Essel Shyam Communication Ltd., New Delhi V. ACIT, New Delhi

ITA 5780/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5099 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Question of law
• Section: 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 5780/DEL/2016 ASSESSMENT YEAR: 2007-08 ESSEL SHYAM COMMUNICATION LTD. (NOW KNOWN AS PLANETCAST MEDIA SERVICES LTD.) 1121, HEMKUNT CHAMBERS, 11 TH FLOOR, 89, NEHRU PLACE, NEW DELHI. PAN NO. AAACE2299Q VS ACIT CENTRAL CIRCLE-26, NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY S/SH. VED JAIN, SR. ADV. RISHABH JAIN, CA UMANG LUTHRA, CA REVENUE BY MS. ASHIMA NEB, SR. DR ORDER PER SHRI N.K. BILLAIYA, A.M. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE CIT(A)-29, NEW DELHI DATED 31.08.2016 PERTAININ G TO AY 2007- 08. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN EXCLUDING INC OME FROM SALE OF DATE OF HEARING 22.05.2019 DATE OF PRONOUNCEMENT 23.05.2019 2 ITA NO . 5780/DEL/2016 V-SAT EQUIPMENTS AMOUNTING TO RS. 3,62,19,389/- FOR THE PURPOSE OF DEDUCTION U/S 80IA OF THE ACT. 3. AT THE VERY OUTSET, THE COUNSEL FOR THE ASSESSEE STATED THAT AN IDENTICAL ISSUE AROSE IN AY 2005-06 AND THE MATT ER TRAVELLED UPTO THE HONBLE DELHI HIGH COURT AND THE HONBLE D ELHI HIGH COURT VIDE ORDER DATED 17.05.2012 IN ITA NO. 284/20 11 HAS REMANDED THE ISSUE BACK TO THE ITAT WHICH FURTHER R EMANDED BACK THE ENTIRE ISSUE TO THE FILES OF THE AO AND TH E AO AFTER VERIFICATION OF THE FACTS AS PER THE DIRECTIONS OF THE HONBLE HIGH COURT OF DELHI HAS RECOMPUTED THE DEDUCTION U/S 80I A OF THE ACT. 4. THE DR FAIRLY STATED THAT SINCE THE HONBLE JURI SDICTIONAL HIGH COURT HAS DECIDED THE ISSUE, THE SAME SHOULD B E FOLLOWED. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW. THE RELEVANT FINDINGS OF THE HONBLE HIGH C OURT OF DELHI READ AS UNDER: 10. THE QUESTION RAISED IN ITA 284/2011 AGAIN RE QUIRES AN ORDER OR REMIT. THE ASSESSING OFFICER NOTICED T HAT THE ASSESSEE HAD SHOWN SALES OF RS. 2,12,28,512/-. ON SCRUTINY OF DETAILS, IT WAS NOTICED THAT MAJOR SALE S WERE IN RESPECT OF ANTENNA, RFT AND OTHER MISCELLANEOUS ITE MS, WHICH INCLUDED COMPUTER PRINTER, UPS, CTV, AIR CONDITIONER, HAND CAMERA, GENERATOR SETS, TELEPHONE INSTRUMENTS, VIDEO CONFERENCING SYSTEMS, MONITOR ET C. HE HELD THAT THE SAID EQUIPMENTS COULD BE BOUGHT AND PROCURED FROM THE ORIGINAL EQUIPMENT MANUFACTURERS (OEMS, FOR SHORT) INCLUDING THE FOREIGN VENDORS. ACCORDINGLY, RS. 50,42,717/- WAS EXCLUDED FROM THE DEDUCTION CLAIMED U/S 80IA OF THE ACT AS INCOME NOT DERIVED FROM SPECIFIED SERVICES, AFTER NOTICING THA T THE COST 3 ITA NO . 5780/DEL/2016 OF MATERIAL WAS RS. 1,61,85,795/-. THE CIT(A) UPHE LD THE SAID ADDITION HOLDING THAT THIS WAS INCOME DERIVED FROM TRADING IN GOODS. THE TRIBUNAL HAS DELETED THE SAI D ADDITION, INTER ALIA, HOLDING: - 11. LET US HAVE A LOOK ON THE NATURE OF EQUIPMENT S. WE HAVE PERUSED PAGES NUMBER 29-40 OF THE PAPER BOOK. ON PAGE 29-31 THE COPY OF THE IMPORT LICENSE FOR IMPOR T OF C BANK REDUNDANT 1:1 UP CONVERTER AND DOWN CONVERTER HAVE BEEN PLACED ON RECORD. THESE ARE THE TECHNICA L DEVICE. SIMILARLY, ON PAGE 32-33 ARE THE IMPORT LI CENSE ON PAGE 34 IS THE DESCRIPTION OF THE ITEMS WHICH ARE T O BE IMPORTED. AT PAGE 34 OF THE DESCRIPTION OF THE ITE MS IS CODAN 40 WKU BANK BUC. ACCORDING TO THE ASSESSEE THESE EQUIPMENTS ARE ESSENTIAL EQUIPMENTS FOR ENABL ING, ASSESSEE TO THE TELECOMMUNICATION SERVICES. THE GO VT. HAS PUT UP VARIOUS RESTRICTIONS ON IMPORT OF SUCH I TEMS BECAUSE OF SECURITY REASONS. IF THE ASSESSEE IS UN ABLE TO PROVIDE THESE ITEMS TO ITS CUSTOMER THEN IT MIGHT N OT BE POSSIBLE FOR IT TO PROVIDE TELECOMMUNICATION SERVIC ES. IT WAS POINTED OUT AT THE TIME OF HEARING THAT THESE EQUIPMENTS CANNOT BE USED FOR AVAILING THE SERVICES FROM ANY OTHER SERVICE PROVIDER. THE CUSTOMER HAS TO AV AIL THE TELECOMMUNICATION SERVICES THROUGH THESE ITEMS NECESSARILY FROM THE ASSESSEE ONLY. CONSIDERING TH E NATURE OF EQUIPMENTS AND THEIR RELATION TO THE NATU RE OF SERVICES PROVIDED BY THE ASSESSEE, IN OUR OPINION T HE RECEIPT RECEIVED BY THE ASSESSEE FOR SUPPLY OF THES E ITEMS IS INEXTRICABLY LINKS TO THE BUSINESS OF ITS TELECOMMUNICATION SERVICES. THE AO IS NOT JUSTIFIE D IN EXCLUDING THESE RECEIPTS. THEREFORE, WE DIRECT THE AO TO INCLUDE THE RECEIPT OF RS. 50,42,717/- REPRESENTING INCOME FROM SALE OF EQUIPMENT IN THE ELIGIBLE RECEIPT FOR GRANT OF DEDUCTION U/S 80IA. 11. LD. COUNSEL FOR THE REVENUE, DURING THE COURSE OF HEARING BEFORE US, HAS DRAWN OUR ATTENTION TO THE ASSESSMENT ORDER AND THE STAND TAKEN BY THE ASSESSE E. IT WAS SUBMITTED THAT THE ASSESSEE HAD STATED AND ACCE PTED THAT THE CUSTOMERS COULD BUY THE EQUIPMENT FROM THE M OR FROM THIRD PARTIES AND HAD PLEADED THAT ENTIRE INCO ME, WHICH WAS INEXTRICABLY RELATED TO BUSINESS OF TELECOMMUNICATION AND WAS EXEMPT. SALE OF EQUIPMEN T 4 ITA NO . 5780/DEL/2016 ETC., HAD CLOSE AND DIRECT NEXUS WITH PROFIT AND GA INS OF THE STIPULATED INDUSTRIAL UNDERTAKING. 12. THE LEGAL CONTENTION OF ASSESSEE IS SUBSTANTIAL LY CORRECT. HOWEVER, WHAT WAS RELEVANT AND REQUIRED EXAMINATION WAS THE CONTRACTS UNDER WHICH THE SALES WERE MADE. SALE OF TV CAMERA, AIR CONDITIONER, GENERATO R SETS PER SE OR ON STANDALONE BASIS WOULD NOT QUALIFY FOR DEDUCTION 80IA READ WITH SUB-SECTION (4) CLAUSE (II ). ON THE OTHER HAND, IN CASE THE ASSESSEE HAS BEEN AWARDED A CONTRACT FOR PROVIDING TELECOMMUNICATION SERVICE, N ETWORK OF TRUNKING AND BROAD BANK/INTERNET SERVICES AND WH ILE FOR EXECUTING THE SAID CONTRACT, GENERATOR SETS, AIR CO NDITIONER ETC. WERE SOLD AS A PART OF A COMPLETE PACKAGE, THE N THE INCOME EARNED MAY QUALIFY FOR DEDUCTION U/S 80IA. THEREFORE, EACH CONTRACT AND NATURE THEREOF HAS TO BE EXAMINED. IT HAS TO BE ASCERTAINED WHETHER IT WAS A CASE OF SUPPLY OF GOODS OR IT WAS A CASE WHERE THE ASSES SEE WAS PROVIDING QUALIFYING SERVICES WHICH MANDATED AN D REQUIRED INEXTRICABLY OR AS AN NECESSARY REQUIREMEN T, (UNDER THE SAME CONTRACT OR UNDER A DIFFERENT CONTR ACT), SALE/SUPPLY GOODS TO OPERATIONALIZE AND USE/PROVIDE THE TELECOMMUNICATION SERVICES. IN CASE, THE SALE OF G OODS WAS INEXTRICABLY LINKED, HAD NEXUS AND WAS CONNECTED WI TH THE PRIMARY PURPOSE OF PROVIDING OR STARTING TELECOMMUN ICATION SERVICES, THE ASSESSEE WILL BE ENTITLED TO BENEFIT U/S 80IA. OTHERWISE, THE ASSESSEE WILL NOT BE ENTITLED TO EXE MPTION U/S 80IA ON THE TRANSACTION. WHETHER THE COMMODITIES/GOODS COULD HAVE BEEN ALSO PURCHASED FR OM A THIRD PARTY MAY NOT RELEVANT AND THE DETERMINATIVE FACTOR IN MANY A CASE. IT IS THE PREDOMINANT OR PRIMARY REAS ON OR PURPOSE WHY THE CONTRACT WAS ENTERED INTO AND WHETH ER IT HAS DIRECT NEXUS AND IS INEXTRICABLY LINKED WITH PR OVIDING THE QUALIFYING ACTIVITIES, IS AND WOULD BE THE DETE RMINATIVE FACTOR. THE SUBSTANTIAL QUESTION OF LAW IS ACCORDI NGLY ANSWERED. AN ORDER OF REMIT IS PASSED, WITH A DIRE CTION TO THE TRIBUNAL TO DECIDE THE ISSUE/QUESTION AFRESH IN THE LIGHT OF THE ABOVE OBSERVATION/RATIO. 5 ITA NO . 5780/DEL/2016 6. THE TRIBUNAL IN ITA NO. 3265/DEL/2008 HAS HELD A S UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND HAVE CAREFULLY GONE THROUGH THE ORDER O F THE HONBLE HIGH COURT IN ASSESSEES OWN CASE FOR AY 20 05-06 WHICH IS THE RELEVANT ASSESSMENT YEAR BEFORE US. I N THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE BACK TO TH E FILE OF AO TO BE DECIDED AS DIRECTED BY THE HONBLE HIGH COURT IN PARA 12 (SUPRA), AFTER GIVING OPPORTUNITY TO THE AS SESSEE. 7. RESPECTFULLY FOLLOWING THE DIRECTIONS OF THE HON BLE HIGH COURT OF DELHI VIZ-A-VIZ THE DIRECTIONS OF THE COOR DINATE BENCH, WE RESTORED THE ISSUE TO THE FILES OF THE AO. THE AO IS DIRECTED TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE DIRECT IONS GIVEN BY THE HONBLE HIGH COURT OF DELHI IN AY 2005-06 AFTER GIV ING A REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23/05/2019 *KAVITA ARORA 6 ITA NO . 5780/DEL/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 22.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS 23.5.19 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 23.5.19 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 23.5.19 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 23.5.19 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.5 .19 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 7 ITA NO . 5780/DEL/2016