Bharat Sanchar Nigam Ltd., New Delhi V. ACIT, New Delhi

ITA 6459/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7895 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Depreciation; Business expenditure; Retrospective amendment; Bad and doubtful debts; Revenue expenditure
• Section: 43B; 143(3); 244A; 115JB; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2196/DEL/2012 AY: 20 05-06 ITA NO. 6459/DEL/2012 AY: 20 09-10 BHARAT SANCHAR NIGAM LIMITED, VS ACIT, CORPORATE OFFICE, CIRCLE 2(1), TAXATION SECTION, FIRST FLOOR, NEW DELHI BHARAT SANCHAR BHAWAN, JANPATH, NEW DELHI-110001 (PAN: AABCB5576G) ITA NO. 5916/DEL/2012 AY: 20 09-10 ITA NO. 2799/DEL/2012 AY: 20 05-06 ACIT, VS BHARAT SANCHAR NIGAM LIMITED CIRCLE 2(1), NEW DELHI-110001 NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARANDEEP SINGH, ADV. RESPONDENT BY : SHRI RAVI JAIN, CIT DR DATE OF HEARING: 15.02.2016 DATE OF PRONOUNCEMENT: 13.05.2016 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A. NOS. 2196 AND 2799 PERTAIN TO ASSESSMENT YE AR 2005-06. I.T.A. NO. 2196 HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 14.3.2012 PASSED BY THE LD. CIT(A)-V, I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 2 NEW DELHI, PARTLY CONFIRMING THE PENALTY IMPOSED U/ S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE A CT) WHEREAS I.T.A. NO. 2799 HAS BEEN PREFERRED BY THE DEPARTMEN T AS A CROSS APPEAL FOR PARTLY ALLOWING THE ASSESSEES APPEAL CH ALLENGING THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. 1.1 I.T.A. NOS. 5916/DEL/2012 AND 6459/DEL/2012 ARE AGAIN CROSS APPEALS BY THE DEPARTMENT AND THE ASSESSEE RE SPECTIVELY AND PERTAIN TO ASSESSMENT YEAR 2009-10, CHALLENGING THE FINDINGS AND ADJUDICATION OF THE LD. CIT(A)-V, NEW DELHI VID E ORDER DATED 24.09.2012. 1.2 ALL THESE APPEALS WERE HEARD TOGETHER AND THEY ARE BEING DISPOSED OF THROUGH THIS COMMON ORDER. NOW WE TAKE UP THESE APPEALS ONE BY ONE. I.T.A. NOS. 2196 & 2799/2012 2. RETURN OF INCOME DECLARING A GROSS TOTAL INCOME OF RS. 8656,56,00,000/- WAS FILED ON 31.10.2005. THE NET INCOME AFTER THE CLAIM OF DEDUCTION UNDER THE PROVISIONS OF CHAP TER VI-A OF THE ACT WAS RS. 787,37,00,000/- AND THE TAXABLE BOOK PR OFIT U/S 115JB OF THE ACT WAS CALCULATED AT RS. 10145,50,00, 000/- I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 3 SUBJECT TO TAX @7.5%. SUBSEQUENTLY, THE INCOME WAS ASSESSED AT RS.4389,77,00,000/- UNDER THE NORMAL PROVISIONS OF THE ACT AND THE BOOK PROFIT WAS ASSESSED AT RS.15334,02,00,000/ - VIDE ORDER DATED 27.12.2007 PASSED U/S 143(3) OF THE ACT. LAT ER ON, PENALTY PROCEEDINGS WERE INITIATED AND A PENALTY OF RS. 115 3,15,65,282/- U/S 271(1)( C) OF THE ACT WAS IMPOSED. THE PENALTY WAS IMPOSED WITH RESPECT TO THE FOLLOWING ADDITIONS/DISALLOWANC ES:- (I) DEPRECIATION DISALLOWED RS.2268,05,00,000/ - (II) DISALLOWANCE OF ASSETS WRITTEN OFF 1,00,000/ - (III) DISALLOWANCE OF DEDUCTION U/S 80IA ON THE FOLLOWING ITEMS OF INCOME:- 1. INTEREST FROM OTHERS 2. LIQUIDATED DAMAGES 3.EXCESS PROVISION WRITTEN BACK 4. RENT ON STAFF QUARTERS 5. SALE OF SCRAP 6. OTHER INCOME RS.13,15,00,00/- RS.147,86,00,000 RS.395,32,00,000 RS. 10,97,00,000 RS. 44,78,00,000 RS.118,15,00,000 RS.729,43,00,000/- I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 4 (IV) ADJUSTMENT OF BOTH PROFITS ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS RS.718,01,00,000/- 3. ON APPEAL, THE LD. CIT (A) DELETED THE PENALTY O N THE DISALLOWANCE PERTAINING TO DEPRECIATION, DISALLOWAN CE OF ASSETS WRITTEN OFF, DENIAL OF DEDUCTION US/ 80IA FOR LIQUI DATED DAMAGES, DENIAL OF DEDUCTION U/S 80IA FOR EXCESS PROVISION W RITTEN BACK, DENIAL OF DEDUCTION U/S 80IA ON SALE OF SCRAP, DENI AL OF DEDUCTION U/S 80IA ON OTHER INCOME AND ON DISALLOWANCE PERTAI NING TO ADJUSTMENT OF BOOK PROFITS ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS. THUS, IN EFFECT, THE IMPOSITION OF PENALTY WAS CONFIRMED BY THE LD. CIT (A) ON THE DISALLOWANCE OF DEDUCTIONS U/S 80IA ON ACCOUNT OF INTEREST FROM OTHERS AND REN T OF STAFF QUARTERS. AGGRIEVED, THE ASSESSEE IS BEFORE US CHA LLENGING THE IMPOSITION OF PENALTY ON THESE TWO ISSUES. THE DEP ARTMENT IS IN APPEAL CHALLENGING THE DELETION OF THE PENALTY ON A LL THE ISSUES ON WHICH RELIEF HAS BEEN GRANTED BY THE LD. CIT (A). I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 5 4. THE LD. AR SUBMITTED THAT THE ISSUE OF DISALLOWA NCE OF DEPRECIATION ALLOWANCE OF RS. 2268,05,00,000/- HAS BEEN DELETED IN THE QUANTUM APPEALS BY THE ITAT A BENCH IN I.T .A. NOS. 2162/DEL/2007 AND 2176/DEL/2008 VIDE ORDER DATED 22 .01.16. ON THE ISSUE OF WRITE OFF OF ASSETS, IT WAS SUBMITT ED THAT THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFI CER FOR FRESH EXAMINATION BY THE ITAT IN THE QUANTUM APPEALS (SUP RA). ON THE ISSUE OF ADDITIONS ON ACCOUNT OF DENIAL OF DEDUCTIO N U/S 80IA, THE LD. AR SUBMITTED THAT THE ITATS ORDER IN THE QUANT UM APPEALS (SUPRA), HAS ALLOWED THE DEDUCTION U/S 80IA ON ALL DISPUTED ITEMS BY HOLDING THAT IN TERMS OF THE NON-OBSTANTE CLAUSE USED IN SECTION 80IA (2A), DEDUCTION FOR AN UNDERTAKING ENG AGED IN PROVISION OF TELECOMMUNICATION SERVICES WILL BE AVA ILABLE IN RESPECT OF PROFIT OF ELIGIBLE BUSINESS AND WAS NOT TO BE RESTRICTED TO PROFITS DERIVED FROM ELIGIBLE BUSINESS AND, ACCORDINGLY, THE DISALLOWANCES HAD BEEN DELETED. AS FAR AS THE REMA INING ISSUE OF DISALLOWANCE/ADJUSTMENT OF BOOK PROFITS ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS WAS CONCERNED, THE LD. A R SUBMITTED THAT FINANCE ACT, 2009 HAD MADE A RETROSPECTIVE AME NDMENT IN SECTION 115JB W.E.F. 1 ST APRIL, 2001 INSERTING CLAUSE (I) IN I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 6 EXPLANATION 1 TO SECTION 115JB AND CONSIDERING THIS RETROSPECTIVE AMENDMENT, THE ASSESSEE HAD NOT PRESS ED THE GROUND IN THE QUANTUM PROCEEDINGS BUT IN VIEW OF TH E ORDER PASSED BY ITAT DELHI IN THE CASE OF ESCORTS CONSTRU CTION EQUIPMENT (I.T.A NOS. 5313 & 5314/DEL/2012), THE PE NALTY OUGHT NOT TO HAVE BEEN IMPOSED WHEREIN IT HAS BEEN HELD THAT PENALTY U/S 271(1)(C) OF THE ACT WAS NOT IMPOSABLE ON CLAIMS MADE BUT NEGATED BY A SUBSEQUENT AMENDMENT. 5. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE A SSESSING OFFICER AND SUBMITTED THAT THE PENALTY HAD BEEN IMP OSED CORRECTLY. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE MATERIAL ON RECORD. AS FAR AS THE PENALTY ON THE IS SUE OF DISALLOWANCE OF DEPRECIATION IS CONCERNED, WE FIND THAT THE QUANTUM HAS BEEN DELETED BY THE ITAT IN I.T.A. NOS. 2162/DEL/2007 AND 2176/DEL/2008 BY FOLLOWING THE JU DGMENT OF THE HON'BLE DELHI HIGH COURT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 AND REPORTED IN 355 ITR 188 (DEL). ACCORDINGLY, PENALTY IS NOT IMPOSABLE ON THIS ISSUE AND GROUND NO. 1 OF DEPARTMENTS APPEAL IS DISMISSED. SINCE THE ISSUE OF I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 7 WRITE OFF OF THE ASSETS HAS BEEN RESTORED TO THE FI LE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION, PENALTY IS NOT IMPOSABLE ON THIS ISSUE ALSO. ACCORDINGLY, GROUND NO. 2 OF T HE DEPARTMENTS APPEAL IS ALSO DISMISSED. AS FAR AS THE GROUND OF SUSTENANCE/DELETION OF PENALTY ON 80IA DEDUCTION IS CONCERNED, THIS ISSUE IS AGAIN COVERED IN FAVOUR OF THE ASSESS EE IN THE QUANTUM APPEALS FOR ASSESSMENT YEAR 2005-06 BY THE ITAT AND ACCORDINGLY, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. ACCORDINGLY, GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALLOWED AND GROUND NO. 3 OF TH E DEPARTMENTS APPEAL IS DISMISSED. THE LAST REMAINI NG GROUND FOR ADJUDICATION IS DEPARTMENTS APPEALS GROUND NO.5 C HALLENGING THE DELETION OF PENALTY LEVIED ON ACCOUNT OF DISALL OWANCE OF PROVISION FOR BAD AND DOUBTFUL DEBTS FOR THE PURPOS E OF COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT. IT IS SEEN FROM THE PENALTY ORDER THAT THE PENALTY HAS BEEN IMPOSED BY THE ASSESSING OFFICER BY APPLYING CLAUSE (I) OF EXPLANA TION (1) TO SECTION 115JB OF THE ACT. THE SAID CLAUSE WAS RETR OSPECTIVELY INSERTED W.E.F. 1.4.2001 BY THE FINANCE (NO.2) ACT, 2009. ON PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE PENA LTY ORDER, IT IS I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 8 SEEN THAT IT IS NOT THE CASE OF THE ASSESSING OFFIC ER THAT THE ASSESSEE HAD FURNISHED ANY INCORRECT PARTICULARS OR HAD CONCEALED ANY MATERIAL FACT. PENALTY CANNOT BE LEV IED ON THE BASIS OF SUBSEQUENT RETROSPECTIVE AMENDMENTS IN LAW . WHEN THE RETURN OF INCOME WAS FILED BY THE ASSESSEE, THE RET ROSPECTIVE AMENDMENT TO SECTION 115JB REGARDING PROVISION FOR BAD AND DOUBTFUL DEBTS (AMOUNT SET ASIDE TOWARDS PROVISION OF DIMINUTION IN THE VALUE OF ASSETS) WAS NOT IN THE STATUTE AND, THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) ON THIS ISSUE AND DECLINE TO INTERFERE. ACCORDINGLY, DRAWING SUPPORT FROM THE ORDER PASSED BY ITAT DELHI IN THE CASE OF ESCORTS CONSTRUCTION EQUIPMENT (I.T.A NOS. 5313 & 5314/DEL/ 2012), GROUND NO. 4 OF THE DEPARTMENTS APPEAL IS DISMISSE D. 7. IN THE RESULT, I.T.A. NO. 2196/DEL/2012 FILED BY THE ASSESSEE IS ALLOWED AND I.T.A. NO. 2799/DEL/2012 FILED BY TH E DEPARTMENT IS DISMISSED. I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 9 I.T.A. NOS. 5916/DEL/2012 & 6459/DEL/2012 8. THESE ARE CROSS APPEALS BY THE DEPARTMENT AND TH E ASSESSEE RESPECTIVELY AND PERTAIN TO ASSESSMENT YEA R 2009-10. THE GROUNDS OF APPEAL RAISED BY THE DEPARTMENT ARE AS UNDER:- 1. THE LD . CIT(A) HAS ERRED ON FACTS AND IN LAW IN DIRECTING THE AO TO TREAT THE FOLLOWING RECEIPTS AS ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION U 1 S 801A OF THE IT ACT : (A) LIQUIDATED DAMAGES AMOUNTING TO RS. 215,37,00,000 /-. (B) EXCESS PROVISION WRITTEN BACK OF RS. 1170 , 14 , 00 , 000 / - (C) RENT OF QUARTERS AMOUNTING TO RS. 12,96,00,000 / - . (D) SALE OF SCRAP AMOUNTING TO RS. 43,39,00,000 1 -. (E) OTHER RECEIPTS INCLUDING . SALE OF DIRECTORIES, PUBLICATIONS, FORMS, WASTE PAPER, ETC. OF RS . 188,40,00,000 / -. (I) THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE AFOREMENTIONED RECEIPTS AS ELIGIBL E PROFITS FOR DEDUCTION FOR DEDUCTION U/S 80IA OF THE ACT AS THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD., 317 ITR 218 HAS HELD THAT IT IS NECESSARY TO PROVE THAT THE RECEIPT GENERATED SHOULD BE OF FIRST DEGREE SOU RCE SPECIAL ACTIVITY , BUT NOT OF ANCILLARY AND INCIDENTAL ACTIVITY OF THE UNDERTAKING. MERELY CRED ITING CERTAIN SUM AS REVENUE RECEIPT CANNOT IPSO FACTO BE ELIGIBLE FOR DEDUCTION U/S 801A THE ACT . 2 THE LD . CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DISALLOWANCE OF RS.169 , 51,78,618 / - MADE ON ACCOUNT OF WRITE OFF OF LOSSES IGNORING THAT THE AS SESSEE COMPANY FAILED TO POINT OUT THE INDIVIDUAL ITEMS OF SUO- MOTO DISALLOWANCE VIS-A-VIS THE ITEMS RELATED TO CL AIM OF THE ASSESSEE COMPANY IN RESPECT OF WRITE OF ASSETS OF RS.169,52,00,000 / - A : D DEBITS IN THE PROFIT AND LOSS ACCOUNT IN THIS REGARD WERE CAPITAL IN NATURE. 9. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 10 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT (A) HAS ERRED IN HOLDING THA T THE SUBSIDY OF RS. 1407.61 CRORES RECEIVED FROM DOT FOR RURAL TELEPHONY IS NOT ELIGIBLE FOR DEDUCTION U/S 8 0-IA OF THE I.T. ACT, 1961. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT THE SUBSIDY RECEIVED BY THE APPELLANT FROM UNIVERSAL SE RVICE FUND OF RS. 667.28 CRORES IS AN ANCILLARY INCOME AN D HENCE IS NOT ELIGIBLE FOR DEDUCTION U/S 80-IA OF TH E INCOME TAX ACT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN HOLDING THA T THE INTEREST FROM OTHERS AMOUNTING TO RS. 39.99 CRORE S IS NOT ELIGIBLE FOR DEDUCTION U/S 80-IA OF THE I.T. AC T, 1961. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN HOLDING THA T THE RENT OF STAFF QUARTERS AMOUNTING TO RS. 12.96 CRO RES IS NOT ELIGIBLE FOR DEDUCTION U/S 80-IA OF THE I.T. AC T, 1961. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN HOLDING THA T THE MISC INCOME FROM USO TONERS.' AMOUNTING TO RS. 6.40 CRORES IS NOT ELIGIBLE FOR DEDUCTION U/S 80-IA OF T HE I.T.ACT, 1961. 6. THAT THE LEARNED CIT (A) ERRED, ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION CLAIMED FOR THE CURREN T YEAR TO THE EXTENT OF RS.674.65 CRORES, WHEREAS THE DISALLOWANCE HAD BEEN MADE BY THE A.O. ON THE BASIS OF RE-ASSESSMENT PROCEEDINGS OF A.Y. 2001-02, WHICH IT SELF HAS NOT GOT FINALITY AND IS PENDING FOR DECISION BE FORE HONBLE DELHI HIGH COURT IN A WRIT PETITION FILED B Y THE ASSESSEE. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS. 396.95 CRORES, AS ESTIMATED BY THE ASSESSING OFFICER, AT 15%, OF THE TOTAL I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 11 EXPENSES OF RS. 2646.35 CRORES .INCURRED ON ACCOUNT OF LICENSE FEES AND SPECTRUM CHARGES. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN NOT ACCEPTI NG THE CONTENTION OF THE APPELLANT THAT THE INTEREST ALLOW ED EARLIER TO THE APPELLANT U/S 244A HAD BEEN WRONGLY WITHDRAWN AND INTEREST U/S 234D HAS BEEN WRONGLY CHARGED. 9. THAT THE ORDER PASSED BY CIT (A) IS BAD IN LAW A ND CONTRARY TO THE FACTS & CIRCUMSTANCES OF THE CASE. 10. THE LD. AR SUBMITTED THAT GROUND NOS. 1 TO 5 AR E COVERED BY THE DECISION OF THE ITAT A BENCH, NEW DELHI IN ASSESSEES OWN CASE IN I.T.A. NOS. 3304 & 3386/DEL/2010 FOR AS SESSMENT YEAR 2004-05. HE SUBMITTED THAT IN TERMS OF THE NO N-OBSTANTE CLAUSE USED IN SECTION 80IA(2A), DEDUCTION FOR TELECOMMUNICATION SERVICES IS AVAILABLE IN RESPECT OF PROFITS OF ELIGIBLE BUSINESS AND IS NOT RESTRICTED TO PROFITS DERIVED FROM ELIGIBLE BUSINESS AS MENTIONED IN SECTION 80IA. HE SUBMITTED THAT GROUND NOS. 1 AND 1.1 OF THE DEPARTMENTS APPE AL ARE ALSO COVERED BY THE DECISION OF THE ITAT (SUPRA). THE L D. AR FURTHER SUBMITTED THAT GROUND NO. 6 OF THE ASSESSEES APPEA L PERTAINING TO DISALLOWANCE OF DEPRECIATION IS ALSO COVERED IN ASSESSEES FAVOUR BY THE JUDGMENT OF THE HON'BLE DELHI HIGH CO URT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 AND AS I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 12 REPORTED IN 355 ITR 188 (DEL). THE LD. AR ALSO SUB MITTED THAT GROUND NO. 7 OF ASSESSEES APPEAL PERTAINING TO DI SALLOWANCE @15% OF LICENSE AND SPECTRUM FEES IS ALSO COVERED I N FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2003- 04 TO 2008-09 BY THE DECISION OF ITAT, DELHI VIDE O RDER DATED 22.1.2016. 10.1 REGARDING GROUND NO. 2 OF THE DEPARTMENTS A PPEAL, THE LD. AR SUBMITTED THAT THE ISSUE OF WRITE OFF OF ASS ETS HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT, A BENCH, NEW DELHI IN ASSESSMENT YEARS 2006-07 TO 2008-09. HE SUBMITTED THAT IN VIEW OF ALL THE ISSUES BEING COVE RED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASES FOR EARLIER YE ARS, THE ASSESSEES APPEAL SHOULD BE ALLOWED AND THAT OF THE DEPARTMENT DISMISSED. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE ASSESSING OFFICER. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE MATERIAL ON RECORD. AS FAR AS GROUND NOS. 1 TO 5 OF ASSESSEES APPEAL AND GROUND NOS. 1 & 1.1 OF DEPARTMENTS APPE AL ARE I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 13 CONCERNED, WE CONCUR WITH THE SUBMISSIONS OF THE LD . AR THAT THEY ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE ITAT DELHI A BENCH IN THE ASSESSEES OWN CASE IN I.T.A. NOS. 3304 & 3386/DEL/2010 FOR ASSESSMENT YEAR 2004-05 WH EREIN THE COORDINATE BENCH HAS DISCUSSED THE ISSUE AT LEN GTH. IT WILL BE WORTHWHILE TO REPRODUCE PARAS 13 TO 13.18 FOR A REA DY REFERENCE:- 13. HAVING SO HELD, WE NOW PROPOSE TO EXAMINE THE RELEVANT PROVISIONS OF SECTION 80-IA OF THE INCOME TAX ACT IN ORDER TO DECIDE WHETHER THE LEGISLATURE INTE NDED THAT THE WORDS DERIVED FROM SHOULD BE READ INTO SUB- SECTION (2A) OR NOT. WHILE SO DECIDING, WE ARE GUID ED BY THE FOLLOWING OBSERVATIONS OF JUSTICE GAJENDRAGADKA R THE FIRST AND PRIMARY RULE OF CONSTRUCTION IS THAT THE INTENTION OF THE LEGISLATURE MUST BE FOUND IN THE W ORDS USED BY THE LEGISLATURE ITSELF IN RE KANAILAL SUR VS. PARAMNIDHI SADHUKHAR 1958 SCR 360. THE PRIMARY TEST AND THE FUNDAMENTAL PRINCIPLE OF INTERPRETATIO N IS THEREFORE TO EXAMINE THE LANGUAGE EMPLOYED IN THE A CT AND WHERE THE WORDS ARE CLEAR AND PLAIN, THE COURT IS BOUND TO ACCEPT THE EXPRESSED INTENTION OF THE LEGISLATURE. HENCE WE NEED TO EXAMINE THE SCHEME O F THE RELEVANT SECTION IN ORDER TO DETERMINE THE TRUE MEANING OF THE WORDS USED IN ANY ONE OR MORE OF THE SUB-SECTIONS. THE PROVISIONS CANNOT BE TAKEN IN AN ISOLATED OR DETACHED MANNER DISSOCIATED FROM THE CONTEXT WHERE THE REFERENTS I.E. THE BUSINESS UNDERTAKINGS OR ENTERPRISES TO WHOM IT IS SAID PROV ISIONS ARE TO BE APPLIED ARE CLEARLY SPECIFIED AND DISTINGUISHABLE FROM ONE ANOTHER. YET, IT IS NECES SARY TO DETERMINE FIRST WHETHER THE LANGUAGE USED IS PLAIN OR AMBIGUOUS FOR WHICH PURPOSE THE PROVISIONS OF SECTI ON 80-IA WOULD BE REQUIRED TO BE READ AS A WHOLE. AMBIGUITY COULD BE SAID TO ARISE ONLY WHERE A PROVI SION I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 14 CONTAINS A WORD OR PHRASE WHICH, IN THE PARTICULARS CONTEXT, IS CAPABLE OF HAVING MORE THAN ONE MEANING . 13.1. WE FIND FROM THE SUBMISSIONS OF THE PARTIES THAT BOTH THE SIDES HAVE CANVASSED THAT THE INTENTION O F THE LEGISLATURE IS VERY CLEAR ON A LITERAL READING OF T HE SECTION, THOUGH BOTH THE PARTIES HAVE TAKEN A CONTR ARY VIEW ON THE MANNER IN WHICH THE WORDS USED IN THE PROVISION ARE TO BE CONSTRUED IN THE CONTEXT FOR IM POSITION OF TAX OR ALLOW DEDUCTION. 13.2. ON A READING OF SUB-SECTION (1) OF SECTION 80-IA, WE FIND THAT THE LEGISLATURE SPECIFICALLY USES THE WORDS MEANING AND IMPORT OF WHICH IS PLAIN AND UNAMBIGUOU S IN THE CONTEXT IT IS TO BE CONSTRUED. DEDUCTION UN DER SECTION 80-IA IN TERMS OF SUB-SECTION (1) IS AVAILA BLE TO GROSS TOTAL INCOME OF AN ASSESSEE WHERE GROSS TO TAL INCOME IS RESTRICTED TO PROFITS AND GAINS DERIVED BY........ FROM ANY BUSINESS REFERRED TO IN SUB-SEC TION (4). THE DEDUCTION IS AVAILABLE OF AN AMOUNT EQUAL TO HUNDRED PERCENT OF THE PROFITS AND GAINS DERIVED FR OM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS SUBJECT TO THE PROVISIONS OF THE SECTION. THE MEAN ING AND INTENTION OF THE LEGISLATURE HAS BEEN LEGALLY S ETTLED AND WELL UNDERSTOOD TO MEAN THAT ONLY THOSE PROFITS COME UNDER THE AMBIT WHICH CAN BE SAID TO BE DERIV ED FROM SUCH BUSINESS. THE INTENTION OF THE LEGISLATU RE ON A PLAIN READING OF THE SAID SUB-SECTION IS LOUD AND C LEAR. REFERENCE TO THE DECISIONS WHICH ESTABLISH A NEXUS OF THE FIRST DEGREE AT THIS STAGE IS REFRAINED FROM AS THE POSITION IS WELL-SETTLED LEGALLY AND AT THIS STAGE IS NOT AN ISSUE FOR CONSIDERATION IN THE PRESENT PROCEEDINGS AS BOT H THE PARTIES AGREE THAT SUB-SECTION (1) OF SECTION 80-IA ENVISAGES ONLY FIRST DEGREE NEXUS FOR THE PURPOSES OF CLAIMING DEDUCTION. THE FACT THAT DEDUCTION IS AVA ILABLE TO HUNDRED PERCENT OF THE PROFITS FOR A PERIOD OF T EN CONSECUTIVE YEARS IS ALSO NOT AN ISSUE UNDER DEBATE AND EVEN OTHERWISE WE FIND THAT THE ABOVE PROVISION IN THE SAID EXTENT IS CLEAR AND UNAMBIGUOUS. I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 15 13.3. WHAT WE MAY TAKE NOTE OF IS THAT ON READING OF ONLY THIS SUB-SECTION IN ISOLATION WHAT EMANATES CL EARLY IS THAT THE DEDUCTION IS APPLICABLE TO ANY UNDERTAK ING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB- SECTION (4) OF SECTION 80-IA WHICH THE LEGISLATURE DESCRIBES AS ELIGIBLE BUSINESS. THE SAID SUB-SEC TION SETS OUT IN UNEQUIVOCAL TERMS THAT THE DEDUCTION IS AVAILABLE TO THE GROSS TOTAL INCOME OF SUCH UNDERTAKING/ENTERPRISE WHICH INCLUDES PROFITS AN D GAINS DERIVED FROM SUCH BUSINESS. THE MEANING AND LIMITS OF FIRST DEGREE NEXUS OF THE SAID PHRASE IS WELL- UNDERSTOOD BY THE TAX PAYER, THE TAX COLLECTOR AND THE LEGISLATURE. THE SAID SUB-SECTION ALSO SETS OUT TH E PERIOD AND EXTENT OF DEDUCTION AVAILABLE AS HUNDRED PERCENT FOR TEN YEARS. 13.4. PROCEEDING TO A PERUSAL OF SUB-CLAUSE (2) OF SECTI ON 80-IA IT IS SEEN THAT THE SAID SUB-SECTION GIVES TH E ASSESSEE THE OPTION THAT THE PROFITS SO COMPUTED COMPLYING WITH THE MANDATE OF SUB-SECTION (1) OF SE CTION 80-IA MAY BE CLAIMED FOR TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE FIRST YEAR IN THE CASE OF THE DEFINED ENTERPRISE/UNDERTAKINGS ETC . IT IS RELEVANT TO NOTE THAT THE RESTRICTIVE MEANING PUT T O THE AVAILABLE PROFITS AS ONLY THOSE PROFITS WHICH COME UNDER THE AMBIT OF FIRST DEGREE NEXUS CONTINUES TO REMAIN IN PLAY AS IS EVIDENT FROM THE OPENING LINE ITSELF. T HE SAID SUB-SECTION RETAINS HUNDRED PERCENT DEDUCTION FOR A PERIOD OF TEN YEARS BUT PROVIDES AN OPTION TO CLAIM THE DEDUCTION FOR TEN CONSECUTIVE YEARS FROM THE EXPAND ED PERIOD OF 15 YEARS BEGINNING FROM THE YEAR IN THE C ASE OF ENTERPRISES AND UNDERTAKING DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVI DING TELE-COMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIA L PARK OR DEVELOPS A SPECIAL ECONOMIC ZONE ETC. UPTO THIS STAGE, WE FIND THAT THERE IS NO AMBIGUITY AS THE LEGISLATURE GIVING DUE WEIGHTAGE TO THE LONG GESTAT ION PERIODS, FOR CERTAIN INFRASTRUCTURAL ACTIVITIES WHE RE PROFITS AVAILABLE FOR DEDUCTION MAY NOT BE THERE IN THE INITIAL 5 YEARS ALSO PERMITS THE OPTION TO CLAIM DE DUCTION I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 16 FOR THE PERIOD OF TEN CONSECUTIVE YEARS FROM THE FI RST 15 YEARS. THUS FULL PLAY OF THE RESTRICTION PLACED ON THE PROFITS AVAILABLE FOR DEDUCTION HAS BEEN PERMITTED AND UPTO THIS STAGE BOTH THE PARTIES HAVE NO OBJECTION TO THE LITERAL MEANING OF THE SAID SUB-SECTION TO BE CONST RUED IN THE ABOVE MANNER. 13.5. IT IS SEEN THAT THE LEGISLATURE BY THE FINANCE ACT , 2001 W.E.F 01.04.2005 SUBSTITUTED THE ORIGINAL PROV ISO TO SUB-SECTION (2) BY INSERTING THE FOLLOWING PROVISO, THE SAME IS AGAIN EXTRACTED HEREUNDER FOR READY-REFEREN CE:- 80-IA. (1) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (2) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX PROVIDED THAT WHERE THE ASSESSEE DEVELOPS OR OPERATES AND MAINTAINS OR DEVELOPS, OPERATES AND MAINTAINS A NY INFRASTRUCTURE FACILITY REFERRED TO IN CLAUSE (A) O R CLAUSE (B) OR CLAUSE (C) OF THE EXPLANATION TO CLAUSE (I) OF SUB- SECTION (4), THE PROVISIONS OF THIS SUB-SECTION SHA LL HAVE EFFECT AS IF FOR THE WORDS 'FIFTEEN YEARS', THE WOR DS 'TWENTY YEARS' HAD BEEN SUBSTITUTED. 13.6. A PLAIN READING OF THE ABOVE PROVISO TO SUB-SECTIO N (2) OF SECTION 80-IA SHOWS THAT THE LEGISLATURE FUR THER CARVES YET ANOTHER EXCEPTION FOR SUCH AN ASSESSEE W HO DEVELOPS OR OPERATES AND MAINTAINS ANY INFRASTRUCTU RAL FACILITY REFERRED TO IN CLAUSE (A); (B) OR (C) OF E XPLANATION TO CLAUSE (I) OF SUB-SECTION (4) OF SECTION 80-IA. FO R THESE UNDERTAKINGS THE LEGISLATURE HAS EXTENDED THE PERIO D DURING WHICH DEDUCTION CAN BE CLAIMED FROM FIFTEEN YEARS TO TWENTY YEARS. THE FACT THAT THE RESTRICTI ONS PLACED ON THE ELIGIBLE BUSINESS BY SUB-SECTION (1) OF SECTION 80-IA SHALL CONTINUE TO BE READ INTO SUB-SE CTION (2) OF SECTION 80-IA IS MADE CLEAR IN THE OPENING W ORDS OF SUB-SECTION (2) ITSELF AND AS OBSERVED IN THE EARLI ER PART OF THIS ORDER IS NOT IN DOUBT AND THE RESTRICTIONS OF DERIVED FROM HAVE NOT BEEN DILUTED EITHER IN SUB- SECTION (2) OR IN THE PROVISO TO SUB-SECTION (2) OF SECTION I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 17 80-IA. ACCORDINGLY IT IS SEEN THAT THE REFERENT B USINESS I.E. THE UNDERTAKINGS OR ENTERPRISES COVERED UNDER THE PROVISO, HAVE BEEN ENABLED TO EXERCISE THEIR OPTION FOR CLAIMING DEDUCTIONS FOR TEN CONSECUTIVE YEARS FROM A PERIOD OF TWENTY YEARS. 13.7. THUS, WE FIND THAT THE MEANING AND INTENT OF SUB- SECTION (1); (2) AND THE PROVISO TO SUB-SECTION (2) OF SECTION 80-IA IS CLEAR AND UNAMBIGUOUS. IT IS SEEN THAT THE LEGISLATURE HAVING SET OUT THE REFERENT ENTERPRISE/UNDERTAKING AS DEVELOPING/STARTING INFRASTRUCTURE, TELECOMMUNICATION OR INDUSTRIAL PAR K/ SEZ ETC. THE DURATION IN SUB-SECTION (2) FOR THE PU RPOSES OF DEDUCTION FOR TEN YEARS IS RETAINED AT HUNDRED P ERCENT FOR THOSE PROFITS OF ELIGIBLE BUSINESS AS COULD SHO W FIRST DEGREE NEXUS. THE EXISTENCE OF THE SAID REQUIREMEN T IS WELL-UNDERSTOOD BY ONE AND ALL AND THERE IS NO AMBIGUITY ARISING ON A READING OF THE ABOVE AS THE PROFITS AND GAINS CONTEMPLATED FOR DEDUCTION ARE DERIVED FROM AS THE CLEAR REFERENCE TO SUB-SECTIO N (1) IN THE VERY FIRST LINE MAKES IT CLEAR. THE INTENTION THAT THE DEDUCTION CAN BE CLAIMED FOR TEN CONSECUTIVE YEARS FROM THE FIRST FIFTEEN YEARS DEPENDING UPON THE REFERRED TO ENTERPRISES/UNDERTAKING FALLING UNDER SUB-SECTION ( 2) AND FOR 20 YEARS FOR THOSE UNDERTAKING/ENTERPRISE F ALLING UNDER THE PROVISO TO SUB-SECTION (2) IS WELL UNDERS TOOD. THE PURPOSE MAY HAVE BEEN GUIDED BY THE FACT THAT CERTAIN ENTERPRISE/UNDERTAKING MAY SHOW PROFITS AFT ER A CONSIDERABLY LONGER TIME IS ALSO PLAINLY CLEAR. 13.8. A PLAIN READING OF SUB-SECTION (2A), IT IS SEEN SHOWS THAT IT STARTS BY GIVING EFFECT TO THE LEGISL ATIVE INTENT BY INSERTING THE WELL UNDERSTOOD WORD NOTWITHSTANDING. THE MEANING AND THE CONSEQUENT LEGISLATIVE INTENT CAN CLEARLY BE UNDERSTOOD BY THE SUBSEQUENT WORDS USED ANYTHING CONTAINED IN .. THUS AS LITERALLY AS IT CAN BE READ THE LEGISLATIVE INTENT OF NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (1) OR SUB-SECTION (2) IS PLAIN AND CLEAR. THE CL EAR MEANING OF THIS NON-OBSTANTE CLAUSE, WHICH IS REFLE CTED I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 18 UPTO THIS STAGE IS THAT WHATEVER MAY HAVE BEEN CONTAINED IN SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 80-IA IS TO BE EXCLUDED. THIS POSITION IS FORTIFIE D BY THE CONSCIOUS INCLUSION OF THE WORD ANYTHING CONTAINED IN WHICH QUALIFIES NOTWITHSTANDING. THE MEANING AND IMPORT OF THE TERM NOTWITHSTANDING IS WELL-SETTLE D AND UNDERSTOOD AND BY ITSELF CANNOT BE SAID TO BE LEADI NG TO ANY AMBIGUITY. THE SAID TERM BY ITSELF WOULD HAVE BEEN SUFFICIENT AND COMPLETE TO CONVEY THE LEGISLATIVE I NTENT THAT WHATEVER MAY HAVE BEEN SAID IN SUB-SECTION (1) AND (2) BUT THE LEGISLATURE HAS NOT RESTED THERE AND HA S TAKEN CARE TO QUALIFY THE WORD WITH THE ALL ENCOMPASSING, ALL INCLUSIVE, WELL UNDERSTOOD WORD ANYTHING CONTAINE D IN SUB-SECTION (1) OR (2). THE MEANING, USE AND IMPOR T OF THE SAID WORD DOES NOT LEAD TO ANY CONFUSION OR AMBIGUITY. THUS PRIMA-FACIE TO OUR UNDERSTANDING W HEN CONSIDERING THE PARA PHRASING USED BY THE LEGISLATU RE IN ITS PLAIN AND LITERAL MEANING THERE CANNOT BE ANY D OUBT ABOUT WHAT THE INTENTION OF THE LEGISLATURE IS AS I T IS LOUD AND CLEAR IN STATING THAT WHILE CONSIDERING AND DEC IDING THE INTENT OF SUB-SECTION (2A) THE MANDATE OF SUB- SECTIONS (1) AND SUB-SECTION (2) ARE NOT REQUIRED T O BE IMPORTED IN RESPECT OF THE REFERENT UNDERTAKING OR ENTERPRISES PROVIDING TELECOMMUNICATION SERVICES. 13.9. A FURTHER READING OF THE SAID SUB-SECTION MAKES IT CLEAR THAT THE DEDUCTION IN COMPUTING THE TOTAL INC OME IS AVAILABLE ONLY TO AN UNDERTAKING WHICH IS PROVIDING TELECOMMUNICATION SERVICES AND THAT TOO WHICH HAVE BEEN SPECIFIED IN CLAUSE (II) OF SUB-SECTION (4). THUS BY VIRTUE OF THIS SUB-SECTION, A SPECIFIED CLASS OF UNDERTAKINGS HAVE BEEN IDENTIFIED AND THE FACT THAT THE ASSESSEE FALLS UNDER THIS CATEGORY IS AN ACCEPTED F ACT AND THUS NOT AN ISSUE IN THE PRESENT PROCEEDINGS. REVERTING BACK TO THE SAID SUB-SECTION IT IS SEEN T HAT THE LEGISLATURE SETS OUT THAT THE DEDUCTION IS TO BE AL LOWED AT HUNDRED PERCENT OF THE PROFITS AND GAINS OF THE EL IGIBLE BUSINESS FOR A PERIOD OF FIVE YEARS AS OPPOSED TO THE ENTERPRISE/UNDERTAKINGS IN SUB-SECTION (1) AND (2) WHEREIN HUNDRED PERCENT OF DEDUCTION IS AVAILABLE F OR I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 19 TEN CONSECUTIVE YEARS. THE DEDUCTION AFTER FIVE YE ARS IN THE CASE OF AN ASSESSEE IN SECTION (2A) IS TO BE FO R THE REMAINING FIVE YEARS UPTO 30 PERCENT OF THE AMOUNT AVAILABLE FOR DEDUCTION. HAVING OVER-RIDDEN THE REQUIREMENTS OF SUB-SECTION (1) AND (2) BY USE OF T HE WORDS PROFITS AND GAINS OF ELIGIBLE BUSINESS IN S UB- SECTION (2A) AND NOT PROFIT AND GAINS DERIVED BY A N UNDERTAKING OR AN ENTERPRISE FROM AS USED IN UNEQUIVOCAL TERMS IN SUB-SECTION (1) AND (2) THE LEGISLATURE MAKES ITS INTENTION KNOWN LOUD AND CLEA R. THE FACT THAT AFTER SPECIFYING THE PERIOD AND APPORTIONMENT OF THE PROFITS AVAILABLE FOR DEDUCTIO N AS HUNDRED PERCENT IN THE FIRST FIVE ASSESSMENT YEARS AND THEREAFTER THIRTY PERCENT FOR THE NEXT FIVE ASSESSM ENT YEARS IT IS SEEN THAT THE LEGISLATURE ALSO ALIVE T O THE NATURE AND EXTENT OF DEDUCTIONS WANTED TO GIVE TO SPECIFIED ENTERPRISE OR UNDERTAKING THEREFORE MAKES A CONSCIOUS REFERENCE TO THE OUSTED SUB-SECTION (2) I N THE OPENING LINES FOR THE PURPOSES OF BRINGING INTO PLA Y THE EXTENDED TIMELINE OF 15 YEARS FOR EXERCISING THE OP TION CONTAINED IN SUB-SECTION (2) BY MAKING A SPECIFIC REFERENCE TO IT. THUS CONSCIOUS OF THE FACT THAT SU B- SECTION (1) AND (2) HAD COMPLETELY BEEN OVER-RIDDEN FOR AN ASSESSEE FALLING IN SECTION (2A) REFERENCE TO SU B- SECTION (2) IS MADE ONLY FOR THE PURPOSES OF INCREA SING THE TIMELINE FROM WHICH THE ASSESSEE COULD OPT FOR SELECTING TEN CONSECUTIVE YEARS OUT OF THE TOTAL 15 YEARS. 13.10. THUS THE DISPUTE OF BRINGING SUB-SECTION (1) INTO PLAY FOR A TAX PAYER FALLING IN SUB-SECTION (2 A) OF SECTION 80-IA TO OUR MINDS CANNOT ARISE. ACCORDING TO THE ASSESSEE SUB-SECTION (2A) DOES NOT PUT THE RESTRICT ION CONTEMPLATED IN SUB-SECTION (1) OF SECTION 80-IA IN THE FACE OF THE NON-OBSTANTE CLAUSE COUPLED WITH THE SP ECIFIC OMISSION TO USE THE WELL UNDERSTOOD TERM DERIVED F ROM. THIS ARGUMENT IS NOTWITHSTANDING THE ARGUMENT THAT CONSIDERING THE ASSESSEES NATURE OF BUSINESS THE D IRECT NEXUS PRESUMED BY SUB-SECTION (1) OF SECTION 80-IA IS ALSO FULFILLED. ON A CAREFUL READING OF THE ABOVE PROVISIONS, WE FIND THAT THE LEGISLATURE HAS LEFT N O I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 20 AMBIGUITY IN THE WORDING OF THE SUB-SECTION (2A). HAVING STARTED WITH THE NON-OBSTANTE CLAUSE IN SUB-SECTION (2A) WHICH OVER-RIDES THE MANDATE OF SUB-SECTION (1) AND (2), THE LEGISLATURE IS WELL AWARE THAT THE PHRASE DERI VED FROM HAS BEEN USED ONLY IN SUB-SECTION (1). THE MEANING OF THE SAID TERMS IS JUDICIALLY WELL-ACCEPT ED AND UNDERSTOOD AND IT IS NOT THE CASE OF THAT REVENUE T HAT THE LEGISLATURE WAS NOT CONSCIOUS OF THE SAID TERM. IT IS SEEN THAT THE IMPORT OF THIS TERM CONTINUES TO EXIS T FOR AN ASSESSEE COVERED UNDER SUB-SECTION (2) OF SECTION 8 0-IA. THE LEGISLATURE HAS CONSCIOUSLY RETAINED IT FOR ENTERPRISE/UNDERTAKING FALLING IN SUB-SECTION (2) A ND THE PROVISO THERETO ONLY KEEPING IN MIND THE NATURE OF THE ENTERPRISES/UNDERTAKINGS CONTEMPLATED UNDER SUB- SECTION (2) THE OPTION OF CLAIMING DEDUCTION IN ANY TEN CONSECUTIVE YEARS IS GIVEN TO BE CLAIMED FROM THE F IRST FIFTEEN YEARS OF BEGINNING OPERATION IS GIVEN. 13.11. THUS, WE FIND THAT THE LEGISLATURE BEING ALIVE TO PROVIDING TAX DEDUCTIONS TO BUSINESS ENTERPRISES AN D UNDERTAKINGS, WHEREVER IT WANTED TO CURTAIL THE TIM E LINE DURING WHICH DEDUCTION CAN BE CLAIMED AND ALSO ADDRESSING THE EXTENT UPTO WHICH IT CAN BE CLAIMED HAS CONSCIOUSLY CARVED OUT AN EXCEPTION TO SPECIFIED UNDERTAKINGS/ENTERPRISES WHOSE NEEDS AND PRIORITIES DIFFER HAS TAKEN CARE TO EXPAND THE TIME LINE FOR C LAIMING DEDUCTIONS. IT HAS CONSCIOUSLY ENABLED THOSE UNDERTAKINGS/ENTERPRISE WHO FALL UNDER SUB-SECTION (2A) TO CLAIM 100% DEDUCTION OF PROFITS AND GAINS OF ELI GIBLE BUSINESS FOR THE FIRST FIVE YEARS AND UPTO 30% FOR THE REMAINING FIVE YEARS IN THE TEN CONSECUTIVE ASSESSM ENT YEARS OUT OF THE FIFTEEN YEARS STARTING FROM THE TI ME THE ENTERPRISE STARTED ITS OPERATION. THE LEGISLATURE HAVING OUSTED APPLICABILITY OF SUB-SECTION (1) AND (2) IN THE OPENING SENTENCE BROUGHT IN FOR THE PURPOSES OF TIM E LINE SUB-SECTION (2) INTO PLAY BUT MADE NO EFFORTS WHAT SOEVER TO PUT THE ASSESSEE UNDER SUB-SECTION (2A) TO MEET THE STRINGENT REQUIREMENTS THAT THE PROFITS SO CONTEMPL ATED WERE TO BE DERIVED FROM. THE REQUIREMENTS OF TH E FIRST I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 21 DEGREE NEXUS OF THE PROFITS FROM THE ELIGIBLE BUSIN ESS HAS NOT BEEN BROUGHT INTO PLAY. 13.12. THE CARDINAL RULE OF INTERPRETATION IS THAT THE STATUTE MUST BE CONSTRUED ACCORDING TO ITS PLAIN LANGUAGE. NEITHER SHOULD ANYTHING BE ADDED NOR ANYTHING BE SUBTRACTED THEREFROM UNLESS THERE ARE ADEQUATE GROUNDS TO JUSTIFY THE INFERENCE THAT THE LEGISLATURE CLEARLY SO INTENDED. IT IS ALSO WELL S ETTLED THAT IN A TAXING STATUTE ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY STATED. THE MEANING AND EXTENT OF THE STATU TE MUST BE COLLECTED FROM THE PLAIN AND UNAMBIGUOUS EXPRESSION USED THEREIN RATHER THAN FROM ANY NOTION S WHICH MAY BE CONSIDERED TO BE JUST OR EXPEDIENT. T O PUT IN THE WORDS ROWLATT J. AS HELD IN CAPE BRANDY SYNDICATE VS COMMISSIONERS OF INLAND REVENUE [(1921 ) 1 KB 64, 71]. IN A TAXING ACT ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THER E IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. 13.13. INTERPRETATION POSTULATES THE SEARCH FOR THE TRUE MEANING OF THE WORDS USED IN THE STATUTES AS A MEDI UM OF EXPRESSION TO COMMUNICATE A PARTICULAR THOUGHT. THE TASK IS NOT EASY AS THE LANGUAGE USED EVEN IN ORDIN ARY CONVERSATION OR CORRESPONDENCE IS CAPABLE OF BEING MIS- UNDERSTOOD, HOWEVER IN SUCH CASES THE PERSON USING THE LANGUAGE CAN BE APPROACHED FOR A CLARIFICATION. TH E LANGUAGE USED IN A STATUTE TILL IT IS AMENDED, REPE ALED OR MODIFIED REMAINS STATIC AS THE LEGISLATURE CANNOT B E APPROACHED FOR CLARIFICATION. AFTER HAVING ENACTED A LAW OR AN ACT, THE LEGISLATURE BECOMES FUNCTUS OFFICIO AS FAR AS THE PARTICULAR ACT IS CONCERNED AND IT CANNOT IT SELF THEREAFTER INTERPRET IT. THOUGH THE LEGISLATURE R ETAINS THE POWER TO AMEND OR REPEAL THE LAW SO MADE AND CA N ALSO DECLARE ITS MEANING BUT THIS CAN BE DONE ONLY BY MAKING ANOTHER LAW OR STATUTE AFTER UNDERTAKING THE WHOLE PROCESS OF LAW MAKING ONCE AGAIN. ACCORDINGL Y I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 22 STATUTORY INTERPRETATION REQUIRES THE COURTS TO SEE K, ASCERTAIN THE MEANING OF THE WORDS USED BY THE LEGISLATURE THROUGH THE MEDIUM OF AUTHORITATIVE FOR MS IN WHICH IT IS EXPRESSED. INTERPRETATION DIFFERS FROM CONSTRUCTION, WHEREAS INTERPRETATION IS FINDING OUT THE TRUE SENSE OF ANY FORM, CONSTRUCTION WOULD MEAN DRAWING OF A CONCLUSION IN RESPECT OF SUBJECTS THAT LIE BEYOND THE DIRECT EXPRESSION OF THE TEXT. 13.14. IT IS WELL UNDERSTOOD THAT THE COURT ONLY INTERPRETS THE LAW AND CANNOT LEGISLATE. EVEN IF A PROVISION OF LAW IS PRESUMED TO BE MISUSED AND SUBJECTED TO THE ABUSE OF THE PROCESS OF LAW, IT IS FOR THE LEGISLATURE TO AMEND, MODIFY OR REPEAL IT, IF DEEME D NECESSARY AS HELD IN PADMA SUNDARA RAO VS STATE OF TAMIL NADU (2002) 255 ITR 147 AT PAGES 154 TO 155 (SC); PRAKASH NATH KHANNA VS CIT (2004) 266 ITR 1 A T PAGE 9 [SC]; UNION OF INDIA VS RAJEEV KUMAR AIR (20 03) SC 2917 AT 2923. COURTS CANNOT REFRAME THE WORDS USED BY THE LEGISLATURE AS THEY HAVE NO POWERS TO LEGISLATE. A MATTER WHICH, FOR THE SAKE OF AN ARGU MENT, SHOULD HAVE BEEN PROVIDED FOR IN A STATUTE CANNOT B E SUPPLIED BY THE COURTS AS TO DO SO WILL BE AN ACT O F LEGISLATION AND NOT OF INTERPRETATION. RELIANCE MA Y BE PLACED ON SMT. KANTA DEVI VS UNION OF INDIA (2003) 4 SCC 753 & 757. 13.15. A LEGAL FICTION TREATING SOMETHING NOT DONE AS DONE, REQUIRES LEGISLATIVE AUTHORITY AND WITHOUT IT , IT CAN NEITHER BE INDULGED IN BY COURTS NOT IT CAN BE CREA TED BY AN ADMINISTRATIVE ORDER. NO DOUBT, IT IS THE BOUND EN DUTY AND OBLIGATION OF THE COURT TO INTERPRET THE S TATUTE BUT THE DUTY IS TO INTERPRET, THE STATUTE AS IT IS AND NOT BY ADDING OR SUPPLYING WORDS TO IT. IT IS CONTRARY TO ALL RULES OF CONSTRUCTION TO READ WORDS INTO STATUTE WHICH TH E LEGISLATURE IN ITS WISDOM HAS DELIBERATELY NOT INCORPORATED AS HELD IN CIT VS TARA AGENCY [2007] 2 92 ITR 444 AT 464 (SC). I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 23 13.16. THE TRUE FUNCTION OF THE COURT IS TO INTERPRET THE LAW NOT TO MAKE IT. IT IS WELL-SETTLED THAT EVEN I F THE LEGISLATURE FALLS SHORT OF THE MARK, THE COURT CAN DO NOTHING MORE THAN DECLARE IT BE THUS, GIVING ITS RE ASONS, SO THAT THE LEGISLATURE MAY TAKE NOTICE AND PROMPTL Y REMEDY THE SITUATION. RELIANCE CAN BE PLACED ON STANDARD CHARTERED BANK VS DIRECTORATE OF ENFORCEME NT [2005] 275 ITR 81 AT PAGE 86 (SC). 13.17. THE SETTLED PRINCIPLES OF INTERPRETATION ARE THAT THE COURT MUST PROCEED ON THE ASSUMPTION THAT THE LEGISLATURE DID NOT MAKE A MISTAKE AND THAT IT DID WHAT IT INTENDED TO DO. THE COURT MUST, AS FAR AS POSSI BLE, ADOPT A CONSTRUCTION WHICH WILL CARRY OUT THE OBVIO US INTENTION OF THE LEGISLATURE. UNDOUBTEDLY, IF THER E IS A DEFECT OR AN OMISSION IN THE WORDS USED BY THE LEGISLATURE, THE COURT WOULD NOT GO TO ITS AID TO C ORRECT OR MAKE UP THE DEFICIENCY. THE COURT COULD NOT ADD WO RDS TO STATUTES OR READ WORDS INTO IT WHICH ARE NOT THE RE, ESPECIALLY WHEN THE LITERAL READING PRODUCES INTELL IGIBLE RESULTS. REFERENCE MAY BE MADE TO DADI JAGANATH DHAM VS JAMMULLU RAMULU AIR [2001] (SC) 2699 AT 2703. ANY PRESUMPTION TO THE CONTRARY IN THE ABSEN CE OF ANY AMBIGUITY WOULD BE CONTRARY TO THE SETTLED LEGA L POSITION AS THE LEGISLATURE AS FAR AS POSSIBLE IS P RESUMED TO KNOW WHAT IT INTENDS TO STAY. 13.18. THUS REVERTING AGAIN TO CONSIDERING THE WORDS USE IN SUB-SECTION (2) THE PROVISO THERETO AND SUB- SECTION (2A) IT IS SEEN THAT WHEREAS IN SUB-SECTION (2) AND THE PROVISO THERETO THE RESTRICTIONS ON THE PROFITS AS SET OUT IN SUB-SECTION (1) IS RETAINED AND INTENDED BUSINESSES ARE GIVEN TO OPTION OF ANY TEN YEARS FROM FIFTEEN YEARS THE PROVISO INTRODUCED TO SUB-SECTION (2) OF SECTION 80 -IA, IT IS SEEN THAT FOR AN ASSESSEE WHO IS DEVELOPING OR OPER ATING AND MAINTAINING INFRASTRUCTURE REFERRED TO IN CLAUS E (A) OR CLAUSE (B) OR CLAUSE (C) OF EXPLANATION TO CLAUSE ( I) OF SUB- SECTION (4) IS GIVEN A FURTHER LEEWAY OF EXERCISING ITS OPTION IN ANY OF THE TEN CONSECUTIVE YEARS FROM THE FIRST TWENTY YEARS INSTEAD OF FIFTEEN YEARS AS CONTEMPLAT ED I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 24 UNDER SUB-SECTION (2) OF SECTION 80-IA FROM THE BEG INNING DEVELOPING OR OPERATION AND MAINTAINING THE INFRASTRUCTURE FACILITY. THUS THE LEGISLATURE IN ITS WISDOM GIVING DUE CONSIDERATION TO STILL LONGER GESTATION PERIODS WHICH MAY BE REQUIRED BY SUCH HIG H INVESTMENT INFRASTRUCTURE RELATED ENTERPRISES WHICH MAY NEED MORE TIME FOR GENERATING PROFITS. HOWEVER, T HE REQUIREMENTS OF DERIVED FROM AS SET OUT IN SUB-SE CTION (1) HAS NOT BEEN DONE AWAY WITH. WHEN JUXTA-POSED WITH THIS THE LANGUAGE USED IN SUB-SECTION (2A) IS CONSIDERED THE LEGISLATURE HAS BEEN VERY CLEAR IN I TS MANDATE AND HAS CONSCIOUSLY USED NOT ONLY THE WELL- ACCEPTED AND JUDICIALLY WELL-SETTLED PHRASE OF NOTWITHSTANDING BUT HAS ALSO UNDERLINED THE IMPOR T AND EXTENT OF THE OVER-RIDE PROVIDED BY ADDING THE WORD ANYTHING CONTAINED IN SUB-SECTION (1) OR SUB-SECTI ON (2) IN ITS OPENING LINES THEREBY REMOVING ALL DOUBTS. THERE WAS NOTHING STOPPING THE LEGISLATURE TO USE THE TER M NOTWITHSTANDING SUB-SECTION (1) OR SUB-SECTION (2) AND PROCEEDED TO LAY DOWN THE PERIOD AND APPORTION THE PERCENTAGES TO THE EXTENT OF WHICH DEDUCTION WAS TO BE ALLOWED. THE USE OF THE TERM ANYTHING CONTAINED I N PRE-FIXED BY NOTWITHSTANDING BY THE LEGISLATURE MAK ES THE MEANING AND INTENTION OF THE LEGISLATURE CRYSTA L CLEAR. THE ARGUMENTS TO THE CONTRARY ADVANCED BY THE REVEN UE RELYING ON CASE LAWS BASED ON DIFFERENT SETS OF PROVISIONS IS OF NO HELP AS THE CLEAR MEANING OF TH E WORDS USED BY THE LEGISLATURE LEADS TO ONLY ONE CONCLUSION NAMELY THAT SUB-SECTION (1) AND (2) OF S ECTION 80-IA FOR THE PURPOSES OF AN UNDERTAKING PROVIDING TELECOMMUNICATION SERVICES WHICH ARE COVERED UNDER CLAUSE (II) OF SUB-SECTION (4) HAVE TO BE IGNORED A ND HAVE NO PLAY. THERE IS NO DOUBT THAT THE ASSESSEE FALLS UNDER CLAUSE (II) OF SUB-SECTION (4) AND IS SUCH AN ENTER PRISE PROVIDING TELECOMMUNICATION SERVICES. AFTER HAVING OVER- RIDDEN THE REQUIREMENTS OF SUB-SECTION (1) AND (2) COMPLETELY THE LEGISLATURE IN ITS WISDOM HAS DIRECT ED THAT HUNDRED PERCENT OF THE PROFITS AND GAINS OF T HE ELIGIBLE BUSINESS AND NOT THE PROFITS AND GAINS D ERIVED FROM CAN BE CLAIMED AS A DEDUCTION IN THE FIRST FI VE I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 25 ASSESSMENT YEARS BY SUCH AN ENTERPRISE COMMENCING A T ANY TIME DURING THE PERIODS AS SPECIFIED IN SUB-SEC TION (2) AND THEREAFTER THIRTY PERCENT OF SUCH PROFITS FOR FURTHER FIVE ASSESSMENT YEARS. THUS GIVING DUE RECOGNITION FOR THE PECULIARITIES OF THE TELECOMMUN ICATION SERVICES WHERE HEAVY INVESTMENT COSTS IN THE INITIA L YEARS ARE A NECESSITY THEY HAVE BEEN ALLOWED TO BE RECOVERED BY WAY OF PROFITS TO THE EXTENT OF HUNDRE D PERCENT FROM THAT ACTIVITY IN THE FIRST FIVE YEARS AND THEREAFTER THE ALLOWABLE DEDUCTION IS SUBSTANTIALLY REDUCED TO THIRTY PERCENT IN THE NEXT FIVE YEARS PRESUMING THAT BY THEN THE HEAVY INFRASTRUCTURAL CO STS WOULD HAVE BEEN RECOVERED AND/OR THE OBJECTIVES OF THE GOVERNMENTAL POLICY WOULD HAVE BEEN ATTAINED. KEEP ING IN MIND THE SERVICES AND FUNCTIONS PERFORMED BY SUC H AN ASSESSEE TOWARDS THE AIMS OF THE GOVERNMENT POLICY WHEREIN GESTATION PERIOD NECESSARILY LOOKING AT THE NATURE OF THE UNDERTAKING IS VERY LONG. THUS, FOR THE PURPOSES OF THE TIME FRAME THE LEGISLATURE HAS GIVE N THE TIMELINE OF FIFTEEN YEARS FROM WHICH TEN CONSECUTIV E YEARS COULD BE OPTED. THE FACT REMAINS THAT THE LEGISLATURE AWARE OF THE DIFFERENCES IN THE USE OF TERMS USED CONSCIOUSLY ENSURES THAT PROFITS AND GAINS DERIVED FROM USED IN SUB-SECTION (1) IS NOT USED IN SUB-SECTION (2A). INSTEAD IN SUB-SECTION ( 2A) THE TERM USED IS PROFITS AND GAINS OF ELIGIBLE BUSINESS JUXTA POSED WITH THE GLARING FACT THAT THE SUB-SECTION (2A) STARTS WITH A NON-OBSTANTE CLAUSE NAMELY NOTWITHSTANDING QUALIFIED FURTHER BY THE USE OF THE WORDS ANYTHING CONTAINED IN. IN THE FACE OF THE CLEAR AND UNAMBIGUOUS STATUTORY PROVISIONS WE FIND OURSELVES UNABLE TO AGREE WITH T HE ARGUMENTS ADVANCED BY THE LD. CIT DR HOWEVER VALIANTLY AS WHAT THE LAW IS HAS VERY CLEARLY BEEN ENUNCIATED AND SET OUT IN THE RELEVANT PROVISION GI VING CAUSE TO NO DEBATE WHATSOEVER. (EMPHASIS SUPPLIED) I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 26 13. WE FIND THAT THIS ORDER WAS FOLLOWED BY COORDIN ATE BENCH OF ITAT, DELHI IN ASSESSMENT YEARS 2003-04 TO 2008-09 ALSO. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DIRECT T HE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE AND ALLO W GROUND NOS. 1 TO 5 OF THE ASSESSEES APPEAL AND DISMISS GROUND NO S. 1 AND 1.1 OF THE DEPARTMENTS APPEAL. AS FAR AS GROUND NO. 6 OF ASSESSEES APPEAL IS CONCERNED, IT IS SEEN THAT THIS ISSUE IS COVERED BY THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2001-02 (REPORTED IN 355 ITR 18 8 (DEL). THIS JUDGMENT HAS ATTAINED FINALITY AS THE DEPARTMENT HA S NOT APPROACHED THE APEX COURT AGAINST THIS JUDGMENT. T HE RELEVANT PARAGRAPHS OF THE JUDGMENT OF THE HON'BLE DELHI HIG H COURT ARE PARAGRAPHS 23 TO 25 AND THE SAME ARE BEING REPRODUC ED BELOW FOR READY REFERENCE:- 23. IN VIEW OF OUR DECISION ABOVE, IT IS NOT NEC ESSARY TO EXAMINE THE QUESTION WHETHER THE CONFIGURATION OF T HE CAPITAL STRUCTURE OF THE PETITIONER COULD BY ITSELF PROVIDE A REASON FOR THE ASSESSING OFFICER TO BELIEVE THAT PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF TH E ACT WERE APPLICABLE AND THE BOOK VALUE AT WHICH THE ASS ETS WERE VESTED WITH THE PETITIONER WERE REQUIRED TO BE REDUCED TO THE EXTENT OF THE RESERVES OF THE COMPAN Y. HOWEVER, HAVING HEARD THE COUNSEL FOR THE PARTIES O N THIS ISSUE, IT IS APPOSITE THAT WE CONSIDER THE SAM E. I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 27 24. EXPLANATION 10 TO SECTION 43(1) OF THE ACT IS A S UNDER: EXPLANATION 10. - WHERE A PORTION OF THE COST OF A N ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY L AW OR BY ANY OTHER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN, S O MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUA L COST OF THE ASSET TO THE ASSESSEE: PROVIDED THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT IS OF SUCH NATURE THAT IT CANNOT BE DIRECTLY RELATABLE TO THE ASSET ACQUIRED, SO MUCH O F THE AMOUNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT OR GRANT THE SAME PROPORTION AS SUCH ASSET BEARS TO ALL THE ASSETS IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. 25. THE ASSESSING OFFICER SEEMS TO HAVE PROCEEDED ON AN ASSUMPTION THAT WHEREAS THE VALUE OF SHARE CAPIT AL, ISSUED TO THE GOVERNMENT AS PART CONSIDERATION FOR THE TRANSFER OF BUSINESS TO THE PETITIONER COMPANY, IS LIMITED ONLY TO THE FACE VALUE OF THE SHARES, THE RESERVES REPRESENT A SUBSIDY, GRANT OR REIMBURSEMENT FOR MEE TING THE COST OF ASSETS TRANSFERRED. WE FIND NO BASIS FO R SUCH AN ASSUMPTION. WE ARE HARD PRESSED TO IMAGINE AS TO HOW FREE RESERVES AND SURPLUSES OF A COMPANY CAN BE CONSIDERED ANYTHING BUT AS PART OF SHAREHOLDERS FUN DS. THE ASSESSING OFFICER ERRED IN COMPLETELY IGNORING THAT RESERVES AND SURPLUSES OF A COMPANY ARE A PART OF SHAREHOLDERS FUNDS AND THE BOOK VALUE OF EQUITY SHA RE CONSISTS OF NOT ONLY THE PAID UP CAPITAL BUT ALSO T HE RESERVES AND SURPLUSES OF THE COMPANY. THE FORMAT O F I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 28 THE BALANCE SHEET AS PRESCRIBED UNDER SCHEDULE VI O F THE COMPANIES ACT, 1956 ALSO CLEARLY INDICATES THAT RES ERVES AND SURPLUSES ARE A PART OF SHAREHOLDERS FUND. THE BALANCE SHEET OF THE PETITIONERS COMPANY ALSO REFLE CTS THE RESERVES AND SURPLUSES AS A PART OF SHAREHOLDER S FUNDS. THE RELEVANT PORTION OF THE BALANCE SHEET OF THE PETITIONER COMPANY AS ON 31.03.2001 IS QUOTED BELOW :- 'SHAREHOLDERS' FUNDS CAPITAL A 50,000,000 PREFERENCE CAPITAL PENDING ALLOTMENT (REFER NOTE 2.3 ON T) 75,000,000 RESERVES & SURPLUS B 339,079,523 LOAN FUNDS SECURED LOAN C 5,100,000 UNSECURED LOANS D 107,983,258 TOTAL 577,162,781' 26. THE SCHEME OF HIVING OFF THE BUSINESS OF TELECO M SERVICES BY GOVERNMENT OF INDIA TO A CORPORATE ENTI TY ENTAILED INCORPORATION OF A WHOLLY OWNED GOVERNMENT COMPANY (I.E, THE PETITIONER COMPANY) AND THE TRANS FER OF THE BUSINESS AS A GOING CONCERN ALONG WITH ALL ITS ASSETS AND LIABILITIES TO THE COMPANY. THE NET ASSETS WERE TRANSFERRED AT BOOK VALUE, WHICH WAS AGREED TO BE A T LEAST RS 63,000/- CRORES AND IN CONSIDERATION OF TH IS THE PETITIONER COMPANY ACCEPTED A LIABILITY OF RS 7500 CRORES AND ISSUED BOTH EQUITY AND PREFERENCE SHARE CAPITAL OF THE FACE VALUE OF RS 5000 CRORES AND RS 7,500 CRORES, RESPECTIVELY. THE BALANCING FIGURE WAS REFL ECTED AS RESERVES WHICH IS AN INTEGRAL PART OF THE SHAREH OLDERS FUNDS. THE GOVERNMENT OF INDIA HAS TRANSFERRED THE I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 29 ASSETS TO THE PETITIONER COMPANY AT THEIR BOOK VALU E I.E., THE VALUE AT WHICH THESAID ASSETS ARE REFLECTED IN THE BOOKS OF DTS AND DTO AND THE BOOK VALUE OF THE GOVERNMENT OF INDIAS HOLDING IN THE PETITIONER COM PANY AS SHAREHOLDER AND A CREDITOR AGGREGATES THE BOOK V ALUE OF THE ASSETS TRANSFERRED. THE CONFIGURATION OF THE CAPITAL STRUCTURE OF THE PETITIONER HAS NO IMPACT ON THE VA LUE OF THE GOVERNMENTS HOLDING IN THE PETITIONER COMPANY AS RESERVES OF A COMPANY ARE SUBSUMED IN THE BOOK VALU E OF ITS CAPITAL. WE FIND NO BASIS, AT ALL, FOR THE A SSESSING OFFICER TO SURMISE THAT RESERVES REPRESENT A SUBSID Y, GRANT OR REIMBURSEMENT FROM WHICH THE COST OF ASSET S OF THE PETITIONER COMPANY ARE MET AND THE WHOLE CONSIDERATION RECEIVED BY THE GOVERNMENT OF INDIA F OR TRANSFER OF BUSINESS IS LIMITED TO THE VALUE OF LOA NS AND THE FACE VALUE OF THE SHARES ISSUED TO THE GOVERNME NT OF INDIA. A RESERVE REPRESENTS THE SHAREHOLDERS FUND AND MAY BE UTILIZED IN VARIOUS WAYS INCLUDING TO DECLAR E DIVIDENDS OR FOR ISSUING BONUS SHARES. THERE IS NO PLAUSIBLE REASON TO ASSUME THAT THE VALUE OF SHAREHOLDERS HOLDING IN A COMPANY IS LIMITED TO TH E FACE VALUE OF THE ISSUED AND PAID UP SHARE-CAPITAL AND T HE RESERVES REPRESENT A SUBSIDY OR A GRANT OR A REIMBURSEMENT BY THE SHAREHOLDERS FROM WHICH DIRECT LY OR INDIRECTLY THE COST OF THE ASSETS IN THE HANDS O F A COMPANY ARE MET. 14. HENCE, IN VIEW OF THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE ASSESSEES OWN CASE AS AFORESAID, WE A LLOW GROUND NO. 6 OF ASSESSEES APPEAL. 15. THE NEXT GROUND FOR CONSIDERATION BEING TAKEN U P IS GROUND NO. 7 OF ASSESSEES APPEAL PERTAINING TO DISALLOWAN CE @15% OF LICENCE AND SPECTRUM FEES. IT IS SEEN THAT THIS IS SUE IS ALSO I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 30 COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF I TAT, DELHI BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2 003-04 TO 2008-09. THE RELEVANT PARAS ARE 4 TO 4.8 AND THEY ARE BEING REPRODUCED BELOW FOR READY REFERENCE:- 4 . ALLOWABILITY OF LICENSE FEE: WE FIRST TAKE UP THE ASSESSEES GROUND WHICH IS AGAINST THE DISALLOWANCE OF LICENSE FEES AND SPECTRUM CHARGES BY THE A.O. 4.1 . THIS ISSUE ARISES IN THE ASSESSEES APPEAL AS GROUND NO.2 FOR THE A.Y. 2003-04 AND AS GROUND NO.1 FOR THE A.Y. 2005-06 TO 2007-08, AS GROUND NO.4 FOR THE A.Y. 2008-09. THIS ISSIE ALSO ARISES IN THE REVENUES A PPEALS. 4.2 . THE A.O. DISALLOWED THE AMOUNT ON THE GROUND THAT THE EXPENDITURE INCURRED ON LICENSE FEE WAS NO T ALLOWABLE U/S 37 OF THE ACT. HE NOTED THAT FOR THE EARLIER YEARS THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSE SSEE ON THE BASIS OF AN ITAT DECISION IN THE CASE OF MTN L, BUT AS THE REVENUE HAS NOT ACCEPTED THIS DECISION, THE ADDITION IS BEING MADE. ALTERNATIVELY HE HELD THAT LICENSE FEE AND SPECTRUM FEE WERE STATUTORY LIABILI TIES AND HAD TO BE PAID BY THE ASSESSEE WITHOUT ANY OPTI ON BEFORE THE DUE DATE SPECIFIED FOR SUCH PAYMENT. HE HELD THAT THE AMOUNT CANNOT BE ALLOWED IN VIEW OF S.43B OF THE ACT, FOR THE REASON THAT, THE AMOUNT OF RS.1,33 2.05 CRORES WAS PAID AFTER THE DUE DATE OF FILING OF THE RETURN AND AS A DIFFERENCE OF RS.85.05 CRORES REMAINED UNP AID. 4.3 . ON APPEAL THE FIRST APPELLATE AUTHORITY HELD THAT AS FAR AS SPECTRUM CHARGES AND NATIONAL LONG DISTAN CE LICENSE FEE ARE CONCERNED, THERE IS A CATEGORICAL QUALIFICATION MADE BY THE AUDITORS OF THE ASSESSEE COMPANY IN THEIR AUDITED REPORT, THAT THE AMOUNT IN QUESTION WAS NOT IN LINE WITH THE AGREEMENT AND THA T THE EFFECT THERE OF COULD NOT BE DETERMINED AND THAT SU CH CLAIM ;WAS MADE MERELY BASED ON ESTIMATES WITHOUT ANY SPECIFIC SCIENTIFIC METHOD ADOPTED BY THE ASSES SEE I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 31 AND THEREFORE IN VIEW OF THESE FACTS AND IN THE AB SENCE OF SUCH DETAILS, THE CLAIM OF THE ASSESSEE THAT THE ENTIRE AMOUNT SHOULD BE ALLOWED AS DEDUCTION CANNOT BE ACCEPTED. HE FURTHER HELD THAT THE ASSESSEE COMPAN Y DOES NOT HAVE SPECIFIC DETAILS BY WHICH DEVIATION O F ESTIMATED LICENSE FEE IN RESPECT OF NLD COULD BE DETERMINED WITH REFERENCE TO THE ACTUAL AMOUNT OF LICENSE FEE AVAILABLE AND THAT IT IS NOT POSSIBLE T O DETERMINE THE NLD REVENUES EARNED DURING THE YEAR, WHICH FORMS PART OF THE AGR. HE RESTRICTED THE DISALLOWANCE TO 15% OF THE TOTAL AMOUNT CLAIMED UND ER THIS HEAD ON ADHOC BASIS. ON THE ALTERNATIVE GROUN D OF DISALLOWANCE MADE BY THE AO U/S 43B OF THE ACT, HE FOLLOWED THE DECISION OF HONBLE CALCUTTA HIGH COUR T IN THE CASE OF CIT VS. VARES INTERNATIONAL PVT. LTD. 225 ITR 831 AND HELD THAT, THE LICENSE FEE IN QUESTION CANNOT BE TREATED AS TAX, DUTY, CESS OR FEES AS HAS BEEN ENVISAGED U/S 43B OF THE ACT AND HENCE A DISALLOWAN CE CANNOT BE MADE UNDER THIS SECTION. AGGRIEVED WITH THIS ORDER BOTH THE ASSESSEE AS WELL AS THE REVENUE HAVE FILED APPEALS. 4.4 . AFTER HEARING RIVAL CONTENTIONS WE FIND THAT THE ISSUE IN QUESTION IS NO MORE RES INTEGRA. THE ITAT MUMBAI D BENCH IN THE CASE OF VIDESH SANCHAR NIGAM LTD. VS. JCIT (2002) REPORTED IN 81 ITD 456 (MUMBAI) VIDE ORDER DT. 14 TH SEPTEMBER, 2000 HELD AS FOLLOWS. SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINE SS - EXPENDITURE - ALLOWABLE AS - ASSESSMENT YEAR 1995-9 6 - ASSESSEE, A GOVERNMENT-COMPANY, WAS INCORPORATED IN 1986 FOR ENTIRE MANAGEMENT, CONTROL, OPERATION AND MAINTENANCE OF OVERSEAS COMMUNICATION SERVICE OF DEPARTMENT OF TELECOMMUNICATIONS (DOT) NOMINAL LICENSE FEE AND DOT LEVY PAID BY ASSESSEE WERE INI TIALLY ALLOWED AS DEDUCTION IN .ASSESSMENT YEARS 1988-89 T O 1991-92 - IN ASSESSMENT YEARS 1992-93 AND 1993-94 CBDT OPINED THAT DOT LEVY WAS NOT REVENUE EXPENDITURE WHICH ASSESSEE ACCEPTED AND FILED REVIS ED RETURNS - FROM ASSESSMENT YEAR 1994-95, DOT LEVY WA S I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 32 ABOLISHED AND LICENCE FEE WAS SUBSTANTIALLY INCREAS ED LINKING IT TO BUSINESS DONE RS.282.60 CRORES PAI D BY ASSESSEE AS LICENCE FEE IN ASSESSMENT YEAR UNDER CONSIDERATION AND DEBITED TO PROFIT AND LOSS ACCOU NT WAS DISALLOWED BY ASSESSING OFFICER HOLDING THAT IT WAS NOTHING BUT -SUBSTITUTE OF DOT LEVY IN REVISED REVE NUE SHARING FORMULA WHETHER PAYMENT MADE BY ASSESSEE, BY WHATEVER NAME CALLED, WAS FOR MAKING USE OF NETWORK OWNED BY DOT AND FOR SERVICES UTILISED FOR PURPOSE OF BUSINESS AND, HENCE, COULD NEVER BE CONSIDERED AS NON-BUSINESS EXPENDITURE - HELD, YES - WHETHER, THEREFORE, DOT LEVY, IRRESPECT IVE OF OPINION OF CBDT, WAS ALLOWABLE AND RIGHTLY ALLOWED IN ASSESSMENT YEARS 1988-89 TO 1991-92 AS BUSINESS EXPENDITURE - HELD, YES - WHETHER, SIMILARLY, LICEN CE FEE WAS UNDISPUTEDLY PAID FOR USE OF FACILITIES PROVIDE D BY DOT AND PAYMENT WAS INEXTRICABLY BOUND UP WITH VERY BUSINESS OF ASSESSEE AND DIRECTLY RELATED TO ACTUAL UTILISATION OF NETWORK FACILITIES AND, THEREFORE, L ICENCE FEE PAID BY ASSESSEE WAS ANALLOWABLE EXPENDITURE UNDER SECTION 37(1) - HELD, YES 4.5 . THE ABOVE DECISION HAS BEEN FOLLOWED BY DELHI F BENCH OF ITAT IN THE CASE OF MTNL VS. JCIT IN ITA NO.377/DEL/2001 FOR THE A.Y. 1997-98 AND IN ITA NOS . 3448, 3449 AND 3450/DEL/2003 AND 2919/DEL/2004 FOR THE AY 1998-99 TO 2002-03 VIDE ORDER DT. 3 RD FEB., 2006. 4.6. FURTHER THE AO HIMSELF FOR THE A.Y. 2004-05 DID NOT MAKE ANY DISALLOWANCE OF LICENCE FEE PAID BY FOLLOWING THE OPINION GIVEN BY THE ATTORNEY GENERAL OF INDIA WHO HAD GIVEN AN OPINION IN FAVOUR OF THE ASSESSEE. 4.7 . THE CONTENTIONS OF THE LD.D.R. THAT HE AMOUNT OF LICENSE FEE IS NOT ASCERTAINABLE HAS BEEN ANSWERED BY THE ASSESSEE BY GIVING AN AFFIDAVIT BEFORE THIS BEN CH, WHEREIN IT IS STATED THAT THE AMOUNT PAID TO THE GOVERNMENT AS LICENSE FEE AND DEBITED BY THE BSNL I N ITS PROFIT AND LOSS A/C HAS NOT BEEN DISPUTED TILL DATE AND I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 33 THAT THE QUANTIFICATION BY B.S.N.L. HAS BEEN ACCEPT ED BY THE GOVERNMENT. WHEN A PARTICULAR AMOUNT OF LICENS E FEE IS CALCULATED AND PAID AS A FULL AND FINAL PAYMENT BY THE ASSESSEE TO THE GOVERNMENT AND WHEN THE GOVERNMENT HAS NOT DISPUTED THE SAME TILL DATE, THE QUESTION OF HOLDING THAT THE AMOUNT IS NOT ASCERTAI NABLE AT THIS LENGTH OF TIMEDOES NOT ARISE. AS REGARDS I NVOKING THE PROVISIONS OF S.43B OF THE ACT, WE UPHOLD THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. THE QUA NTUM OF THE LICENSE FEE PAID IS NEITHER TAX, DUTY, CESS OR FEES. THE LD. CIT(A) HAS RIGHTLY RELIED ON THE DECISION O F HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VARAS INTERNATIONAL PVT. LTD. REPORTED IN 225 ITR 831. THE LICENSE FEES BEING A CHARGE RECEIVED BY THE GOVERNMENT FOR PARTING WITH RIGHTS, IS NEITHER A TA X, NOR A DUTY, NOR A FEES, NOR A CESS WITHIN THE MEANING OF S.43B OF THE ACT. HENCE THIS SEC.43B CANNOT BE APPLIED. 4.8. IN VIEW OF THE ABOVE DISCUSSION WE ALLOW THE APPEAL OF THE ASSESSEE AND DISMISS THE APPEAL OF TH E REVENUE ON THIS ISSUE. AS WE HAVE HELD SO, THE ALTERNATIVE CONTENTIONS RAISED BY THE ASSESSEE NEE D NOT BE ADJUDICATED AS IT WOULD BE AN ACADEMIC EXERCISE. 16. CONSISTENT WITH THE VIEW TAKEN AS REPRODUCED H EREIN ABOVE, WE ALLOW GROUND NO. 7 OF ASSESSEES APPEAL. 17. THE LAST GROUND FOR CONSIDERATION BEFORE US IS GROUND NO. 2 OF THE DEPARTMENTS APPEAL WHEREIN THE DEPARTMENT I S CHALLENGING THE DELETION OF DISALLOWANCE OF RS. 169 ,51,78,618/- MADE ON ACCOUNT OF WRITE OFF OF LOSSES. THIS ISSUE HAS BEEN I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 34 DISCUSSED BY THE LD. CIT (A) IN PARA 6 (PAGE 15) OF THE IMPUGNED ORDER AS UNDER:- ON THIS ISSUE FINDING FOR THE AY 2008-09 IS REPROD UCED AS UNDER ' I HAVE EXAMINED THE CONTENTIONS OF THE APPELLANT WITH REGARD TO THEIR COMPLAINT OF ''DOUBL E DISALLOWANCE', ONCE THROUGH WRITING BACK IN THE COMPUTATION OF INCOME OF THE PROVISIONS MADE FOR AS SET WRITE-OFFS, AND THEN AGAIN IF THE SAME WERE TO BE DISALLOWED SEPARATELY BY THE A.O. THE ACCOUNTING ENTRIES PASSED IN THIS REGARD ARE CONSISTENTLY BEIN G FOLLOWED FROM YEAR TO YEAR. IT APPEARS THAT THE FUL L ACCOUNTING IMPLICATION OF THIS ITEM OF 'WRITE OFF O F ASSETS' IN LIGHT OF THE CORRESPONDING 'PROVISION AC COUNTS' FOR 'DECOMMISSIONED ASSETS HAS NOT BEEN FULLY UNDERSTOOD. THE A.O'S STEP OF DISALLOWING THESE EXPENSE DOES RESULT IN A DOUBLE DISALLOWANCE OF THE SAME EXPENDITURE, WHICH IS BEING CREDITED TO THE PROVISION ACCOUNT, AND THE PROVISION ACCOUNT ITSELF BEING WRITTEN BACK. I THEREFORE DIRECT THE DELETION OF THIS ADDITION ERRONEOUSLY MADE BY THE LEARNED A.O UPON A MIS-READING OF THE FACTS AND ACCOUNTING INVOLVED. APPELLANT GETS A RELIEF OF RS. 353.75 CRORES.' FOLLOWING THE SAME, THE APPELLANT IS ALLOWED RELIEF ON THIS ITEM OF RS. 169.52. 18. EVEN BEFORE US, THE LD. DR COULD NOT CONTROVERT THE FINDINGS OF THE LD. CIT (A) AND DEMONSTRATE THAT THE FACTUAL FINDING BY THE LD. CIT (A) WAS ERRONEOUS. HENCE, WE REFUSE TO INT ERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE AND DISMI SS GROUND NO. 2 OF DEPARTMENTS APPEAL. I.T.A.NOS. 2196, 6459/D/2012 5916, 6549/D/2012 ASSESSMENT YEARS: 2005-06, 2009-10 35 19. IN THE FINAL RESULT, THE APPEALS OF THE ASSESSE E ARE ALLOWED AND THE APPEALS OF THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.05.2016. SD/- SD/- (S.V. MEHROTRA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: THE 13TH OF MAY, 2016 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 4. DR, ITAT BY ORDER ASSTT. REGISTRAR