IDEA CELLULAR LIMITED, MUMBAI V. DCIT CIRCLE 11(1), NEW DELHI

ITA 6573/MUM/2013

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3536 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 23-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRY
• Keywords: Business income; Question of law; Bad and doubtful debts; Revenue expenditure; Set aside
• Section: 115JB; 37(1); 13; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6908/M/2013 ASSESSMENT YEAR: 2005-06 DCIT CIR 3(2), ROOM NO.609, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE COMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LTD.), 5 TH FLOOR, WINDSOR, OFF. CST ROAD, NEAR VIDYANAGARI, KALINA, SANTACRUZ (E), MUMBAI 400 098 PAN: AAACE 1646D (APPELLANT) (RE SPONDENT) ITA NO.6573/M/2013 ASSESSMENT YEAR: 2005-06 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE COMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LTD.), 5 TH FLOOR, WINDSOR, OFF. CST ROAD, NEAR VIDYANAGARI, KALINA, SANTACRUZ (E), MUMBAI 400 098 PAN: AAACE 1646D VS. DCIT CIR 3(2), ROOM NO.609, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI J.D. MISTRY, A.R. REVENUE BY : MS. SHREEKALA PARDESHI, D.R. DATE OF HEARING : 26.03.2020 DATE OF PRONOUNCEMENT : 07.06.2021 O R D E R ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 2 PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED CROSS APPEALS HAVE BEEN PREFERRED AGAINST THE ORDER DATED 29.08.2013 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2005-06. ITA NO.6573/M/2013 (ASSESSEES APPEAL) 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: '1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN ALLOWING THE CLAIM OF ASSESSEE FOR DEDUCTION U/S. 35ABB OF RS.40,24,22,970/- AS AGAINST RS. 16,28,41,776/- ALL OWED BY THE AO IN ASSESSMENT.' (I) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE OF AMORTIZED LICENSE FEES OF RS.23,95,81,194/- WITHOUT APPRECIATING THE FACT THA T WHEN NTP 1999 HAD BEEN ENUNCIATED AND ACCEPTED BY THE ASSESSEE; ASSESSEE'S CLAIM U/S.35ABB UNDER EARLIER TELECOM POLICY WAS NOT IN ACCORDANCE WITH LAW. (II) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS RIGHT IN ALLOWING THE APPEAL AND ALLOWING THE E NTIRE DEDUCTION U/S. 35ABB OF RS.40,24,22,970/- CLAIMED BY THE ASSESSEE CONTRARY TO THE ORDER OF LD. CIT(A)-XIII, NEW DELHI IN ASSESSEE'S OWN CASE FOR A.Y.2000-01 WH ICH IN FACT WAS RELIED UPON BY THE LD. CIT(A)-V NEW DELHI.' (III) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. C1T(A) WAS RIGHT IN ALLOWING THE ENTIRE DEDUCTION U/S. 35A BB OF RS. 40,24,22,970/- CLAIMED BY THE ASSESSEE CONTRARY TO THE ORDER OF ITAT 'I' B ENCH, NEW DELHI, IN ASSESSEE'S OWN CASE FOR A.Y.2001-02 WHICH IN FACT WAS RELIED U PON BY THE LD. CIT(A)-V NEW DELHI.' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT IN ALLOWING CLAIM OF THE ASSESSEE FOR DED UCTION U/S. 37(1) IN RESPECT OF REVENUE LICENSE FEES OF RS. 19,25,06,859/- IGNORING THE FACT THAT SUCH LICENSE FEES WAS CAPITAL IN NATURE AND ONLY DEDUCTION U/S. 35 ABB WAS ALLOWED AS PER I T ACT.' (I) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT IN HOLDING THAT THE REVENUE SHARING LICEN SE FEES PAID BY ASSESSEE WAS REVENUE EXPENDITURE ALLOWABLE U/S.37(1) DESPITE THE FACT THAT THE SAME WAS FEES PAID BY ASSESSEE FOR ACQUIRING RIGHTS OF ENDURING N ATURE AND WAS THEREFORE CAPITAL IN NATURE.' 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT ALLOWING THE LOSS ON FOREIGN CURRENCY LOS S OF RS.96,80,000/- WITHOUT APPRECIATING THE FACT THAT THE SAME WAS NOTIONAL LO SS NOT ALLOWABLE AS HELD BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF M/S. ARVIND MILLS LTD.' (I) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS RIGHT ALLOWING THE LOSS ON FOREIGN CURRENCY ONL Y ON THE BASIS OF ACCOUNTING ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 3 POLICY FOLLOWED BY THE ASSESSEE AND WITHOUT VERIFYI NG THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN ABSENCE OF ANY MATERIAL EVIDENCE .' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED .' 5. 'THE APPELLANT CRAVES LEAVE TO AMEND OR A LTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE C ONFIRMATION OF DISALLOWANCE BY LD. CIT(A) OF RS.21,78,491/- AS MADE BY THE AO TOWARDS ADVERTISEMENT AND PUBLICITY EXPENSES ON ACCOUNT OF BEING RELATING TO PRIOR PERIOD. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS INC URRED CERTAIN ADVERTISEMENT AND PUBLICITY EXPENSES DURING THE YEA R WHICH WERE DULY DISCLOSED IN THE SCHEDULE 14 OF THE FINAN CIAL STATEMENT .A NOTE WAS APPENDED AT THE BOTTOM OF THE SCHEDULE 14 THAT THE SAID EXPENSES OF ADVERTISEMENT AND PUBLICITY INCLUD ED PRIOR PERIOD EXPENSES OF RS.21,78,491/-. ACCORDING TO TH E ASSESSEE THE SAID EXPENDITURE HAS CRYSTALLIZED DURING THE YE AR AS THE INVOICES PERTAINING TO THESE EXPENSES WERE RECEIVED DURING THE YEAR ONLY BUT THESE INVOICES WERE DATED OF EARLIER YEAR I.E. F.Y. 2003-04 AND WAS CLASSIFIED AS PRIOR PERIOD EXPENSES UPON THE INSISTENCE OF AUDITORS OF THE ASSESSEE. THESE PRIO R PERIOD EXPENSES WERE ALSO DISCLOSED IN TAX AUDIT REPORT IN FORM 3CD FOR A.Y. 2005-06 A COPY OF WHICH IS FILED AT PAGE NO. 36 OF THE PAPER BOOK. THE AO DURING THE ASSESSMENT PROCEEDINGS HAS WRONGLY TREATED THESE EXPENSES AS REPAIR AND MAINTENANCE E XPENSES AND ACCORDINGLY CALLED UPON THE ASSESSEE VIDE ORDE R SHEET ENTRY DATED 12.11.2007 AS TO WHY THESE SHOULD NOT BE ADDE D BACK TO THE INCOME OF THE ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 04.12.2007 SUBMITTING THAT THE DE TAILS OF REPAIR AND MAINTENANCE AND FURTHER SUBMITTED THAT PRIOR PE RIOD ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 4 EXPENSES CAN NOT BE DISALLOWED AS THESE ARE NOT IN FACT PRIOR PERIOD BUT EXPENSES CRYTALISED DURING THE YEAR AS T HE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. 5. IN THE APPELLATE PROCEEDINGS, THE APPEAL OF THE ASSESSEE WAS DISMISSED BY THE LD. CIT(A) BY OBSERVING AND HO LDING AS UNDER: 5.1. FINDING ON GROUND OF APPEAL NO.III IN FACTS OF THE CASE THE A.O. HAS DISALLOWED THE FO REGOING PRIOR PERIOD EXPENSES (DESCRIBED AS REPAIR AND MAINTENANCE EXPENSES IN TH E ORDER) ON THE GROUND THAT SINCE THE ASSESSEE IS FOLLOWING THE MERCANTILE SYST EM OF ACCOUNTING, THEREFORE ANY EXPENDITURE IN THE NATURE OF PRIOR PERIOD WILL NOT BE ALLOWABLE EXPENDITURE DURING THE YEAR UNDER CONSIDERATION. IN DOING. SO, THE AO PLACED RELIANCE ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF MADRAS FERTILIZERS LIMITED V. CIT (209 ITR 174). THE BASIC ARGUMENT OF THE APPELLANT FOR ALLOWABILITY OF SUCH ADMITTEDLY PRIOR PERIOD EXPENSE IS THAT THE LIABILITY TO PAY SUCH EXPENSES HAS CRYSTALLIZED DURING THE RELEVANT PREVIOUS YEAR . THE RELIANCE ON THE CASE LAWS MADE BY THE APPELLANT ALSO APPROVE ALLOWANCE OF SUCH EXPENSES ON PROOF OF CRYSTALLIZAT ION OF LIABILITY IN THE PREVIOUS YEAR. AS THE APPELLANT HAS EXPRESSED IT'S INABILITY IN SUBSTANTIATING THE CRYSTALLIZATION OF THE CLAIM IN THE PRESENT PREVIOUS YEAR THEREFORE THE APPEAL ON THIS GROUND IS DISMISSED. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT BOTH THE AUTHORITIES BELOW HAVE CONFUSED THE EXPENSES TO BE ON ACCOUNT OF REPAIR AN D MAINTENANCE WHEREAS AS A MATTER OF FACT THESE EXPEN SES WERE INCURRED ON ACCOUNT OF ADVERTISEMENT AND PUBLICITY. WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT SINCE THE BILLS PERTAINING TO THESE EXPENSES WERE RECEIVED DURING T HE YEAR THOUGH THESE BILLS RELATED TO THE EARLIER YEAR, THE REFORE THESE EXPENSES HAVE TO BE ALLOWED AS PERTAINING TO THE CU RRENT YEAR AS THE CRYSTALISATION HAS HAPPENED DURING THE YEAR. W ITHOUT PREJUDICE, THE ASSESSEE HAS SUBMITTED THAT THE YEAR OF ALLOWABILITY OF EXPENSES SHOULD BE OF NO CONSEQUENC ES SO LONG AS THE RATE OF TAX FOR BOTH THE YEARS IS UNIFORM. THE ASSESSEE HAS ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 5 PLACED RELIANCE ON THE DECISION OF CIT VS. NAGRI MI LLS CO. LTD. (1958) 33 ITR 681 (BOM.) AND ALSO 3 OTHER DECISIONS . WE HAVE PERUSED THE DECISIONS AND FOUND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE RATIO LAID DOWN IN THE SAID DECISIONS. WE ALSO FIND THAT THE ADDITION MADE BY THE AO IS TA X NEUTRAL. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) A ND DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.21,78,491/-. 7. THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE O RDER OF LD. CIT(A) REJECTING THE ADDITIONAL GROUND WHEREBY THE ASSESSEE HAS CLAIMED DEDUCTION FOR PROVISIONS FOR BAD AND DOUBTF UL DEBTS AMOUNTING TO RS.1,97,50,000/- ON THE GROUND THAT CL AIM BY THE ASSESSEE WAS AN AFTERTHOUGHT. 8. THE FACTS IN BRIEF ARE THAT THE ASSESSEE SUO-MOT O DISALLOWED PROVISIONS FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.1,97,50,972/- IN THE COMPUTATION OF INCOME FOR A .Y. 2005-06 AT THE TIME OF FILING THE RETURN OF INCOME, A COPY OF WHICH IS FILED AT PAGE NO.56 TO 57 OF THE PAPER BOOK AND THE ASSES SMENT WAS COMPLETED ACCORDINGLY. SUBSEQUENTLY, DURING THE A PPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND REQUESTING THE LD. CIT(A) TO ALLO W THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS SINCE THE ASS ESSEE HAS NOT ONLY DEBITED THE PROFIT & LOSS ACCOUNT UNDER THE HE AD PROVISION FOR BAD AND DOUBTFUL DEBTS BUT ALSO REDUCED THE SA ME FROM THE SUNDRY DEBTORS IN THE BALANCE SHEET AND THUS IT AMO UNTED TO WRITE OFF OF DEBTS OF THE ASSESSEE. HOWEVER, THE L D. CIT(A) REJECTED THE ADDITIONAL GROUND RAISED BY THE ASSESS EE BY HOLDING THAT THE ASSESSEE HAS CORRECTLY ADDED BACK THE AMOU NT OF ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 6 RS.1,97,50,000/- BEING PROVISIONS FOR BAD AND DOUBT FUL DEBTS AND NOW THE CLAIM VIDE ADDITIONAL GROUND IS A AN AF TERTHOUGHT. 9. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT THE ASSESSEE HAS DEBITED THE SAID AMOUNT OF PROVISIONS FOR BAD A ND DOUBTFUL DEBTS AMOUNTING TO RS.1,97,50,000/- IN THE FINANCIA L STATEMENT, SCHEDULE NO.14 AND SIMULTANEOUSLY REDUCED THE SAID PROVISIONS FOR BAD AND DOUBTFUL DEBTS FROM SUNDRY DEBTORS IN THE BALANCE SHEET IN SCHEDULE 5 A COPY OF WHICH IS FILED AT PAG E NO.12 TO 15 OF THE PAPER BOOK. THE LD. A.R. SUBMITTED THAT IN VIEW OF THE HONBLE APEX COURT DECISION IN THE CASE OF VIJAY BA NK VS. CIT (2010) 323 ITR 166 THE SAID AMOUNT MAY KINDLY BE AL LOWED. THE LD. A.R. ALSO PLACED RELIANCE ON THE DECISION OF HO NBLE BOMBAY HIGH COURT ALSO IN THE CASE OF CIT VS. TAINWALA CHE MICALS AND PLASTIC INDIA LTD. (2013) 215 TAXMANN.COM 153. 10. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF LD. CIT(A). 11. IN THE REBUTTAL, THE LD. A.R. RELIED ON THE DEC ISIONS ALREADY CITED BY HIM. THE LD. A.R. ALSO COUNTERED THE ARGU MENTS PRESENTED BY THE LD. D.R. THAT SINCE THE DECISION O F THE APEX COURT WAS RENDERED IN THE CONTEXT OF A BANK AND RAT IO APPLIES TO THE BANKING COMPANY ONLY AND HAS NO APPLICATION TO NON BANKING COMPANY. THE LD. A.R. SUBMITTED THAT IN PA RA 8 OF THE DECISION IT HAS BEEN MADE AMPLY CLEAR THAT 36(1)(V II) APPLIES TO BOTH BANKING AND NON BANKING COMPANIES. 12. HAVING HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE RAISED BY ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 7 THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE APEX COURT IN THE CASE OF VIJAY BANK VS. CIT (SUPRA) WHER EIN THE HONBLE APEX COURT HAS HELD THAT FOR THE PURPOSE OF CLAIMING THE DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT IT IS SUFFICIENT TO DEBIT THE PROFIT & LOSS ACCOUNT AND CORRESPONDINGLY REDUCE THE AMOUNT FROM SUNDRY DEBTORS AND IT IS NOT NECESSARY TO CLOSE THE INDIVIDUAL ACCOUNT OF ALL DEBTORS IN THE BOOKS. AC CORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTION. GROUND NO.2 IS ALLOWED. 13. GROUND NO.3 IS WITHOUT PREJUDICE GROUND AND THE REFORE NEED NOT TO BE ADJUDICATED AS WE HAVE ALLOWED THE G ROUND NO.2 IN FAVOUR OF THE ASSESSEE. 14. THE ISSUES RAISED IN GROUND NO.4 IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ACTION OF THE AO IN ADDING BA CK THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.1,97,50,000/- AND PROVISIONS FOR THE DOUBTFUL AD VANCES AMOUNTING TO RS.70,60,000/- TO THE BOOK PROFIT COMP UTED UNDER SECTION 115JB OF THE ACT BY TREATING IT AS PROVISIO NS FOR UNASCERTAINED LIABILITY WITHIN THE MEANING OF CLAUS E C OF EXPLANATION TO 115JB OF THE ACT. 15. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAD MA DE PROVISIONS IN THE BOOKS OF ACCOUNT TOWARDS BAD AND DOUBTFUL DEBTS AND ADVANCES AND DEBITED THE SAME TO THE PROF IT & LOSS ACCOUNT AS PROVISIONS FOR BAD AND DOUBTFUL DEBTS AN D DOUBTFUL ADVANCES AMOUNTING TO RS.1,97,50,000/- AND RS.70,60 ,000/- RESPECTIVELY. THE AO DURING THE COURSE OF ASSESSME NT OBSERVED THAT PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND DOUB TFUL ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 8 ADVANCES ARE NOT ALLOWABLE WHILE COMPUTING BOOK PRO FIT UNDER SECTION 115JB OF THE ACT FOR THE REASON THAT THESE PROVISIONS ARE CREATED TOWARDS UNASCERTAINED LIABILITY. THE AO OB SERVED THAT THERE IS NO CORRELATION BETWEEN THE PROVISIONS MADE AND ACTUAL WRITE OFF OF DEBTS AND ADVANCES. BESIDES, THE AO ALSO NOTED THAT THE ASSESSEE COULD NOT FURNISH THE SPECIFIC DETAILS AS TO THE PERIOD AND AMOUNT FOR WHICH THE PROVISIONS WERE ACT UALLY MADE AND CONSEQUENTLY ADDED THE SAME TO THE INCOME OF TH E ASSESSEE. 16. IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) UPH ELD THE ORDER OF AO BY HOLDING THAT PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND DOUBTFUL ADVANCES AMOUNTED TO PROVISIONS FOR DIMINUTION IN THE VALUE OF ASSETS AS PER CLAUSE I OF EXPLANATION 1 TO SECTION 115JB OF THE ACT AND WERE RIGHTLY DISA LLOWED. 17. WE HAVE ALREADY DECIDED THE ISSUE OF PROVISION OF BAD AND DOUBTFUL DEBTS IN FAVOUR OF THE ASSESSEE IN GROUND NO.2 DIRECTING THE AO TO ALLOW THE SAME. THIS GROUNDS IS CONSEQUE NTIAL GROUND AND ACCORDINGLY WE ARE INCLINED TO HOLD THAT ASSESS EE IS ENTITLED TO DEDUCTION OF PROVISIONS FOR BAD AND DOUBTFUL DEB TS AND PROVISION FOR ADVANCES WHILE COMPUTING BOOK PROFITS . ACCORDINGLY, THE GROUND IS ALLOWED. 18. THE APPEAL OF THE ASSESSEE APPEAL IS ALLOWED. ITA NO.6908/M/2013 (REVENUES APPEAL) 19. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: GROUND NO. I: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HON'BLE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 11(1), NEW DELHI ('THE AO') IN DISALLOWING ADVERTISEMENT AND P UBLICITY EXPENSES AMOUNTING TO ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 9 RS. 21,78,491/- ON THE GROUND THAT SUCH EXPENSES AR E PRIOR PERIOD IN NATURE AND THE LIABILITY TO PAY SUCH EXPENSES DID NOT CRYSTALLIZED DURING THE RELEVANT PREVIOUS YEAR. 2. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO DELETE THE DISALLOWANCE OF AFORESAID EXPENSES AMOUNTING TO RS. 21,78,491/-. 3. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO ALLOW THE AFORESAID EXPENSES IN THE PREVIOUS YEARS TO WHICH THE EXPENSES ARE RELATED. GROUND NO. II: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DISALLOWING THE ADDITIONAL GROUND RAISED B Y THE APPELLANT, CLAIMING DEDUCTION FOR PROVISION FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS. 1,97,50,000/- ON THE GROUND THAT THE CLAIM MADE BY THE APPELLANT WAS AN 'AFTERTHOUGHT'. 2. THE HON'BLE CIT (A) FAILED TO APPRECIATE THE FACT T HAT THE APPELLATE AUTHORITIES CAN ADMIT AND ADJUDICATE THE ADDITIONAL CLAIM RAISE D BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDING. WITHOUT PREJUDICE TO GROUND II GROUND NO. ILL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DISALLOWING THE DEDUCTION FOR PROVISION FO R BAD AND DOUBTFUL DEBTS AMOUNTING TO RS. 1,97,50,000/- U/S. 36(L)(VII) OF T HE ACT ON THE GROUND THAT DEDUCTION UNDER SECTION 36(L)(VII) IS ALLOWABLE ONL Y ON THE BAD DEBT WRITTEN OFF AND NOT ON PROVISION MADE FOR DOUBTFUL DEBT. 2. THE APPELLANT PRAYS THAT THE CLAIM FOR THE PRO VISION FOR BAD AND DOUBTFUL DEBT AMOUNTING TO RS. 1,97,50,000/- ALLOWED U7S. 36(L)(V II) OR 36(2) OF THE ACT. GROUND NO. IV: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO OF ADDING BACK T HE PROVISION FOR BAD DEBT AMOUNTING TO RS. 1,97,50,000/- AND PROVISION FOR DO UBTFUL ADVANCES AMOUNTING TO RS. 70,60,000/- TO THE BOOK PROFIT COMPUTED U/S. 11 5JB OF THE ACT BY TREATING IT AS A PROVISION FOR UNASCERTAINED LIABILITY WITHIN THE ME ANING OF CLAUSE (C) OF THE EXPLANATION TO SECTION 115JB OF THE ACT. 2. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO DELETE THE ADDITION OF AFORESAID AMOUNTS OF RS. 2,68,10,000/- MADE TO BOOK PROFIT UN DER CLAUSE (C) OF THE EXPLANATION TO SECTION 115JB OF THE ACT. 20. THE ISSUE RAISED IN FIRST GROUND OF APPEAL IS A GAINST THE ORDER OF LD. CIT(A) ALLOWING THE CLAIM OF THE ASSES SEE FOR DEDUCTION UNDER SECTION 35ABB OF THE ACT TO THE TUN E OF RS.23,95,81,194/-. 21. THE FACTS IN BRIEF ARE THAT THE AO OBSERVED ON THE BASIS OF COMPUTATION OF INCOME THAT ASSESSEE HAD ADDED BACK A SUM OF RS.18,53,22,781/- ON ACCOUNT OF LICENSE FEE PAID TO DOT AGAINST ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 10 WHICH A DEDUCTION OF RS.40,24,22,970/- HAVE BEEN CL AIMED UNDER SECTION 35ABB OF THE ACT AND ACCORDINGLY CALL ED UPON THE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEE VIDE LE TTER DATED 23.11.2007 FILED THE DETAILED WORKING OF LICENSE FE E CLAIMED UNDER SECTION 35ABB OF THE ACT. THE AO NOTED THAT IN ASSESSMENT YEAR 2001-02 DISALLOWANCE OF CLAIM IN RE SPECT OF VARIABLE LICENSE FEE WAS MADE AND THE SAME WAS UPHE LD BY LD. CIT(A). FOLLOWING THE SAID, THE AO HELD THAT ASSESS EE IS ENTITLED TO AMORTIZE RS.16,28,41,776/- AS AGAINST RS.40,24,2 2,970/- CLAIMED BY IT AND HENCE MADE AN ADDITION OF RS.23,9 5,81,194/-. 22. IN THE APPELLATE PROCEEDINGS, THE CLAIM OF THE ASSESSEE WAS ALLOWED BY LD. CIT(A) BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL FOR A.Y. 2004-05 IN ITS OWN C ASE. THE LD. A.R. AT THE OUTSET SUBMITTED THAT THE ISSUE IS SQUA RELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRI BUNAL IN ASSESSEES OWN CASE IN ITA NO.3665/M/2011 A.Y. 2004 -05 AND THUS THE LD. A.R. PRAYED THAT THE GROUND RAISED BY THE REVENUE MAY KINDLY BE DISMISSED. 23. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE GROUNDS OF APPEAL. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND FOUND THAT T HE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.3665/M/ 2011 A.Y. 2004-05. THE RELEVANT FINDING IS REPRODUCED AS UND ER: 4. WE HAVE CONSIDERED AND EXAMINED THE CONTENTIONS . AS THERE IS A CHANGE IN TELECOM POLICY ENHANCING LICENSE PERIOD FROM 10 TO 20 YEARS ON PAYMENT OF ONE TIME ENTRY FEE /MIGRATION FEE, THE DEDUCTION IS TO BE ALLOWED ON REVISED BASIS. THE ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 11 ISSUE OF REVISED CLAIM WAS DECIDED BY LD. CIT(A) IN EARLIER YEARS WITH CERTAIN DIRECTIONS TO AO WHICH ARE YET TO BE IMPLEMENTED. T HE BASIS OF REVISED AMOUNT FOR DEDUCTION IS REQUIRED TO BE DETERMINED IN THE RESPE CTIVE YEARS BY AO. SINCE THE REVENUE IS NOT IN APPEAL ON THE DIRECTIONS OF CIT(A ) IN EARLIER YEARS, WHATEVER AMOUNT IS QUANTIFIED THEREIN, SIMILAR AMOUNTS ON TH AT BASIS ARE TO BE ALLOWED IN THIS YEAR, BEING CONSEQUENTIAL. AO IS DIRECTED TO DETERM INE ACCORDINGLY THE ELIGIBLE AMOUNT IN THIS YEAR. WITH THESE DIRECTIONS, THE ASS ESSEE'S ALTERNATE CONTENTION IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH OF THE TRIBUNAL, WE DIRECT THE AO TO DETERMINE THE ELIGIBLE AMOUNT IN THIS YEAR ALSO FOLLOWING THE DECISION IN A.Y. 2004-05 AND ALLOW THE SAME. THE GROUND IS ALLOWED FOR STATI STICAL PURPOSES. 25. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.90,25,06,859/- BY LD . CIT(A) AS DISALLOWED BY THE AO IN RESPECT OF REVENUE LICENSE FEE ON THE GROUND THAT THE LICENSE FEE WAS CAPITAL IN NATURE A ND ONLY DEDUCTION UNDER SECTION 35ABB WAS ALLOWABLE AS PER ACT. 26. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTED THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS .7,18,89,454/- AS AGAINST RS.26,43,96,313/- CLAIMED BY IT. THE AO OBSERVED THE SAID FACTS FROM THE LETTER FILED BY THE ASSESSE E GIVING DETAILS OF AMOUNT TO BE ALLOWED AND DISALLOWABLE ON ACCOUNT OF REVENUE SHARING LICENSE FEE PAID. 27. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AL LOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2001-02, 2003-04 & 2004-05 AND ACCORDINGLY DIRECTED THE AO T O ALLOW THE ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 12 FULL AMOUNT OF RS.26,43,96,313/- PAID TOWARDS RSLF UNDER SECTION 37(1) OF THE ACT. 28. THE LD. A.R., AT THE OUTSET, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN ITA NO.1551 OF 2013 ORDER DATED 11.04.2016 A.Y. 2003- 04. THE LD. A.R. THEREFORE PRAYED THAT THE GROUND OF THE REVENUE MAY KINDLY BE DISMISSED FOLLOWING THE SAID ORDER. 29. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT TH E ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY ITS O WN CASE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN ITA NO .1551 OF 2011 ORDER DATED 11.04.2016 A.Y. 2003-04 WHEREIN TH E HONBLE BOMBAY HIGH COURT HAS OBSERVED AND HELD AS UNDER: 6. THE TRIBUNAL HAS ALSO NOTED IN PARAGRAPH 5 THAT IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2001-02 THE IDENTICAL ISSUE WAS RAISED AND WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL REPRODUCED THE FINDING OF FACT AND HELD THAT SINCE THE MATTER WAS DECIDED IN FAVOUR OF THE SERVI CE PROVIDERS AND AGAINST THE REVENUE IN THE CASE OF VERY ASSESSEE BEFORE IT FOR THE PREVIOUS ASSESSMENT YEAR, THERE IS NO REASON TO DEVIATE OR DIFFER FROM THOSE VIEWS. IT FOUND THAT THE CONTROVERSY IS ENTIRELY IDENTICAL TO THE ONE DEALT WITH EARLIER. IN SUCH CIRCUMSTANCES, THE TRIBUNAL DID NOT INTERFERE WITH THE ORDER OF TH E FIRST APPELLATE AUTHORITY AND DISMISSED THE REVENUE'S APPEAL ON 20 TH NOVEMBER, 2012. 7. IN SUCH CIRCUMSTANCES, WE ARE NOT IN AGREEMENT W ITH MR. MALHOTRA THAT THE QUESTION FRAMED AT PAGE 6 IS A SUBSTANTIAL QUESTION OF LAW. IT BEING IDENTICAL AND COVERED BY THE TRIBUNAL'S OWN ORDER IN THE CASE OF IDENTICAL SERVICE PROVIDER, WE DO NOT THINK THAT A DIFFERENT VIEW WAS POSSIBLE. THE T RIBUNAL'S VIEW CANNOT BE SAID TO BE PERVERSE OR VITIATED BY ANY ERROR OF LAW APPAREN T ON THE FACE OF THE RECORD. FURTHER, WE FIND AND AS POINTED OUT BY MR. MISTRI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE THAT THE HIGH COURT OF DELHI AT NE W DELHI IN INCOME TAX APPEAL NO.1336 OF 2010 DECIDED ON 19TH DECEMBER,2013 IN TH E CASE OF 'COMMISSIONER OF INCOME TAX VS. BHARTI HEXACOM LTD,' AND 'COMMISSION ER OF INCOME TAX VS. BHARTI CELLULAR LTD.', HAS DISMISSED THE REVENUE'S APPEAL. ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 13 SINCE THE ISSUE BEFORE US IS IDENTICAL TO ONE AS D ECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT, THEREFORE, W E ARE INCLINED TO DISMISS THE GROUND RAISED BY THE REVENUE. 30. THE ISSUE RAISED IN GROUND NO.3 IS AGAINST THE ORDER OF LD. CIT(A) DELETING THE ADDITION OF LOSS ON ACCOUNT OF FOREIGN CURRENCY AMOUNTING TO RS.11,96,80,000/-. 31. THE FACTS IN BRIEF ARE THAT AO DURING THE ASSES SMENT PROCEEDINGS FOUND THAT ASSESSEE HAS DEBITED A SUM O F RS.96,80,000/- TO THE P&L ACCOUNT TOWARDS FOREIGN E XCHANGE FLUCTUATION LOSS. THE AO HELD THE SAID LOSS TO BE NOTIONAL LOSS WHICH HAS NOT BEEN ACTUALLY ASCERTAINED BY THE ASSE SSEE AND ACCORDINGLY ADDED THE SAME TO THE INCOME OF THE ASS ESSEE. 32. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AL LOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 6.1 FINDING ON GROUND OF APPEAL NO. IV I HAVE CONSIDERED OF THE SUBMISSIONS OF THE APPELLA NT AND THE FACTS OF THE CASE. THE APPELLANT HAS POINTED -THAT THE FOREIGN EXCHANGE LO SS AMOUNTING TO RS. 6,42,10,000/- IS CAPITALIZED AS PART OF THE FIXED A SSETS BLOCK IN SCHEDULE -3 OF THE AUDITED ACCOUNTS . THE APPELLANT HAS FURTHER INVITE D MY ATTENTION TO THE SIGNIFICANT ACCOUNTING POLICES OF THE COMPANY PERTAINING TO FIX ED ASSETS. AS PER THIS POLICY FOREIGN EXCHANGE LOSS/ GAINS ARE CHARGED / CREDITED TO THE P/L ACCOUNT EXCEPT WHEN THEY RELATE TO THE FIXED ASSETS. THUS, FROM THE ABO VE THE APPELLANT HAS SHOWN THAT IT HAS CHARGED ONLY THAT PORTION OF FOREIGN EXCHANGE L OSS WHICH PERTAINS TO REVENUE ITEMS. RESULTANTLY, THE CASE OF THE APPELLANT IS CO VERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN CIT VS. WOODWARD GOVERNOR (312 ITR 254), DISCUSSED ABOVE. ACCORDINGLY, 1 AGREE WITH THE APPELLANT THAT THE LOSS FOR RS.96,80,000/- OUGHT TO BE ALLOWED AS A DEDUCTION IN COMPUTING IT' S BUSINESS INCOME. THE AO IS DIRECTED TO ALLOW THE SUM OF RS. 96,80,000/- IN THE COMPUTATION OF INCOME OF -THE APPELLANT. THIS GROUND OF APPEAL IS ACCORDINGLY ALL OWED. 33. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE APEX COUR T IN THE CASE ITA NO.6908/M/2013 & ITA NO.6573/M/2013 M/S. IDEA CELLULAR LTD. (SUCCESSOR TO IDEA MOBILE C OMMUNICATION LTD., PREVIOUSLY KNOWN AS ESCOTEL MOBILE COMMUNICATION LT D.) 14 OF CIT VS. WOODWARD GOVERNOR 312 ITR 254 SC WHEREIN IT HAS BEEN HELD THAT LOSS RESULTING FROM FLUCTUATION IN F OREIGN CURRENCY IS REVENUE LOSS AS THE SAME IS RECOGNISED ON THE BA SIS OF ACCOUNTING POLICY AT THE END OF EACH YEAR IN RESPEC T OF OUTSTANDING CONTRACTS OF THE ASSESSEE. WE NOTE THA T LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING TH E DECISION OF THE APEX COURT IN THE CASE OF CIT VS. WOODWARD GOVE RNOR (SUPRA). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RAISED BY THE REVENUE. 34. ACCORDINGLY, APPEAL OF THE REVENUE IS DISMISSED . 35. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSE AND THE APPEAL OF THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.06.2021. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 07.06.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.