEE COMPANY, AND ARGUMENTS OF THE A.R. THE AR COULD NOT RECONCI LE THE ABOVE AMOUNT OF RS.4,85,906 FOUND FROM AIR REPORT WITH BO OKS OF ACCOUNT OF THE APPELLATE COMPANY. THEREFORE, THE ACTION OF THE A.O. ON DISALLOWANCE OF THIS AMOUNT IS SUSTAINED. THIS GROU ND OF APPEAL OF THE APPELLANT IS DISMISSED. 9. BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT ASSESSING OFFICER WAS NOT POSSESSING ANY COMPLETE DETAILS. HE HAS CERTAIN DETAILS SUPPLIED BY THE A.I.R. WING COLLECTING ANNUAL INFOR MATION RETURN (A.I.R.). HE TOOK US THROUGH THE DETAILS AVAILABLE ON PAGE NOS. 83 TO 100 OF THE PAPER BOOK. ON THE STRENGTH OF THESE DETAILS, HE PO INTED OUT THAT IN BRIEF, THESE DETAILS ARE IN RESPECT OF FOUR CATEGORIES. AT PAGE 83, AGAINST THE HEADING, TAX DESCRIPTION, THE AMOUNT HAS BEEN SHOWN AS FEE FOR PROFESSIONAL/TECHNICAL SERVICES. SIMILARLY, IN REGA RD TO SHYAM TELELINK, AMOUNT HAS BEEN SHOWN AS INCOME FROM COMMISSION, IN OTHER RECEIPTS IT IS SHOWN AS CONTRACTOR. HE ALSO SUBMITTED THAT THERE I S SOME DISCREPANCY WITH 8 REGARD TO THE INTEREST OTHER THAN SECURITIES WHICH WAS RECEIVED FROM HDFC. THIS HAS BEEN RECONCILED BY THE ASSESSEE AND IT WAS WRONGLY MENTIONED IN THE UNRECONCILED ITEM. HE DREW OUR ATTENTION TOWARD S PAGE NO. 109 AT SR. NO.42.THE MAIN THRUST OF THE ARGUMENTS RAISED BY TH E LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE ASSESSING OFFICER WAS NOT POS SESSING ANY INFORMATION WHICH CAN CONCLUSIVELY PROVE THE UNEXPLAINED INCOME . INCOME CANNOT BE CONSIDERED BY INFERENCE. ASSESSING OFFICER HAS TO F IRST DEMONSTRATE THAT AN ITEM OF INCOME WAS NOT PROPERLY DISCLOSED BY THE AS SESSEE. IT IS NOT ASCERTAINABLE FROM THE RECORD THAT INFORMATION REFE RRED BY THE ASSESSING OFFICER IS RELATABLE TO THE ASSESSEE OR NOT. HE MIG HT HAVE CONSIDERED IRRELEVANT DETAILS AND THEN ASKED THE ASSESSEE TO R ECONCILE IT. ASSESSING OFFICER HAS TO FIRST ESTABLISHED THAT AN ITEM OF IN COME HAS NOT BEEN DISCLOSED BY THE ASSESSEE IN THE RETURN. ONLY THEN ASSESSEE C AN BE PUT TO EXPLAIN ITS POSITION WITH REGARD TO THE INFORMATION POSSESSED B Y THE ASSESSING OFFICER. HE, THEREFORE, SUBMITTED THAT ADDITION HAS BEEN MAD E ON THE BASIS OF IRRELEVANT DETAILS AND THE SAME MAY BE DELETED. 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. WE HAVE EXTRACTED THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(APPEALS). WE HAVE CONFRONTE D THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING TO SHOW WHE RE HE TOOK THIS PLEA BEFORE 9 THE ASSESSING OFFICER THAT THE INFORMATION RELIED U PON BY THE ASSESSING OFFICER ARE NOT RELATING TO THE ASSESSEE. HE WAS UN ABLE TO BRING ANY SUCH EXPLANATION TO OUR NOTICE. THE ASSESSMENT ORDER HAS TOTALLY BEEN SILENT. SIMILAR IS THE FATE OF LEARNED CIT(APPEALS)S ORDER . IT IS QUITE DIFFICULT FOR US TO GIVE ANY LOGICAL FINDING ON THE BASIS OF THE OBSERVATIONS AVAILABLE IN THESE TWO ORDERS. ON PAGE NOS. 83 TO 100, THE PAPE R BOOK CERTAIN DETAILS POSSESSED BY THE ASSESSING OFFICER AND SUPPLIED BY AIR WING ARE AVAILABLE. THERE IS NO FORWARDING LETTER EXHIBITING THE NATURE OF THESE DETAILS. THERE IS NO FINDING HOW THESE DETAILS INDICATE THE NATURE OF INCOME ASSESSABLE IN THE HANDS OF THE ASSESSEE. ASSESSING OFFICER NEITHER MA DE ANY DISCUSSION IN THE ORDER. FACED WITH THIS DIFFICULTY, WE DEEM IT APPR OPRIATE TO SET ASIDE THE ORDER OF THE REVENUE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION. ASSESSING OFFICER SHALL FIRST DETERMINE THE NATURE OF THESE DETAILS, THEREAFTER H E SHALL POINT OUT HOW THESE ARE RELATED TO THE ASSESSEE AND HOW AN INCOME ASSES SABLE IN THE HANDS OF ASSESSEE IS DISCERNIBLE FROM THESE DETAILS. AFTER M AKING THIS ANALYSIS, IF HE FINDS PRIMA FACIE THAT INCOME IN ASSESSABLE IN THE HANDS OF ASSESSEE FROM THESE DETAILS THEN HE WILL ISSUE A DETAILED SHOW-CA USE NOTICE TO THE ASSESSEE FOR EXPLAINING ITS POSITION. WE DIRECT THE ASSESSIN G OFFICER ACCORDINGLY. 10 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 29.04.2011 (G.E. VEERABHADRAPPA ) ( RAJPAL YADAV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 29/04/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR