DCIT, New Delhi V. Bharti Mobile Ltd., Gurgaon

ITA 3819/DEL/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7011 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 09-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Revised return

Judgement Text

ITA NO. 3819/D/2010 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-3819/DEL/2010 ( ASSESSMENT YEAR: 2002-03) DCIT CIRCLE 2(1), ROOM NO. 398D, C.R. BUILDING, NEW DELHI. VS BHARTI MOBILE LTD. (NOW BHARTI AIRTEL LTD.) PLOT NO. 16, UDYOG VIHAR, PHASE IV, GURGAON. AAACJ4139Q ASSESSEE BY SH. AMIT BHALLA, CA SH. GAURAV WADHWA, CA REVENUE BY SH. RAVI JAIN, CIT DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER DATED 04/05/2010 PASSED BY THE LD . CIT (A) V, NEW DELHI FOR A.Y. 2002-03. 2. THE ASSESSEE IS INVOLVED IN THE BUSINESS OF PROV IDING CELLULAR MOBILE TELEPHONE SERVICES. DURING THE YEA R UNDER CONSIDERATION, THE RETURN OF INCOME WAS FILED DECLA RING A TOTAL DATE OF HEARING 21.09.2016 DATE OF PRONOUNCEMENT 27.09.2016 ITA NO. 3819/D/2010 PAGE 2 OF 11 LOSS OF RS. 820,672,218/-. SUBSEQUENT TO THE FILIN G OF THE ORIGINAL RETURN, A REVISED RETURN WAS FILED DECLARI NG TOTAL LOSS OF RS. 2,628,860,522/-. THE TOTAL TURNOVER FOR THE YEAR WAS RS. 444.30 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE AUDITOR HAD S HOWN AN AMOUNT OF RS. 598,786/- AS PROVISION FOR GRATUITY F OR THE PUNJAB CIRCLE AND THE AO WAS OF THE OPINION THAT TH IS PROVISION HAD NOT BEEN DISALLOWED BY THE ASSESSEE I N ITS COMPUTATION OF INCOME. THE AO ACCORDINGLY, DISALLO WED THIS AMOUNT. FURTHER, THE AO ALSO OBSERVED THAT THE ASS ESSEE HAD FILED THE REVISED RETURN OF INCOME CLAIMING DEDUCTI ON OF RS. 69,340,434/- BEING WIRELESS PLANNING COMMISSION (WP C) CHARGES AND LIQUIDATED DAMAGES PAID TO THE DEPARTME NT OF TELECOMMUNICATION VIDE THEIR DEMAND NOTE AND A SUM OF RS. 1,922,296,536/- AS INTEREST PAID TO DEPARTMENT OF TELECOMMUNICATION. THE AO OBSERVED THAT THESE TWO AMOUNTS WERE NOT DEBITED TO THE AUDITED PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND WERE INCLUDED IN THE RE VISED RETURN ONLY ON THE BASIS OF THE DEMAND NOTE RAISED BY THE DEPARTMENT OF TELECOMMUNICATION. IT WAS THE ASSESS EES ITA NO. 3819/D/2010 PAGE 3 OF 11 CLAIM BEFORE THE AO THAT THE DEPARTMENT OF TELECOMMUNICATION HAD RAISED A DEMAND OF RS. 2,278,940,996/- AS INTEREST AND THE AMOUNT WAS PAID ON 19 TH SEPTEMBER, 2001. THE ASSESSEE ALSO SUBMITTED THAT AN AMOUNT OF RS. 856,644,460/- WAS REFUNDED TO THE ASS ESSEE BY THE DEPARTMENT OF TELECOMMUNICATION AND, THEREFORE, THE NET AMOUNT OF RS. 1,922,296,536/- WAS CLAIMED AS INTERE ST. THE ASSESSEE HAD FURTHER SUBMITTED BEFORE THE AO THAT B OTH THESE CLAIMS BY THE DEPARTMENT OF TELECOMMUNICATION HAVE BEEN CHALLENGED IN THE COURT OF LAW AND PENDING THE FINA L DECISION, THESE DEDUCTIONS HAVE BEEN CLAIMED IN THE COMPUTATI ON OF TOTAL LOSS. THE AO WAS OF THE OPINION THAT THE LIQ UIDATED DAMAGES WERE RESULT OF VIOLATION OF SOME TERMS OF T HE CONTRACT AGREEMENT BY THE ASSESSEE WITH THE DEPARTMENTAL TELECOMMUNICATION AND THE ASSESSEE WOULD BE ENTITLE D TO CLAIM THE DEDUCTION ONLY WHEN THE CONTRACTUAL LIABI LITY WAS CRYSTALLIZED AND ASCERTAINED. THE AO FURTHER OBSERV ED THAT SINCE THE ASSESSEE HAD NOT ACCEPTED THE LIABILITY A ND HAD NOT DEBITED THE SAME TO THE PROFIT AND LOSS ACCOUNT AND THE MATTER WAS PENDING IN THE COURT, THE AMOUNTS WERE N OT ITA NO. 3819/D/2010 PAGE 4 OF 11 DEDUCTIBLE IN THE ASSESSMENT YEAR UNDER CONSIDERATI ON AND ACCORDINGLY, THESE TWO AMOUNTS WERE ALSO DISALLOWED AND THE ASSESSMENT WAS COMPLETED AT A TOTAL LOSS OF RS. 636,624,766/-. 2.2 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIR ST APPELLATE AUTHORITY AND THE LD. CIT (A), ON THE ISS UE OF PROVISION OF GRATUITY, GAVE A SPECIFIC FINDING THAT THE ASSESSEE HAD NOT CLAIMED THE AMOUNT OF RS. 598,786/- AS A DE DUCTION IN ITS RETURN OF INCOME AS ALLEGED BY THE AO AND TH E AO WAS DIRECTED TO DELETE THE ADDITION. ON THE ISSUE OF W PC CHARGES AND LIQUIDATED DAMAGES, THE LD. CIT (A) HELD THAT T HE AMOUNT CLAIMED IN THE COMPUTATION OF INCOME HAD BECOME DUE AND WAS HENCE ALLOWABLE RESPECTIVE OF THE FACT THAT NO ENTRIES WERE PASSED IN THE BOOKS OF ACCOUNTS. THESE TWO DISALLO WANCES WERE ALSO DELETED. 3. AGGRIEVED, THE DEPARTMENT HAS NOW APPROACHED THE ITAT AND RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LD. CIT (A) IS WRONG, PERVERS E, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS ITA NO. 3819/D/2010 PAGE 5 OF 11 LIABLE TO BE SET ASIDE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS. 5,98,786/- ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR GRATUITY IGNORING THE FACT THAT THE ASSESSEE WROTE BACK EXCESS PROVISION OF RS. 10,78,000/- INSTEAD OF 16,77,000/- AS PER SCHEDULE 12 OF THE P&L ACCOUNT THEREBY CLAIMED EXCESS PROVISION FOR GRATUITY OF RS. 5,98,786/-. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITIONS OF RS. 1,92,22,96,536/- AND RS. 6,93,40,434/- ON ACCOUNT OF PAYMENT MADE TO DOT IN RESPECT OF INTEREST & WPC CHARGES & LIQUIDATED DAMAGES, RESPECTIVELY IGNORING THE FACT THAT LIABILITY IN RESPECT OF INTEREST & WPC CHARGES & LIQUIDATED DAMAGES ARISING OUT OF CONTRACT WITH DOT HAD NOT CRYSTALLIZED OR ASCERTAINED DURING THE PREVIOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR AS THE ASSESSEE DISPUTED THE LIABILITY ARISING OUT OF CONTRACT. 4. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 4. THE LD. CIT DR, ON THE ISSUE OF PROVISION OF GRA TUITY, RELIED ON THE ASSESSMENT ORDER AND SUBMITTED THAT T HE ITA NO. 3819/D/2010 PAGE 6 OF 11 CALCULATIONS MADE BY THE AO WERE CORRECT. ON THE I SSUE OF WPC CHARGES AND LIQUIDATED DAMAGES, THE LD. CIT DR SUBMITTED THAT THE PROVISIONS OF RULE 46A WERE NOT FOLLOWED BY THE LD. CIT (A) WHILE ALLOWING THE ASSESSEES CLAIM . HE DREW ATTENTION TO THE PAPER BOOK FILED BY THE ASSESSEE I N REGARD TO THE EVIDENCES WHICH WERE FILED BEFORE THE LD. CIT ( A) (AND AVAILABLE IN THE ASSESSEES PAPER BOOK) IN SUPPORT OF ITS CLAIM AND SUBMITTED THAT ITEM NOS. 6, 7, 8, 9 AND 10 WERE NEVER PRODUCED BEFORE THE AO BUT WERE CONSIDERED BY THE L D. CIT (A) WHILE ADJUDICATING THE ISSUE AND AS SUCH THE AO DID NOT HAVE ANY OPPORTUNITY TO EXAMINE THESE DOCUMENTS. THE LD . CIT DR SUBMITTED THAT THIS ACTION OF THE LD. CIT (A) WAS N OT LEGALLY TENABLE. 5. THE LD. AR RELIED ON THE FINDINGS OF THE LD. CIT (A) ON THE ISSUE OF PROVISION FOR GRATUITY. AS REGARDS THE SU BMISSION OF THE LD. CIT DR ON THE ISSUE OF NOT CALLING FOR A RE MAND REPORT FROM THE AO ON EVIDENCES AS APPEARING AT SL. NOS. 6 , 7, 8, 9 AND 10, THE LD. AR SUBMITTED THAT EVIDENCE AT SL. N O. 6 WAS ALREADY BEFORE THE AO, WHEREAS EVIDENCES AT SL. NOS . 7, 8, 9 ITA NO. 3819/D/2010 PAGE 7 OF 11 AND 10 WERE PRODUCED BEFORE THE LD. CIT (A) ON BEIN G SPECIFICALLY ASKED BY THE LD. CIT (A) TO DO SO AND AS SUCH IT WAS NOT THE ASSESSEE WHO HAD SOUGHT TO FILE ADDITIO NAL EVIDENCES, BUT IT WAS UNDER THE INSTRUCTIONS OF THE LD. CIT (A) THAT THESE DOCUMENTS WERE FILED AND AS SUCH PROVISI ONS OF RULE 46A WILL NOT APPLY ON THE FACTS OF THE PRESENT CASE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT A PROVISION FO R GRATUITY HAS BEEN DEALT IN THE COMPUTATION OF INCOME FILED BY TH E ASSESSEE (REPRODUCED AT PAGE NO. 40 OF THE PAPER BOOK FILED BY THE ASSESSEE) AS UNDER: BHARTI MOBILE LIMITED ANNEXURE 3 AASSESSMENT YEAR 2002-03 GRATUITY 40A (7) AMOUNT (RS.) OPENING BALANCE 5,112,000 ADD: PROVISION PROVIDED AT PUNJAB CIRCLE 599.000 5,711.000 WRITTEN BACK AS EXCESS PROVISION LESS: (REFER SCHEDULE 12 OF P&L A/C) 1,677,000 AMOUNT PAID AT AP & KK 4,034,000 WHICH HAS NOT BEEN ROUTED THROUGH P&L A/C BUT NOW IT IS ALLOWABLE EXP. SCHEDULE 12 OF AUDITED ACCOUNTS WRITTEN BACK 1,677,000 PUNJAB PROVISION 599,000 AS PER PROFIT & LOSS ACCOUNT 1,078,000 ITA NO. 3819/D/2010 PAGE 8 OF 11 6.1 THE FIGURES IN THE COMPUTATION PRODUCED ABOVE ALSO TALLY WITH THE COMPUTATION CHART PROVIDED AT PAGE 3 8 OF THE PAPER BOOK AND A PERUSAL OF THE SAME SHOWS THAT THE IMPUGNED AMOUNT OF RS. 598,786/- (ROUNDED OFF TO RS . 599,000/-) HAS NOT BEEN CLAIMED BY THE ASSESSEE AS A DEDUCTION. IT IS SEEN THAT THE CLAIM OF GRATUITY O F RS. 4,034,000/-HAS BEEN MADE BY THE ASSESSEE ON PAYMENT BASIS. IT IS FURTHER SEEN THAT THE EXCESS PROVISION AMOUNT ING TO RS. 1,677,000/-, WHICH HAS BEEN WRITTEN BACK TO THE PRO FIT AND LOSS ACCOUNT, HAD NOT BEEN CLAIMED IN THE EARLIER Y EARS AND HENCE, CANNOT BE TAXABLE IN THE YEAR UNDER CONSIDER ATION. IT IS FURTHER SEEN THAT THE ASSESSEE HAS REDUCED ONLY RS. 1,078,000/- INSTEAD OF RS. 1,677,000/- IN ITS COMPU TATION OF INCOME AND THUS, THE AMOUNT OF RS. 599,000/- HAS IN EFFECT NOT BEEN CLAIMED AS A DEDUCTION. THEREFORE, WE HAV E NO REASON TO INTERFERE WITH THE FINDINGS OF LD. CIT (A ) ON THIS ISSUE. THIS GROUND OF DEPARTMENTS APPEAL IS DISMI SSED. 6.2 AS FAR AS THE DEPARTMENTS GROUND RELATING TO P AYMENT OF WPC CHARGES AND LIQUIDATED DAMAGES IS CONCERNED, IT IS SEEN ITA NO. 3819/D/2010 PAGE 9 OF 11 THAT THE LD. CIT (A) HAS CONSIDERED THE FOLLOWING E VIDENCES FURNISHED BY THE ASSESSEE WHILE ADJUDICATING IN FAV OUR OF THE ASSESSEE I. COPY OF MIGRATION OF OLD MOBILE TELEPHONY LICENSE T O NEW TELECOM POLICY 99 PLACED AT SL. NO. 6 OF THE PAPER BOOK AT PAGES 133 TO 135. II. COPY OF LETTER OF DEPARTMENT OF COMMUNICATION FOR OUTSTANDING DUES, DUE TO NTP 99 PLACED AT SL. NO. 7 OF THE PAPER BOOK AT PAGES 136 TO 137. III. COPY OF DETAILS OF LICENSE FEE PAID AND OUTSTANDING PLACED AT SL. NO. 8 OF THE PAPER BOOK AT PAGES 138 TO 139. IV. COPY OF THE ORDER OF THE ARBITRATION MATTER PASSED BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF BHARTI MOBILE LTD. PLACED AT SL. NO. 9 OF THE PAPER BOOK AT PAGES 140 TO 399. V. COPY OF LETTERS TO DEPARTMENT OF TELECOMMUNICATION FOR RESTORATION OF TERMINATED CELLULAR CIRCLE LICEN SE AND SIMULTANEOUS MIGRATION TO NTP 99 PLACED AT SL. NO. 10 OF THE PAPER BOOK AT PAGES 400 TO 405. ITA NO. 3819/D/2010 PAGE 10 OF 11 6.3 IT IS THE DEPARTMENTS CONTENTION THAT THESE EV IDENCES WERE FILED FOR THE FIRST TIME BEFORE THE LD. CIT (A ) AND THAT THE AO WAS NOT AFFORDED AN OPPORTUNITY TO EXAMINE THESE DOCUMENTS. THE CERTIFICATE FURNISHED BY THE ASSESS EE IN THE PAPER BOOK ALSO SUPPORTS THE DEPARTMENT STAND THAT THE ABOVE MENTIONED EVIDENCES WERE NOT BEFORE THE AO AT ANY STAGE OF THE PROCEEDINGS. ALTHOUGH IT IS THE ASSES SES CONTENTION THAT THE EVIDENCES WERE FURNISHED IN RES PONSE TO A REQUISITION BY THE LD. CIT (A), THE SAME IS NOT DIS CERNABLE FROM THE IMPUGNED ORDER. HENCE, IN THE LIGHT OF THESE F ACTS, IT IS OUR CONSIDERED OPINION THAT THE INTEREST OF JUSTICE WOULD BE SERVED, IF THE ISSUE IS RESTORED TO THE FILE OF LD. CIT (A) FOR RE- ADJUDICATION AFTER INVITING THE COMMENTS OF THE AO ON ALL THESE EVIDENCES IN THE FORM OF A REMAND REPORT. NEEDLESS TO SAY, THE ASSESSEE SHALL ALSO BE GIVEN AN OPPORTUNITY TO SUBM IT ITS REJOINDER ON THE REMAND REPORT SO OBTAINED. THIS G ROUND OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 3819/D/2010 PAGE 11 OF 11 7. IN THE FINAL RESULT, THE APPEAL OF THE DEPARTMEN T IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.09.2016 SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA ) VICE PRESIDENT JUDICIAL MEMBER DATED: 27.09.2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI