REACH NETWORK INDIA PRIVATE LIMITED , MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 9 ( 3), MUMBAI

MA 66/MUM/2018

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 7863 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/SHRI B. R. BASKARAN , ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER M.A. N O . 66 /M/201 8 (ARISING OUT OF ITA NO. 8102 /MUM/201 0 ) ( / ASSESSMENT YEAR: 2007 - 08 ) REACH NETWORK INDIA P. LTD. TIMES SQUARE, UNIT - 4, B - WING, 3 RD , FLOOR, ANDHERI KURLA ROAD, ANDHERI EAST MUMBAI - 400059. / VS. ACIT - 9(3) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. /. /. PAN/GIR NO. : AABCT 2555 M ( / APPELLANT ) / APPLICANT .. ( / RESPONDENT ) / DATE OF HEARING: 03 .0 8 .201 8 /DATE OF PRONOUNCEMENT: 27. 0 9 . 2018 ORDER PER AMARJIT SINGH, J M THIS ORDER SHALL DISPOSE OF THE MISCELLA N EOUS APP LICATION MOVED BY THE ASSESSEE BEARING NO.66/M/18 ARISING OUT OF THE ITA. NO. 8102 /M/1 0 FOR THE A.Y.2007 - 08 . 2. IT IS AVERRED IN THE APPLICATION THAT THE CLAIM OF DEDUCTION U/S 80 - IA (4)(II) OF THE ACT DENIED BY THE HONBLE TRIBUNAL VIDE JUDGMENT DATED 12.07.2017 ON THE BASIS OF THE WRONG NOTION AND ON THE BASIS OF WRONG FA CTS NARRATED BY THE ASSESSEE IN ADVERTENTLY ITS REPLY DATED 25.11.2009 IN WHICH THE SO CALLED TRADING IN BANDWIDTH CANNOT BE REGARDED AS PROVISION OF INTERNET SERVICES , THEREFORE, THE ORDER HAS BEEN PASSED ON ACCOUNT OF WRONG UNDERSTANDING OF FACTS WHICH IS LIABLE TO BE RECALLED. IT IS ALSO AVERRED THAT THE ASSESSEE COMPANY WAS INCORPORATE D IN AUGUST, 2000 AND IT WAS GRANTED APPROVAL BY FIPB TO UNDE RTAKE ASSESSEE BY: SHRI J. D. MISTRY (AR) REVENUE BY: S HRI DR. MANOJ KUMAR MA 66 / MUM/201 8 CERTAIN ACTIVITIES LIKE (I) TO ACT INTERNET SERVICE PROVIDER (II) AND PROVIDE INTERNET CONNECTIVITY AND RELATED SERVIC ES (III) TO PROVIDE CAPITAL IP - BN SERVICE (IV) TO SET UP AN INTERNATIONAL GATEWAY AND PROVIDE GATEWAY SERVICES. THE DEPARTMENT OF TELECOMMUNICATION GRANTED ITS LICENSE FOR A PERIOD OF 15 YEARS W.E.F. 05.02.2001 FOR PROVIDING INTERNET SERVICES ALL OVER INDIA. THE ASSESSEE HAS CREDITED IN THE P&L ACCOUNT FOR SUM OF RS.26.97 CRORES AS SALE OF BANDWIDTH AND RS.2.21 CRORES UNDER THE HEAD NETWORK AND SUPPORT SERVICES FEE, THAT IT HAD CHARGED TO ITS P&L ACCOUNT RS.29.60 CRORES AS OPERATING AND OTHER EXPENSE S INCLUDING BANDWIDTH PROCUREMENT RS.18.97 CRORES AND NETWORK & SUPPORT FEE OF RS.3.06 CRORES . THE ASSESSEE CLAIM DEDUCTION OF RS.1.34 CRORES U/S 80 - IA (4)(II) OF THE ACT. THE ASSESSEE WAS HELD MERELY A TRADER IN BANDWIDTH BEING THE ASSESSEE WAS PURCHASING WITH BANDWIDTH FROM VARIOUS ISP.S AND WAS SELLING TO OTHER ISP.S, SO THE CLAIM OF THE ASSESSEE U/S 80 - IA OF THE ACT WAS DECLINED. THE SERVICES OF THE ASSESSEE WAS NO T IN THE NATURE OF TRADER. THE ASSESSING OFFICER AS WELL AS THE CIT(A) AND THE HONBLE ITAT HAS MISCONSTRUED INTERPRETATION OF LETTER DATED 25.11.2009 AND WRONGLY DENIED THE CLAIM OF THE ASSESSEE, THEREFORE, THE ORDER WAS PASSED BY THE HONBLE ITAT IS LIAB LE TO BE RECALLED IN THE INTEREST OF JUSTICE. 3. NOTICE APPLICATION WAS GIVEN OF THE REVENUE WHO RELIED UPON THE ORDER PASSED BY THE HONBLE ITAT DATED 12.07.2017. 4 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. ON APPRAISAL OF THE ORDER PASSED OF THE HO NBLE ITAT, WE NOTICED THAT HONBLE ITAT HAS MAINLY CONSIDERED THE LETTER DATED 25.11.2009 FOR CONSIDERING THE C LAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA OF THE ACT. IN BRIEF, THE CLAIM OF THE ASSESSEE IS BASED UPON THE MEANING FOR DESCRIPTION OF INTERNET SERVICE PROVIDE RS (ISP). THE ASSESSEE ALSO RELIED UPON THE MEANING OF THE SERVICE INTERPRETED BY WIKIPEDIA WEB SITE. THE INTERNET SERVICES ARE GENERALLY BY INTERMEDIARIES BY (A) ACQUIRING THE RIGHT TO USE OF BANDWI D TH, ACQUIRING/SETTING UP THE MA 66 / MUM/201 8 NECESSARY HARDWARE/INFRASTRUCTURE AND MAKING THE BANDWITH ACQUIRED AS PER POINT (A) TO OUTSIDERS/ CUSTOMERS BY USING EQUIPM ENTS AS PER POINT. IN BRIEF, THE CONTROVERSY HAS BEEN DECIDED BY THE AO AS WELL AS THE CIT AND EVEN HONBLE ITAT ON THE BASIS OF SAID LETTER DATED 25.11.2009 WHICH NOWHERE LEADS CORRECT DEFINITION OF THE NATURE OF THE BUSINESS. THE ASSESSEE HAS MENTIONED I N ITS FORM NO. 3CA AND 3CD ABOUT THE NATURE OF BUSINESS OF INTERNET SERVICE PROVIDER AND NETWORK AND SUPPORT SERVICE . THE ASSESSEE HAS CHARGED THE SERVICE TAX FROM ITS CLIENT WHICH NOWHERE FALLS WITHIN THE AMBIT OF TRADE. THE ASSESSEE ALSO ISSUED TDS CERTIFICATE TO THE APPLICANT WHEREIN THE TAX DEDUCTED AT SOURCE U/S 194J OF THE ACT ON FEES IN PROFESSION OF TAKEN SERVICES TO ITS CUSTOMER WHICH CAN NOT BE TREATED AS TRADE OF BANDWIDTH. ON APPRAISAL OF THE DOCUMENTS ON RECORD AND CONSIDERING OF THE CONTENTION OF THE ASSESSEE , WE ARE OF THE VIEW THAT THE NATURE OF THE BUSINESS OF THE ASSESSEE HAS NOT BEEN PROPERLY INTERPRETED AND IT REQUIRES PROPER INTERPRETATION . N OW IT IS TO BE SEEN WHETHER IN THE CI RCUMSTANCES THE ISSUE IS LIABLE TO BE RECALLED OR NOT. SO IN THIS REGARD, WE NOTICED THAT IF AN ORDER HAS BEEN PASSED BY THE TRIBUNAL ON THE BASIS OF MISCONCEPTION AND MISAPPREHENSION, THEREFORE, THE ORDER DOES NOT FALL WITHIN THE AMBIT OF REVIEW SO UNDOUB TEDLY IT CAN BE RECALLED, IN VIEW OF THE PROVISION OF SECTION 2 54(2) OF THE ACT. WE ALSO FIND SUPPORT OF LAW SETTLED BY HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF H. H. MAHARAJA MARTANT SINGH VS. CIT DATED 14.10.1987 & DELHI HIGH COURT CIT VS. SHAKUN TALA RAJESHWAR 160 ITR PAGE 840, THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES, WE RECALL THE ORDER DATED 22.07.2017 VIS - - VIS ISSUE OF CLAIM OF DEDUCTION U/S 80IA OF THE ACT OF DECIDING AFRESH IN ACCORDANCE WITH LAW. MA 66 / MUM/201 8 IN THE RESULT , THE MISCELLANEOUS APPL ICATION FILED BY THE ASSESSEE IS HEREBY ALLOWED . ORDER WAS PRON OUNCED IN TH E OPEN COURT ON 27. 09. 2018 . SD/ - SD/ - ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI, DT: 27. 09 . 2018 . VIJAY COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, G , BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES