YOU BROADBAND & CABLE INDIA LTD ( FORMERLY KNWON AS YOU TELECOM INDIA P. LTD), MUMBAI V. DCIT 9(3), MUMBAI

ITA 8409/MUM/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0680 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 11-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2010
• Court: TRIBUNAL
• Department Lawyers: B S BIST; S PADMAJA
• Assessee Lawyers: MITESH JOSHI
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 8409/MUM/2010 (ASSESSMENT YEAR 2006 - 07) I.T.A. NO. 5918 /MUM/20 11 (ASSESSMENT YEAR 20 07 - 08 ) YOU BROADBAND & CABLE INDIA LTD . (FORMER LY KNOWN AS YOU BROADBAND INDIA PVT.LTD.) PLOT NO. 54, MAROL COOPERATIVE INDUSTRIAL AREA MAKWANA, OFF ANDHERI KURLA ROAD, ANDHERI EAST MUMBAI - 400 059. VS. DCIT 9(3) ROOM NO. 229 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDE NT ) I.T.A. NO. 53/MUM/2013 (ASSESSMENT YEAR 2008 - 09) I.T.A. NO. 54/MUM/2013 (ASSESSMENT YEAR 2009 - 10) I.T.A. NO. 6973/MUM/2013 (ASSESSMENT YEAR 2010 - 11) DCIT 9(3) ROOM NO. 229 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. YOU TELECOME INDIA PVT. LTD. (NOW KNOWN AS YOU BROADBAND & CABLE INDIA LTD) PLOT NO. 54, MAROL CO - OPERATIVE INDUSTRIAL AREA MAKWANA, OFF ANDHERI KURLA ROAD, ANDHERI EAST MUMBAI - 400 059. ( APPELLANT ) ( RESPONDENT ) PAN NO .AABCB6062F ASSESSEE BY SHRI MITESH JOSHI DEPARTMENT BY MISS S. PADMAJA & SHRI B.S. BIST DATE OF HEARING 2 6 . 4 . 201 7 DATE OF PRONOUNCEMENT 17 . 5 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - T HE APPEALS FILED BY THE ASSESSEE FOR AY 2006 - 07 AND 2007 - 08 AND THE APPEALS FILED BY THE REVENUE FOR AY 2008 - 09 TO 2010 - 11 ARE DIRECTED AGAINST THE YOU BROADBAND & CABLE INDIA LTD. 2 ORDERS PASSED BY LD CIT(A) - 20, MUMBAI . ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING INTERNET CONNECTION TO ITS SUBSCRIBERS . THE FIRST COMMON ISSUE URGED IN THE APPEALS FILED FOR AY 2006 - 07 & 2007 - 08 BY THE ASSESSEE AND THE APPEAL FILED BY THE REVENUE FOR AY 2008 - 09 RELATES TO THE DISALLOWANCE OF BANDWIDTH CHARGES U/S 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TAX AT SOURCE. THE ASSESSEE PROCURED BANDWIDTH FACILITIES FROM TELECOMMUNICATION COMPANIES AND PROVIDED INTERNET FACILITY TO ITS CUSTOMERS. FOR AVAILING BANDWIDTH FACILITIES, THE ASSESSEE HAS PAID BANDWIDTH CHARGES. THE A SSESSEE DID NOT DEDUCT TAX AT SOURCE FROM SUCH PAYMENTS. THE AO TOOK THE VIEW THAT THE PAYMENT OF BANDWIDTH CHARGES IS IN THE NATURE OF PAYMENT TOWARDS TECHNICAL SERVICES AND ACCORDINGLY TOOK THE VIEW THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE U /S 194J OF THE ACT. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, THE AO DISALLOWED THE BANDWIDTH CHARGES U/S 40(A)(IA) OF THE ACT IN ALL THE THREE YEARS CITED ABOVE . 3. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS ONLY AVAILED A STANDARD FACILITY PROVIDED BY THE TELECOMMUNICATION COMPANIES AND THE SAME WILL NOT FALL IN THE CATEGORY OF TECHNICAL SERVICES DEFINED IN SEC. 194J OF THE ACT. IN THIS REGARD, THE LD A.R TOOK SUPPORT FROM THE DECISION RENDERED BY HONBLE MADRAS HIGH COURT IN THE CASE OF SKYCELL COMMUNICATIONS LTD AND ANOTHER VS. DCIT (251 ITR 53). HE FURTHER SUBMITTED THAT THE HONBLE DELHI COURT HAS HELD IN THE CASE OF CIT VS. ESTEL COMMUNICATIONS P LTD (2009)(318 ITR 185) THAT THE PAYMENT TO NON - RESIDENT FOR PROVISION OF BANDWIDTH IS N OT FEE FOR TECHNICAL SERVICES AND HENCE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE IS PROVIDING INTERNET ACCESS TO ITS CUSTOMERS BY PROCURING BANDWIDTH FROM TELECOMMUNICATION YOU BROADBAND & CABLE INDIA LTD. 3 COMPA NIES, WHICH IN TURN ENSURE SEAMLESS TRANSMISSION OF DATA. THE INTERNET PROTOCOLS ARE NOT MERE STANDARD INFRASTRUCTURE AS CONTENDED BY THE ASSESSEE. REFERRING TO A TECHNICAL MANUAL, THE LD D.R SUBMITTED THAT THE INTERNET SERVICE PROVIDER LIKE ASSESSEE IS IN THE MIDDLE OF STRUCTURE BETWEEN THE CUSTOMER AND IBPS. SHE SUBMITTED THAT THE DATAS ARE TRANSFERRED BETWEEN ONE NODE AND ANOTHER NODE AND IN THIS PROCESS THE IBPS PEER WITH EACH OTHER BY TRANSMITTING DATA OF ITS OWN CUSTOMERS AND CUSTOMERS OF OTHERS. A CCORDINGLY SHE SUBMITTED THAT THE ACTIVITIES CARRIED ON BY THE TELECOMMUNICATION COMPANIES WOULD RESULT IN RENDERING OF TECHNICAL SERVICES TO THE ASSESSEE IN THE FORM OF PROVIDING BANDWIDTH FACILITY. THE LD D.R ALSO REFERRED TO CERTAIN DECISIONS RELIED ON BY LD CIT(A), WHICH WERE RENDERED IN THE CONTEXT OF SEC. 80 - O OF THE ACT , IN THIS REGARD . THE LD D.R ALSO RELIED UPON THE DECISION RENDERED BY AAR IN THE CASE OF AJMER VIDYUT VITRAN NIGAM LTD (2012)(24 TAXMANN.COM 300), WHEREIN THE AAR HAS HELD THAT THE E LECTRICITY TRANSMISSION SERVICES ARE TECHNICAL SERVICES, SINCE THE SAME IS PAID TO ENSURE DUE AND PROPER TRANSMISSION OF ELECTRICAL ENERGY FROM GENERATION POINT TO DISTRIBUTION POINT. THE LD D.R SUBMITTED THAT THE IBPS ALSO ENSURE SEAMLESS TRANSMISSION OF DATA AND HENCE THE BANDWIDTH CHARGES PAYMENT SHOULD ALSO BE CONSIDERED AS PAYMENT MADE TOWARDS TECHNICAL SERVICES. THE LD D.R FURTHER SUBMITTED THAT THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND TELECOMMUNICATION COMPANY HAS NOT BEEN EXAMINED BY ANY AUT HORITY AND ACCORDINGLY PRAYED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. EVEN THOUGH THE LD D.R PLACED RELIANCE ON THE DECISION RENDERED AAR, WE ARE UNABLE TO FOLLOW THE SAME IN VIE W OF THE AVAILABILITY OF THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF ESTEL COMMUNICATIONS P LTD (SUPRA), WHEREIN THE HIGH COURT HAS HELD THAT THE PROVISION OF INTERNET BANDWIDTH DOES NOT INVOLVE YOU BROADBAND & CABLE INDIA LTD. 4 PROVISION OF ANY TECHNICAL SERVICES. FU RTHER THE HONBLE MADRAS HIGH COURT HAS ALSO HELD IN THE CASE OF SKYCELL COMMUNICATIONS LTD (SUPRA) THAT THE PROVISION OF SERVICES THROUGH A STANDARD FACILITY WILL NOT RESULT IN PROVISION OF TECHNICAL SERVICES AS CONTEMPLATED IN SEC. 194J OF THE ACT. WE A LSO NOTICE THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE CO - ORDINATE BENCH IN THE CASE OF PACIFIC INTERNET (INDIA) (P) LTD VS. ITO (2009)(27 SOT 523), WHEREIN THE PAYMENT MADE FOR PROCURING BANDWIDTH AND NETWORK OPERATION FACILITIES WAS NOT IN THE NATURE O F PAYMENT FOR TECHNICAL SERVICES AND THE COORDINATE BENCH HAS FOLLOWED THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF ESTEL COMMUNICATIONS (P) LTD (SUPRA). ACCORDINGLY BY FOLLOWING THE DECISION RENDERED BY HONBLE DELHI HIGH COURT, WE HO LD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE BANDWIDTH CHARGES U/S 194J OF THE ACT AS THE SAME IS NOT PAYMENT TOWARDS TECHNICAL SERVICES. ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY LD CIT(A) ON THIS ISSUE IN ALL THE THREE YEARS R EFERRED ABOVE AND DIRECT THE AO TO DELETE THE ADDITION MADE U/S 40(A)(IA) OF THE ACT. 6. NOW, WE SHALL TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR A.Y. 2007 - 08. FIRST ISSUE RELATES TO DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT , WHICH HAS BEEN DISPOSED OF IN THE EARLIER PARAGRAPHS. 