ACIT, New Delhi V. M/s Bharti Telemedia Ltd., New Delhi

ITA 5056/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6989 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N PANDEY
• Keywords: Capital asset; Depreciation; Revenue expenditure
• Section: 201

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SMT BEENA A PILLAI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5056/DEL/2016 (ASSESSMENT YEAR: 2012 - 13 ) ACIT, CIRCLE - 4(2), NEW DELHI VS. M/S. BHARTI TELEMEDIA LTD, BHARTI CRESCENT 1, NELSON MANDELA ROAD, VASANT KUNJ, PHASE - II, NEW DELHI PAN: AADCB0147R (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S. N. PANDEY, SR. DR ASSESSEE BY: SHRI GAURAV WADHWA, CA SHRI VINAY MEENA, CA DATE OF HEARING 15/05 / 201 9 DATE OF PRONOUNCEMENT 3 1 / 0 7 / 2019 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS APPEAL IS FILED BY THE ASST COMMISSIONER OF INCOME TAX, CIRCLE 4 (2), NEW DELHI (THE LEARNED AO) AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 2, NEW DELHI DATED 24/06/2016 RAISING SOLITARY GROUNDS OF THE APPEAL THAT THE LEARNED CIT A HAS ERRED IN DELETING THE ADDITION OF INR 9 35712000/ ON ACCOUNT OF AMORTISATION OF LICENSE FEE AND SPECTRUM CHARGES U/S 35 ABB OF THE INCOME TAX ACT. 2 . THE BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SETTING UP, OPERATING AND MAINTAINING DIRECT TO HOME (DTH) BUSINESS SERVICES INCLUDING DIGITAL AND ANY OTHER MOD E OF INTERACTIVE BROADCASTING SERVICES. THE ASSESSEE FILED ITS RETURN OF INCOME AT A LOSS OF INR 3 207483769/ ON 27/9/2012. THE ASSESSMENT U/S 143 (3) OF THE ACT WAS PASSED BY THE LEARNED AO ON 21/2/2015 WHEREIN THE ADDITION OF INR 9 35712000/ WAS MADE ON ACCOUNT OF VARIABLE LICENSE FEES. THE ASSESSEE PREFERRED THE APPEAL BEFORE THE LEARNED CIT A WHO PASSED AN ORDER ON PAGE | 2 24/6/2016 DELETING THE ABOVE ADDITION FOLLOWING THE DECISION OF THE HONOURABLE DELHI HIGH COURT IN ITA NUMBER 1328/2010, 1336/2010, 1 14/2012 AND 996/2011 DATED 19/12/2013 FOR ASSESSMENT YEAR 2003 04, 2004 05, 2006 07 AND 2007 08 IN CASE OF BHARTI HEXACOM LTD AS WELL AS IN CASE OF BHARTI CELLULAR LTD STATING THAT THE LICENSE FEE ON REVENUE SHARING BASIS AFTER 31/07/1999 SHOULD B E TREATED AS REVENUE EXPENDITURE. THEREFORE, THE REVENUE AGGRIEVED WITH THE ORDER OF THE LEARNED CIT A HAS FILED THIS APPEAL. 3 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER. 4 . THE LEARNED AUTHORISED REPRESENTA TIVE SUBMITTED THAT THE ISSUE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONOURABLE JURISDICTIONAL HIGH COURT. 5 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE FACTS OF THE CASE SHOWS THAT THE ASSESSEE COMPANY SUBMITTED ITS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT AND COMPUTATION OF INCOME TAX TO THE LEARNED A SSESSING OFFICER WHEREIN IT WAS FOUND THAT THE COMPANY HAS DEBITED AN AMOUNT OF INR 1 299776306/ IS PAYMENT TOWARDS LICENSE FEE AND SPECTRUM CHARGES. THE ABOVE AMOUNT WAS CLAIMED AS AMORTIZATION OVER THE PERIOD OF THE LICENSE UNDER SECTION 35ABB OF THE A CT, WHILE DISALLOWING THE SAME AS REVENUE EXPENDITURE. THEREFORE, THE LEARNED ASSESSING OFFICER QUESTIONED THE ASSESSEE COMPANY AS TO WHY ADDITION OF THE ABOVE SUM SHOULD NOT BE MADE. THE ASSESSEE EXPLAINED THAT INR 1 299776306/ DEBITED TO THE PROFIT AN D LOSS ACCOUNT AS A LICENSE FEE PAID TO THE MINISTRY OF INFORMATION AND BROADCASTING AS A PERCENTAGE OF REVENUE FOR EACH FISCAL YEAR. IT WAS FURTHER STATED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONOURABLE DELHI HI GH COURT. HOWEVER, THE LEARNED ASSESSING OFFICER MADE THE IDENTICAL ADDITION HOLDING THAT THE DECISION WAS NOT ACCEPTED BY THE REVENUE IN SPECIAL LEAVE PETITION WAS FILED BEFORE THE HONOURABLE SUPREME COURT, WHICH IS PENDING ADJUDICATION. THEREFORE HE CO MPUTED THE DISALLOWANCE CONSIDERING THE PAYMENT OF INR 1 299776306/ AND ALLOWING AMORTIZATION OF ONLY INR 216629384/ OUT OF THE VARIABLE FEES PAID. ACCORDINGLY HE DISALLOWED INR 9 35712000/ . THE LEARNED CIT A HAS DELETED THE ABOVE PAGE | 3 ADDITION RELYING U PON THE DECISION OF THE HONOURABLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS BHARTI HEXACOM LTD [2013] 40 TAXMANN.COM 40 (DELHI)/[2014] 221 TAXMAN 323 (DELHI)/[2014] 265 CTR 130 (DELHI) HOLDING IN PARA NO 35 AND 36 AS UNDER : - 35. THE LICENCE ACQUIRED WAS INITIALLY FOR 10 YEARS AND THE TERM WAS EXTENDED UNDER THE 1999 POLICY TO 20 YEARS BUT THIS ITSELF DOES NOT JUSTIFY TREATING THE LICENCE FEE PAID ON REVENUE SHARING BASIS UNDER THE 1999 POLICY AS A CAPITAL EXPENSE MADE TO ACQUIRE AN ASSET. AS OBSERVED IN EMPIRE JUTE CO. LTD. ( SUPRA ), THE ENDURING BENEFIT TEST HAS LIMITATION AND CANNOT BE MECHANICALLY APPLIED WITHOUT CONSIDERING THE COMMERCIAL OR BUSINESS ASPECTS. PRACTICAL AND PRAGMATIC VIEW AND CONSIDERATIONS RATHER THAN JURISTIC CLASSIFICATIO N IS THE DETERMINATIVE FACTOR. THE PAYMENT OF YEARLY LICENCE FEE ON REVENUE SHARING BASIS IS FOR CARRYING ON BUSINESS AS CELLULAR TELEPHONE OPERATOR. IT IS A NORMAL BUSINESS EXPENSE. 36. READ IN THIS MANNER, THE LICENCE GRANTED BY THE GOVERNMENT/ AUTHORITY TO THE ASSESSEE WOULD BE A CAPITAL ASSET, YET AT THE SAME TIME, THE ASSESSEE HAS TO MAKE PAYMENT ON YEARLY BASIS ON THE GROSS REVENUE TO CONTINUE, TO BE ABLE TO OPERATE AND RUN THE BUSINESS, IT WOULD ALSO BE REVENUE IN NATURE. FAILURE TO MAKE STIPULATED R EVENUE SHARING PAYMENT ON YEARLY BASIS WOULD RESULT IN FORFEITING THE RIGHT TO OPERATE AND IN TURN DENY THE ASSESSEE, RIGHT TO DO BUSINESS WITH THE AID OF THE CAPITAL ASSET. NON - PAYMENT WILL PREVENT AND BAR AN ASSESSEE FROM PROVIDING SERVICES. THUS, THE HONOURABLE HIGH COURT HAS HELD THAT PAYMENT OF YEARLY LICENSE FEE ON REVENUE SHARING BASIS IS FOR CARRYING ON BUSINESS AS CELLULAR TELEPHONE OPERATOR. IT IS A NORMAL BUSINESS EXPENSE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A. ACCORDINGLY RESPECTFULLY FOLLOWING THE DECISION OF THE HONOURABLE HIGH COURT IN CASE OF BHARTI HEXACOM LIMITED (SUPRA) , WE DISMISS THE SOLITARY GROUND OF APPEAL OF THE LEARNED ASSESSING OFFICER. 6 . ACCORDINGLY APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1 / 0 7 / 2019 . - SD/ - - SD/ - ( BEENA A PILLAI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER PAGE | 4 DATED: 3 1 / 0 7 / 2019 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI