DCIT CORPORATE CIRCLE 1 (2), CHENNAI V. M/S BHARTI AIRTEL LTD 9FORMERLY KNOWN AS BHARTI CELLULAR LTD), CHENNAI

ITA 755/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4989 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2000-2001
• Appeal Filed On: 02-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMMIDI
• Assessee Lawyers: ALOK VASANTH
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . , .. ', BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NOS.755 & 756/CHNY/2018 $% % /ASSESSMENT YEARS: 2000-01 & 2002-03 THE DY. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI-34. VS. M/S.BHARTI AIRTEL LTD., (FORMERLY KNOWN AS BHARTI CELLULAR LTD.), OCEANIC TOWERS, NO.101, SANTHOME HIGH ROAD, SANTHOME, CHENNAI-28. [PAN: AAACS 7705 B ] ( ( /APPELLANT) ( )*( /RESPONDENT) DEPARTMENT BY : MR.SAILENDRA MAMMIDI, CIT ASSESSEE BY : MR.ALOK VASANTH, ADV. 3 /DATE OF HEARING : 31.07.2018 3 /DATE OF PRONOUNCEMENT : 01.08.2018 / O R D E R PER BENCH : THESE ARE DEPARTMENTAL APPEALS DIRECTED AGAINST OR DERS DATED 22.12.2017 OF COMMISSIONER OF INCOME TAX (A)-1, CHE NNAI. THE APPEALS ARE FILED WITH A DELAY OF FIVE DAYS. CONDONATION P ETITION IS ON RECORD. ITA NOS.755 & 756/CHNY/2018 :- 2 -: REASONS SHOWN ARE ACCEPTABLE. DELAY IS CONDONED AN D APPEALS ARE ADMITTED. 2. GROUNDS TAKEN BY THE DEPARTMENT ARE COMMON FOR B OTH THE YEARS, AND THESE ARE RE-PRODUCED HEREUNDER: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW, FACTS AND CIRCUMSTANCES OF THE CASE 2. THE LEARNED CIT(A) HAS ERRED IN DELETING THE DIS ALLOWANCE MADE IN RESPECT OF THE EXCESS EXPENDITURE OF RS.54.99 LAKHS CLAIMED IN RESPECT OF LICENCE FEE PAYMENT 2.1 THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE NOT CONSIDERING THE FACT THAT THE ENTIRE EXPENDITURE WAS CAPITAL IN NATURE F ALLING WITHIN THE TERMS OF SEC.35ABB AND THE ASSESSEE WAS ELIGIBLE FOR DEDUCTI ON AS PER THE CONDITIONS UNDER SEC.35ABB AND NOT THE ENTIRE EXPENDITURE CLAIMED. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E AO HAD TREATED THE EXPENDITURE AS CAPITAL IN NATURE FALLING WITHIN THE AMBIT OF SEC.35ABB ON THE GROUND THAT THE NATURE OF FEE/EXPENDITURE HAD NOT U NDERGONE ANY CHANGE CONSEQUENT TO THE CHANGE IN THE NEW TELECOM POLICY EFFECTIVE FROM 01.08.1999 2.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ME RE PAYMENT OF AN AMOUNT IN INSTALLMENTS DOES NOT CONVERT OR CHANGE THE CAPITAL PAYMENT TO REVENUE IN NATURE. 2.4 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E TERM OF THE LICENCE WAS/IS 10 OR 20 YEARS FROM THE DATE OF COMMENCEMENT AND THERE FORE, THE EXPENDITURE WAS CAPITAL IN NATURE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O. RESTORED. 3. A READING OF THE ABOVE GROUNDS SHOW THAT THE REV ENUE IS AGGRIEVED ON THE DELETION OF A DISALLOWANCE MADE BY LD.AO ON LICENCE FEE PAID BY THE ASSESSEE. ITA NOS.755 & 756/CHNY/2018 :- 3 -: 4. ASSESSEE ENGAGED IN THE BUSINESS OF PROVIDING CE LLULAR MOBILE SERVICES, HAD PAID TWO TYPES OF LICENCE FEE, ONE FO R DOT LICENCE FROM DEPARTMENT OF TELECOMMUNICATIONS AND OTHER FOR WPC LICENCE FROM WIRELESS PLANNING AND COORDINATION WING OF THE MINI STRY OF COMMUNICATIONS. THESE LICENSES WERE FOR UTILIZATIO N OF APPROPRIATE RADIO FREQUENCY SPECTRUM. WPC LICENCE IS CO-TERMINUS WIT H DOT LICENCE. FOR THE IMPUGNED ASSESSMENT YEAR, LD.AO HELD THAT SUCH EXPENSES INCURRED BY THE ASSESSEE WERE CAPITAL IN NATURE. ACCORDING TO HIM, THE ASSESSEE COULD CLAIM ONLY WHAT WAS ALLOWED UNDER SEC.35ABB O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). IN OTHER WORDS, THE AO ALLOWED ONLY THE FEE WHICH WAS ACTUALLY PAID IN ACCORDANCE WITH SEC.35AB B OF THE ACT. 5. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THE LD .CIT(A). ASSESSEE POINTED OUT THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. BHARTI HEXACOM LTD. [2014] 97 DTR 0294, HAD AFTER C ONSIDERING THE GOVERNMENT TELECOM POLICY RULED THAT EXPENDITURE IN CURRED TOWARDS LICENCE FEE UP TO 31.07.1999 ALONE COULD BE TREATED AS CAPI TAL OUT GO AND LICENCE FEE WHICH HAS BASED ON REVENUE SHARING AFTER THE SA ID DATE HAD TO BE CONSIDERED AS REVENUE EXPENDITURE. LD.CIT(A) ACCEP TED THIS CONTENTION OF THE ASSESSEE. ACCORDING TO HIM, HONBLE DELHI HIGH COURT, IN THE ABOVE CASE, HAD ALSO HELD THAT EVEN CAPITAL EXPENDITURE Q UALIFIED FOR DEDUCTION U/S.35ABB OF THE ACT. THUS, HE DELETED THE DISALLO WANCE MADE BY THE AO. ITA NOS.755 & 756/CHNY/2018 :- 4 -: 6. NOW BEFORE US, THE LD.DR, THOUGH HE ADMITTED THA T THE ISSUE STOOD COVERED IN FAVOUR OF THE ASSESSEE THROUGH THE ABOVE MENTIONED JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF BHARTI H EXACOM LTD., SUBMITTED THAT MERE PAYMENT OF THE AMOUNT IN INSTALLMENTS WOU LD NOT CHANGE THE NATURE OF THE PAYMENT AND THERE COULD BE NO DIFFERE NCE IN THE NATURE OF THE LICENCE FEE PAYMENT, EVEN AFTER THE NEW TELECOM POLICY CAME INTO EFFECT ON 01.08.1999. 7. PER CONTRA, THE LD.AR SUPPORTING THE ORDERS OF T HE LD.CIT(A) POINTED OUT THAT THE CASE BHARTI HEXACOM LTD. (SUPRA), DECI DED BY THE HONBLE DELHI HIGH COURT, INCLUDED AN APPEAL OF THE REVENUE IN THE ASSESSEES CASE FOR THE AY 2001-02 ALSO. THUS, ACCORDING TO H IM, THE JUDGMENT SQUARELY COVERED THE ISSUES IN FAVOUR OF THE ASSESS EE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD CAREFULLY. JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BHARTI HEXACOM LTD.(SUPRA) DOES MENTION THAT IT WAS A COMMON ONE DISPOSING OF VARIOUS APPEALS FILED BY TH E LD.CIT(A) ON IDENTICAL QUESTIONS OF LAW. THE CASES CONSIDERED W ERE AS UNDER: 1. 1328/2010 - 2003-04 2. 1336/2010 - 2004-05 3. 114/2012 BHARTI HEXACOM 2006-07 4. 996/2011 - 2007-08 5. 893/2010 - 2000-01 6. 1680/2010 BHARTI CELLULAR 2001-02 7. 1679/2010 - 2002-03 8. 177/2010 BHARTI AIRTEL LTD. 2005-06 9. 1333/2010 BHARTI TELENET LTD. 2000-01 10. 417/2013 HUTCHINSON ESSAR PVT. LTD. 1999-2000 ITA NOS.755 & 756/CHNY/2018 :- 5 -: IT IS CLEAR THAT THE JUDGMENT COVERED THE QUESTION RAISED BEFORE US IN ASSESSEES CASE ITSELF, FOR THE AY 2001-02. IMP UGNED AYS BEFORE US ARE AY 2000-01 AND AY 2002-03. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE LD.CIT(A) WAS JUSTIFIED IN RELYING ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BHARTI HEXA COM LTD.(SUPRA), AND HOLDING IT IN FAVOUR OF THE ASSESSEE. THE ISSUE IN OUR OPINION STANDS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE JUDG MENT OF THE HONBLE DELHI HIGH COURT. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASONS TO INTERFERE WITH THE ORDERS OF THE LD.CIT(A). 9. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 1 ST DAY OF AUGUST, 2018, IN CHENNAI. SD/- SD/- ( . . ' ) ( DUVVURU R.L. REDDY ) $ /JUDICIAL MEMBER ( . ) ( ABRAHAM P.GEORGE ) /ACCOUNTANT MEMBER /CHENNAI, 8 /DATED: AUGUST 01, 2018. TLN 3 )$9: ;: /COPY TO: 1. ( /APPELLANT 4. < /CIT 2. )*( /RESPONDENT 5. : )$$ /DR 3. < ( ) /CIT(A) 6. % /GF