7. NEXT ISSUE RELATES TO DEPRECIATION CLAIMED BY THE ASSESSEE ON GOOD WILL AMOUNT, WHICH HAS BEEN DIS ALLOWE D BY THE AO AND LEARNED CIT(A) . THIS ISSUE HAS SINCE BEEN SETTLED BY HON'BLE SUPREME COURT IN THE CASE OF SM IFS SECURITIES LTD 348 ITR 302, WHEREIN HON'BLE SUPREME COURT HAS HELD THAT DEPRECIATION IS ALLOWABLE ON GOODWILL. ACCORD I NGLY, WE REVERSE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW DEPRECIATION ON GOODWILL AMOUNT . 8 . NOW WE SHALL TAKE UP THE APPEAL FILED BY THE REVENUE FOR A.Y. 2008 - 09. IN THIS YEAR, THE LD CIT(A) HAS DELETED THE ADDITION MADE U/S 40(A)(IA) OF THE ACT YOU BROADBAND & CABLE INDIA LTD. 5 BY DISALLOWING BANDWIDTH CHARGES AND HENCE THE REVENUE HAS FILED APPEAL. THIS ISSUE HAS ALREADY BEEN DISPOSED OF BY US IN THE EARLIER PARAGRAPHS ALONG WITH THE APPEALS OF THE ASSESSEE FILED FOR AY 2006 - 07 AND 2007 - 08 . 9. NEXT ISSUE URGED BY THE REVENUE RELAT ES TO LEASE RENTAL EXPENDITURE CLAIMED BY THE ASSESSEE. T HE ASSESSEE HAD TAKEN CERTAIN ASSETS ON LEASE. ORIGINALLY, IT CAPITALISED THE VALUE OF ASSETS BY TREATING LEASE AS FINANCE LEASE AND CLAIMED DEPRECIATION THEREON. HOWEVER THE ASSESSEE FILED REVISED COMPUTATION OF INCOME AND CLAIMED ENTIRE LEASE INSTAL L MENT AS LEASE RENTAL EXPENDITURE . IN THE REVISED COMPUTATION DEPRECIATION WAS ALSO WITHDRAWN. THE ASSESSING OFFICER DID NOT ACCEPT THE REVISED COMPUTATION AND ACCORDINGLY DISALLOWED LEASE RENTALS. THE LEARNED CIT(A), HOWEVER, ALLOWED THE CLAIM OF THE ASSESSEE 10. LEARNED AR SUBMITTED T HAT THE LESSOR HAS BEEN ALLOWED DEPRECIATION AS OWNER OF THE ASSETS AND HENCE LEASE RENTAL PAID BY THE ASSESSEE IS ALLOWABLE AS DEDUCTION. LEARNED AR PLACED RELIANCE ON THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF ICDS LTD. ( 350 ITR 527) . 11. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. WE NOTICED THAT THE TAX AUTHORITIES HAVE NOT EXAMINED THE LEASE AGREEMENT. THE ASSESSEE SUBMITS THAT THE LESSOR , VIZ., M/S C ISCO SYSTEMS CAPITAL ( INDIA ) PVT. LTD. HAS BEEN ALL OWED DEPRECIATION AS OWNER OF THE ASSET AND HENCE LEASE RENTAL PAID BY THE ASSESSEE SHOULD BE ALLOWED AS DEDUCTION. SINCE THIS FACTUAL ASPECTS HAVE NOT BEEN EXAMINED BY THE TAX AUTHORITIES, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT T HE END OF THE ASSESSING OFFICER . A CCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH BY DULY CONSIDERING THE LEASE AGREEMENT AND ALSO THE FACTS AVAILABLE IN THE CASE OF LESSOR. YOU BROADBAND & CABLE INDIA LTD. 6 12. WE SHALL NOW TAKE UP THE APPEALS FILED BY THE REVENUE FOR A.Y. 2009 - 10 & 2010 - 11. IN BOTH THE YEARS THE ISSUE RELATES TO LEASE RENTAL CLAIMED BY THE ASSESSEE AS DEDUCTION . I DENTICAL ISSUE WAS CONSID ERED BY US IN A.Y. 2008 - 09 IN THE PRECEDING PARAGRAPH, WHEREIN WE HAVE RESTORED THIS MATTER TO THE FILE OF THE ASSESSING OFFICER. CONSISTENT WITH THE VIEW TAKEN, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE IN BOTH YEARS AND RESTORE TH E SAME TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THEM AFRESH. 13. IN THE RESULT, APPEALS FILED BY THE ASSESSEE IN A.Y . 2006 - 07 & 2007 - 08 ARE ALLOWED; APPEAL FILED BY THE REVENUE IN A.Y. 2008 - 09 IS TREATED AS PARTLY ALLOWED AND APPEALS FILED BY T HE REVENUE FOR A.Y. 2009 - 10 & 2010 - 11 ARE TREATED AS ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 17 .5. 201 7. SD/ - SD/ - (SANDEEP GOSAIN ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 17 / 5 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI