DCIT, New Delhi V. M/s. Bharti Televentures Ltd. (Now Bharti Airtel Ltd.), New Delhi

ITA 4312/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5219 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 07-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APOORVA KARAN
• Keywords: Reopening of assessment; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: A , NEW DELHI BEFORE SHRI A MIT SHUKLA , JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 4312 /DEL/201 4 AY: 20 05 - 06 DY.CIT, CIRCLE 2(1) NEW DELHI VS . BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.) NO.1, ARAVALI CRESCENT NELSON MANDELA ROAD VASANT KUNJ PHASE III NEW DELHI PAN: AAACB 2894 G (APPELLANT) (RESPONDENT) APPELLAN T BY S MT.APOORVA KARAN, CIT (DR) . RESPONDENT BY SH. ANIL BHALLA, CA DATE OF HEARING 08 TH AUGUST, 2017 DATE OF PRONOUNCEMENT 16 TH AUGUST, 2017 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DT. 27.05.2014 OF THE LD. CIT(A) - V , NEW DELHI RELATING TO ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 2 ASSESSMENT YEAR (A.Y.) 20 05 - 06 ON THE FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THE REOPENING OF ASSESSMENT U/S 147 AS INVALID WITHOUT APPRECIATING THE FACT THAT THE AMOUNT OF INTEREST LIABLE TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT WAS DUE TO NON DEDUCTION OF TAX WAS NOT ASSESSED TO TAX ON THE DAY WHEN ORDER WAS PASSED BY HIM MEANING THEREBY THAT THIS AMOUNT ESCAPED ASSESSMENT THOUGH ON THE DAY OF REOPENING, IT WAS ASSESSED TO TAX. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUNDS OF APPEAL AT ANY BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE S CASE WAS REOPENED U/S 147/148 OF THE INCOME TAX ACT, 1961 (THE ACT) BY ISSUIN G NOTICE DATED 15.01.2009 TO THE ASSESSEE. THE REASONS FOR REOPENING ARE AS UNDER. 'A CONSOLIDATED ORDER U/S 201 (1) OF THE IT ACT WAS PASSED BY THE ITO TDS WARD 1 (1), INTERNATIONAL TAXATION, NEW D ELHI FOR THE FY 2003 - 04 TO 2008 - 09. FROM THE ORDER, IT TRANSPIRED THAT M/S BHARTI AIRTEL LIMITED HAS MADE PAYMENT OF INTEREST AND PRINCIPAL TO ABN AMRO BANK N. V. STOCKHOLM BRANCH WITHOUT DEDUCTION OF TAX AT SOURCE AS HELD BY THE ITO TDS WARD 1 (1), INTL. TAXATION. THE POSITION REGARDING THE PAYMENT OF INTERES T WITHOUT DEDUCTION OF TAX HAS BEEN WORKE D OUT FOR AY 20 0 5 - 06 (FY 2 2004 - 05) AS UNDER: ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 3 SL.NO. DATE AMOUNT RS. 1. 15 - 06 - 2004 202777 2. 15 - 06 - 2004 15319 3. 30 - 06 - 2004 21072 4. 30 - 06 - 2004 5853 5. 30 - 12 - 2004 368741 6. 01 - 06 - 2004 624285 7. 01 - 12 - 2004 699230 8. 16 - 08 - 2004 18123 9. 16 - 08 - 2004 123567 10. 16 - 08 - 2004 127096 11. 16 - 08 - 2004 25422 12. 16 - 08 - 2004 173336 13. 16 - 08 - 2004 178285 14. 16 - 08 - 2004 15778 15. 16 - 08 - 2004 205275 16. 16 - 08 - 2004 62618 17. 16 - 08 - 2004 26913 18. 16 - 02 - 2005 183501 19. 16 - 02 - 2005 188741 20. 20 - 12 - 2004 1102428 T O T A L : 3368360 SINCE THE AMOUNT OF INTEREST HAS BEEN PAID WITHOUT DEDUCTION OF TAX AS HELD BY THE ITO IN HIS ORDER DATED 27 - 06 - 2008, THE ABOVE EXPENDITURE BY WAY OF INTEREST REQUIRED TO BE DISALLOWED U / S 40(A)(IA) OF (NE ACT. AN AMOUNT OF RS 45,59,52,000 HAS BEEN DEBITED ON ACCOUNT OF 'PREOPERATIVE EXPENDITURE WRITTEN OFF' BUT AS PER THE NOTES OF ACCOUNTS THAT THE EXPENDITURE WAS INCURRED FOR THE PERIOD OF ACQUIRING LICENSE FEES UPTO THE DATE OF COMMENCEMENT OF COMMERCIAL OPERATION. T H US, THE EXPENDITURE INCURRED RELATES TO PRE - COMMENCEMENT OF BUSINES S AND SAME HAS TO BE TREATED AS CAPITAL EXPENDITURE. IN VIEW OF THE ABOVE. I HAVE REASON TO BELI EVE THAT AN AMOUNT TO THE EXTENT MENTIONED ABOVE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2005 - 06 AND. ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 4 HENCE, CLEARLY ATTRACTS THE PROVISIONS OF CLAUSE (B) OF EXPLANATION 2 TO SECTION 147 OF THE IT ACT, THEREFORE, NOTICE U / S 148 OF THE ACT IS BEING ISSUED. ' 2.1. IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT THE A.O. HAD DISALLOWED THE ENTIRE AMOUNT OF INTEREST PAID TO ABN AMRO BANK STOCKHOLM BRANCH OF RS.1 ,84,91,00,000/ - ON TERM LOAN TAKEN. IN THE REASSE SSMENT PROCEEDINGS THE A.O. HAS OBSERVED THAT ON THE BASIS OF REASONS RECORDED (SUPRA) THAT THE ASSESSEE HAS PAID INTEREST TO ABN AMRO BANK STOCKHOLM BRANCH WITHOUT EFFECTING TDS U/S 40(A)(IA) OF RS.14,73,65,750/ - ($ 33,68,360) WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER. THE ABOVE INTEREST ON WHICH NO TDS HAS BEEN MADE DISALLOWED BY THE ASSESSING OFFICER. 2.2. BEING AGGRIEVED BY THE ADDITION MADE BY THE A.O. IN THE REASSESSMENT PROCEEDINGS , THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED WRITTEN REPLY AND ALSO RELIED ON SOME OF THE CASE LAWS. LD. CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, ALLOWED THE A PPEAL OF THE ASSESSEE. ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 5 2.3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US ON THE ABOVE MENTIONED GROUNDS. 3. LD.DR SUBMITTED THAT THE A.O. WAS JUSTIFIED TO REOPEN THE CASE U/S 147/148 OF THE ACT AND HE HAS RIGHTLY DENI ED THE CLAIM OF THE ASSESSEE ON WHICH NO TDS HAS BEEN DEDUCTED U/S 40(A)(IA) OF THE ACT. FURTHER HE ALSO RELIED ON THE ORDER OF THE A.O. 3.1. ON THE OTHER HAND LD.COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). HE RELIE D ON THE ORDER OF THE LD. CIT(A). 4. AFTER HEARING BOTH SIDES, PERUSING MATERIAL ON RECORD, ORDERS O F LOWER AUTHORITIES, WE HOLD AS UNDER. 5. THE LD. CIT(A) AFTER CONSIDERING ALL THE MATERIAL FACTS OF THE CASE HELD AS UNDER. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT WITH RESPECT TO RE - OPENING U/S 147 OF THE ACT. THE ASSESSMENT IN THIS CASE WAS REOPENED ON THE GROUND THAT THE INTEREST WAS PAID TO ABN AMRO BANK WITHOUT DEDUCTION OF TAX AT SOURCE AND THEREFORE THE SAME S HOULD HAVE BEEN DISALLOWED U/S 40(A)(I) OF THE ACT. FROM THE ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 6 SUBMISSIONS MADE IT IS OBSERVED THAT THE AO AT THE TIME OF THE ORIGINAL ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 31.12.2007 HAD DISALLOWED THE ENTIRE INTEREST CLAIM OF RS. 1,84,91,00,000 / - ON TERM LOAN. THE INTEREST PAID TO ABN AMRO OF RS. 14,73,65,750 / - WAS INCLUDED IN THE INTEREST AMOUNT OF RS . 1,84,91,00,000 / - . THEREFORE, AS THINGS STOOD AT THE TIME WHEN THE AO ISSUED NOTICE FOR RE - OPENING U/S 147/148 ON 15.1.2009, THE ENTIRE INTEREST PAID T O ABN AMRO BANK ALREADY STOOD DISALLOWED IN THE ASSESSMENT ORDER, WHICH WAS PENDING DECISION AT THE END OF FIRST APPELLATE AUTHORITY. AS REGARDS THE OTHER REASON RECORDED FOR RE - OPENING WHICH WAS IN RESPECT OF AN AMOUNT OF RS. 45,59,52,000 / - WHICH IS DEBIT ED ON ACCOUNT. OF PREOPERATIVE EXPENDITURE WRITTEN OFF, THE AO HAS NOT MADE ANY DISALLOWANCE IN THE PRESENT RE - ASSESSMENT ORDER. THEREFORE THE VALIDITY/ LEGALITY OF REOPENING WOULD HAVE TO BE ADJUDICATED UPON ONLY WITH REFERENCE TO THE ISSUE WHETHER INTERE ST PAID TO ABN ARNRO BANK WITHOUT DEDUCTION OF TAX AT SOURCE WOULD ATTRACT DISALLOWANCE U/S 40(A)(I) OF THE ACT. ON A CAREFUL CONSIDERATION OF THE SUBMISSION MADE AND IN THE FACTS OF THE CASE IT IS APPARENT THAT THERE IS NO ESCAPEMENT OF INCOME CHARGEABLE TO TAX U/S 147 OF THE ACT SINCE THE ABOVE AMOUNT WHICH IS NOW SOUGHT TO BE TAXED ON THE GROUND OF ESCAPEMENT ALREADY STOOD DISALLOWED BY THE AO THROUGH THE ORIGINAL ASSESSMENT ORDER AND THE SAME REMAINED DISALLOWED AT THE TIME OF ASSUMING JURISDICTION BY AO U / S 147. THEREFORE AS THE ESSENTIAL INGREDIENT OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX REMAINED UNFULFILLED THEREFORE FOR THIS REASON THE AO WAS NOT LEGALLY JUSTIFIED IN INVOKING SECTION 147. ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 7 ADDITIONALLY, THE HON'BLE SUPREME COURT IN THE CASE OF KEL VINATOR INDIA LTD IN 320 ITR 561 HAS WHILE CONFIRMING THE ORDER OF DELHI HIGH COURT IN 258 ITR 1 HAS HELD THAT IT IS NOT OPEN TO AO TO RECTIFY IT'S MISTAKE BY TAKING RECOURSE TO SECTION 147 OF THE ACT. ON THE BASIS OF ABOVE OBSERVATION IT IS CLEAR THAT TH E SAME AMOUNT CANNOT BE SUBJECTED TO DISALLOWANCE ON DIFFERENT GROUNDS, AT DIFFERENT POINT IN TIME. AS OBSERVED THE AO HAD ALREADY APPLIED HIS MIND IN DISALLOWING THE ENTIRE INTEREST AT THE TIME OF ORIGINAL ASSESSMENT AND THEREFORE NOW HE CANNOT RESORT TO REOPENING U/S 147 TO DISALLOW THE AMOUNT SAME, THOUGH ON A DIFFERENT PREMISE, WHICH HE HAD NOT RESORTED TO AT THE TIME OF ORIGINAL ASSESSMENT. THAT THIS WOULD CONSTITUTE A MERE CHANGE IN OPINION WHICH IS NOT PERMITTED UNDER THE LAW AS SETTLED BY THE HON'B LE SUPREME COURT IN KELVINATOR INDIA LTD (SUPRA). THEREFORE BASED ON THE ABOVE DISCUSSION THE AO WAS NOT JUSTIFIED IN REOPENING OF ASSESSMENT U/S 147 AND HENCE, THE GROUND NO 1 IS ALLOWED IN FAVOUR OF THE ASSESSEE. 5.1. LD. CIT(A) HAS GIVEN A WELL REASO NED ORDER, WHICH DO NOT REQUIRE ANY INTERFERENCE. IN THE FIRST ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT THE ENTIRE AMOUNT OF INTEREST OF RS. 1 ,84,91,00, 000/ - HAS ALREADY BEEN DISALLOWED BY THE A.O. WE ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 8 FEEL THERE IS NO NEED FOR ANY FURTHER DISALL OWANCE U/S 40(A)(IA) OF THE ACT TO THE SAME AMOUNT AGAIN . THEREFORE, THE A.O. IS NOT JUSTIFIED TO ADD BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN THE RESULT THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 16 TH AUGUST, 2017. SD/ - SD/ - ( A MIT SHUKLA ) ( L.P. SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 16 TH AUGUST , 2017 * MANGA ITA 4312/DEL/2014 A.Y. 2005 - 06 BHARTI TELEVENTURES LTD. (NOW BHARTI AIRTEL LTD.), NEW DELHI 9 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES NEW DELHI