ASST CIT CIR 11(1), MUMBAI V. IDEA CELLUR LTD ( SUCCESSOR TO IDEA MOBILE COMMUNICATION LTD), MUMBAI

ITA 5635/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9573 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 05-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 04-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND , SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 5635/MUM/2011 / ASSESSMENT YEAR 2003-04 DY. COMMISSIONER OF INCOME TAX 3(2), R.NO. 608, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020. VS. M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE COMMUNICATION LTD), 5 TH FLOOR, WINDSOR, OFF. CST ROAD, NEAR VIDYANAGARI, KALINA, SANTACRUZ (E), MUMBAI-98. PAN: AAACE 1646 D ( ! / APPELLANT ) ( '# ! / RESPONDENT ) REVENUE BY : SHRI P.K. SHUKLA ASSESSEE BY : SHRI RONAK G. DOSHI $ %& / DATE OF HEARING : 20-11-2012 '( $ %& / DATE OF PRONOUNCEMENT : 20-11-2012 ) / O R D E R PER RAJENDRA, AM THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT . 01-11-2010 OF THE CIT(A)- XVIII, NEW DELHI. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSING OFFICER (AO). 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR ELIGIB LE DEDUCTION U/S.35ABB AMOUNTING TO RS.33,55,51,000/- ON ACCOUNT OF VARIABLE LICENSE FE ES U/S.35ABB AS AGAINST RS.7,18,89,545/- AS ALLOWED BY THE ASSESSING OFFICE R. 2.THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 5635/MUM/2011 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE COMMUNICATION LTD), 2 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF PROVID ING CELLULAR MOBILE SERVICES, FILED ITS RETURN OF INCOME ON 28-11-2003 SHOWING CURRENT YEARS LOSS OF RS. (-) 125,09,20,590/-.AO FINALISED THE ASSESSMENT U/S.143(3) OF THE INCOME-TAX ACT,1961(ACT), ON 31-03-2006, DETERMINING TOTAL LOS S AT RS. (-) 39,06,57,847/-. 3. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT AS SESSEE HAD ADDED BACK A SUM OF RS. 18.07 CRORES ON ACCOUNT OF THE LICENSE F EE PAID TO DOT AGAINST WHICH DEDUCTION AMOUNTING TO RS. 40.24 CRORES WAS SHOWN T O HAVE BEEN CLAIMED U/S. 35ABB OF THE ACT. AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, AO HELD THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION OF RS. 7.18 CRO RES AS AGAINST RS. 33.55 CRORES CLAIMED BY IT. AN ADDITION AMOUNTING TO RS. 26.36 C RORES WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. ASSESSEE FILED AN APPEAL BE FORE THE FIRST APPEAL AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE-COMPANY AND THE ARGUMENTS OF THE AO, HE HELD THAT ISSUE OF DIS-ALLOWANCE OF R EVENUE SHARE LICENSE WAS DECIDED IN FAVOUR OF THE APPELLANT BY THE ITAT-DELHI FOR THE A Y 2001-02 VIDE ITS ORDER DT. 16- 12-2009. FINALLY, HE HELD THAT REVENUE SHARE LICENS E FEE WAS TO BE ALLOWED AS REVENUE EXPENDITURE. 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO. AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ISSUE UNDER CONSIDERATION HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER DELI VERED BY THE F BENCH OF NEW DELHI (ITA NO. 310/DEL/2006 AY 2001-02 DT. 16-12-20 09).HE FURTHER RELIED UPON THE CASES OF BHARTI CELLULAR LIMITED (ITA NO.5335/DEL/2 003AY 2000-01DT. 29-05-2009); BHARTI AIRTEL LIMITED [41 SOT 175 (MUM)] AND VODAFO NE ESSAR GUJARAT LTD [38 SOT 51 (AHD.)]. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. WE FIND THAT IN ASSESSEES OWN CASE FOR THE AY 2001-02 , THE ISSUE WAS DECIDED IN ITS FAVOUR. THE ISSUE OF VARIABLE LICENSE FEE PAID; TO DEPARTMENT OF TELECOMMUNICATION IN ACCORDANCE WITH THE NEW REVENUE SHARING RETIME ;WAS DECIDED IN THAT CASE BY THE SAID ORDER IN FOLLOWING WORDS: THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX(A) HAS ERRED IN UPHOLDING AN ADDITION OF RS.26,92,54,013/- (RS.22,84,86,443 - 1, 92,32,340/- I.E. 1/5TH OF 28,84,86,443/- TOWARDS VARIABLE LICENSE FEE PAID TO THE DEPARTMENT OF TELECOMMUNICATION IN ACCORDANCE WITH THE NEW REGIME OF TO THE NEW REVENUE SHARING REGIME. 3 .BEFORE US LD. COUNSEL OF THE ASSESSEE SUBMITTED TH AT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIB UNAL IN BHARTI CELLULAR LTD. VS. DCIT IN ITA NO. 5335/DEL/2003. IN THIS CASE THE ISSUE RAISED AS FOLTOWS: THE LD. AO HAD ERRED BOTH ON FACTS AND IN LAW IN H OLDING SUM OF RS. 29,56,20,000/- TO THE CAPITAL EXPENDITURE BEING THE VARIABLE REVENUE SHARING FEE PAID PURSUANT TO THE MIGRATION OF THE APPELLANT TO THE NEW TELECOM POLIC Y 1999 REGIME WHEREBY THE GOVERNMENT HAD UPTO THE DATE OF THE MIGRATION I.E. 1.8.1999 QUANTIFIED THE FIXED FEE PAYABLE BY THE APPELLANT UPTO 31.7.1999 AND THEREAF TER FIXED A BASIS FOR THE REVENUE SHARING FEE. THE CIT(A) HAS FURTHER ERRED IN CONFIR MING THE ACTION OF THE AO AND IN NOT TREATING RS. 29,56,20,000/- TO BE REVENUE EXPENDIT URE. ITA NO. 5635/MUM/2011 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE COMMUNICATION LTD), 3 3 .1THE TRIBUNAL ADJUDICATED AS UNDER: 9 .WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE ORDER OF THIS TRIBUNAL IN THE CASE OF MTNL REFERRED TO SUPRA. IT IS NOTICED THAT THE BOMBAY BENCH OF THIS TRIBUNAL IN THE CASE OF MTNL HAS AFTER CONS IDERING THE VARIOUS DETAILS AND SUBMISSIONS OF THE ASSESSEE AND THE REVENUE THEREIN , HAS HELD THAT THE LICENCE FEE WAS PAID ONLY FOR THE USE OF THE RIGHT TO DO THE BU SINESS OF TELECOM PROVIDER. THE SAID RIGHT DID NOT GIVE RISE TO ANY CAPITAL ASSET. FURT HER THE BOMBAY BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS:- 8 . REVOCATION OF LICENCES - THE CENTRAL GOVERNMENT M AY, AT ANY TIME REVOKE ANY LICENCE GRANTED U/S 4, ON THE BREACH OF ANY OF THE CONDITIONS THEREIN CONTAINED, OR IN DEFAULT OF PAYMENT OF ANY CONSIDERATION PAYABLE THE REUNDER. FROM PERUSAL OF 5.8 OF THAT ACT, IT IS NOW EVIDENT THAT UNDER THE CIRCU MSTANCES 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 LICENCE FEE TO THE GOVERNMENT. THE IRR ESISTIBLE CONCLUSION, THEREFORE, WOULD BE THAT PAYMENT OF LICENCE FEE IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS 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 AO TO ALLOW THE DEDUCT ION TO THE APPELLANT. 10 . RESPECTFULLY FOLLOWING THE DECISION OF THE COORDI NATE BENCH OF THIS TRIBUNAL IN THE CASE OF MTNL REFERRED TO SUPRA, WE ARE OF THE VIEW THAT THE VARIABLE REVENUE SHARE LICENCE FEE PAID PURSUANT TO THE MIGRATION OF THE A SSESSEE TO THE NEW TELECOM POLICY OF 1999 IS LIABLE TO BE ALLOWED AS REVENUE EXPENDIT URE AND WE DO SO. IN THE CIRCUMSTANCES, AO IS DIRECTED TO DELETE THE ADDITIO N MADE BY HOLDING THE VARIABLE REVENUE SHARE FEE PAID TO BE CAPITAL EXPENDITURE. IN THE CIRCUMSTANCES, GROUND NO.3 IN ASSESSEES APPEAL STANDS ALLOWED. 3.2 .SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICAL, BOTH THE COUNSELS HAVE FAIRLY AGREED THAT THE SAME DECISION MAY BE APPLIED. ACCO RDINGLY, FOLLOWING THE ABOVE PRECEDENT, WE SET ASIDE THE ORDERS OF THE LD. CIT(A ) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. ONE OF US WAS PARTY TO THE SAID ORDER. WE FIND TH AT SAME ISSUE HAS BEEN DECIDED AGAINST THE REVENUE IN THE CASE OF BHARTI AIRTEL LT D., AND VODAFONE ESSAR GUJARAT LTD (SUPRA). RESPECTFULLY FOLLOWING THE ORDERS OF THE DELHI, MUMBAI AND AHMEDABAD BENCHES, WE DISMISS GROUND NOS. 1 TO 3 FILED BY THE AO. APPEAL FILED BY AO STANDS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0 TH NOVEMBER, 2012. ) $ '( + ,- 20 TH NOVEMBER, 2012 ( $ . / SD/- SD/- ( . . / I.P. BANSAL ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, , DATE: 20 TH NOVEMBER, 2012 TNMM ITA NO. 5635/MUM/2011 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE COMMUNICATION LTD), 4 ) ) ) ) $ $$ $ '%0 '%0 '%0 '%0 10% 10% 10% 10% / COPY OF THE ORDER FORWARDED TO : 1. APP ELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR I BENCH, ITAT, MUMBAI 6. GUARD FILE #0% '% //TRUE COPY// ) ) ) ) / BY ORDER, 2 22 2 / 3 3 3 3 DY./ASSTT. REGISTRAR , / ITAT, MUMBAI