2018 (2) TMI 1272 - AT - Income Tax

Tribunal Decision on Tax Adjustments, Depreciation Rates, LIC Deduction, Interest Levy, and Telecom Services

M/s Vodafone Essar East Ltd. formerly known as Hutchison Telecom East Ltd. Versus JCIT, Range-7, Kolkata And Vice-Versa

The Tribunal upheld the CIT(A)'s decision to allow adjustment of unabsorbed depreciation while computing book profit under section 115JB. The Tribunal ... Adjusting the unabsorbed depreciation while computing the book profit u/s 115JB - MAT application - Held that:- We find that the amounts of brought forward losses are greater than the amount of unabsorbed depreciation. The assessee is entitled for unabsorbed depreciation amounting to ₹37,35,12,000/- only. There was a profit in the assessment year 2002-03 for ₹ 2,79,09,000/- before the claim of the depreciation pertaining to that AY 2002-03. However, in the year under consideration the assessee had shown brought forward business losses of ₹ 1,60,85,45,000/- and unabsorbed depreciation of ₹ 37,35,12,000/-. Unabsorbed depreciation is lower than the amount of brought forward losses therefore in our considered view the assessee is entitled to claim the deduction of unabsorbed depreciation while determining the profit u/s 115JB of the Act. The amount of unabsorbed depreciation is inclusive of the deprecation pertaining to the assessment year 2002-03 for ₹ 6,67,29,000/-. Thus, it cannot be concluded that the amount of unabsorbed depreciation ₹ 6,67,29,000/- is not eligible for deduction while that determining the book profit u/s 115JB of the Act. - Decided against revenue. No hesitation to hold that the assessee can claim the deduction either of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. Disallowing depreciation @ 25% on computers instead of 60% claimed by it - Held that:- In the instant case, the issue relates to the rate of depreciation claimed by assessee on computer(s) and its accessories. The assessee in the immediate preceding Assessment Year i.e. 2003-04 claimed depreciation on computers @ 60% whereas the AO allowed depreciation @ 25% on the computers(s) on the ground that sufficient documentary evidence were not produced by the assessee during assessment proceedings pertaining to the AY 2003-04. The assessee has filed the documents before Ld. CIT(A) which is still sub judice. The AO on the basis of disallowance made in the immediate preceding AY also made similar disallowance on the opening WDV in the year under consideration. On perusal of impugned appellate order, we note that Ld. CIT(A) in the immediate preceding AY i.e. 2003-04 has directed the AO to verify the necessary records and adjudicate the issue accordingly. As none of the party has brought to our notice about the outcome of the order passed by Ld. CIT(A) in the immediate preceding Assessment Year.We also note that the ld. CIT-A in the instant case has given very clear & unambiguous direction for adjudication of the impugned issue of depreciation. Therefore we do not find any infirmity in the order of ld. CIT(A). Ground of assessee is allowed for statistical purpose. Disallowance paid to LIC on account of contribution in respect of gratuity fund - Held that:- The impugned issue is duly covered in favour of assessee and against the Revenue by the judgment of Hon'ble Supreme Court in the case of Taxtool [2009 (9) TMI 66 - SUPREME COURT] Interest u/s 234B is not leviable if taxes paid under the provision of Minimum Alternate Tax (MAT) u/s. 115JB - Held that:- The issue stand covered against the assessee and in favour of Revenue by the judgment Hon'ble Supreme Court in the case of JCIT vs. Rolta India Ltd.[2011 (1) TMI 5 - SUPREME COURT OF INDIA]. Entitlement to choose 10 consecutive years out of 15 years for deduction u/s 80-IA and consequently allowing deduction @ 100% of the profit - Held that:- We hold that the assessee has the discretion to choose the initial year out of the block of 15 years. Thereafter the assessee would claim the deduction as per the provision of section 80-IA for the remaining year but subject to the block of 15 years. - Decided in favour of assessee. Allowing certain receipts as deduction u/s 80-IA - Held that:- The facts of the present case are identical to the case BSNL (2015 (12) TMI 1531 - ITAT DELHI) which was decided in favour of assessee. In the case on hand the AO made the disallowance of the deduction claimed by the assessee under section 80-IA of the Act in respect of certain receipts/ income i.e. Interest on Money deposited, Provision/liabilities written back, Bad debt recovery, Bounce cheque charges, Cell site sharing revenue and other income. Thus respectfully following in the case of BSNL (Supra) we direct the AO to allow the deduction under section 80-IA in respect of its receipts. Thus the ground of appeals raised by the Revenue is dismissed and the grounds of appeals raised by the assessee is allowed. Non-deduction of TDS on domestic roaming charges under section 40(a)(ia) - Held that:- We hold that the payment of roaming charges does not fall under the ambit of TDS provisions either u/s.194C/194I or 194J and hence we have no hesitation in directing the Learned Assessing Officer to delete the addition made u/s. 40(a)(ia) on this account. Issues Involved:1. Adjustment of unabsorbed depreciation while computing book profit under section 115JB.2. Depreciation rate on computers.3. Deduction of contribution to LIC for gratuity fund.4. Levy of interest under section 234B.5. Deduction under section 80IA for telecommunication services.6. Deduction under section 80IA for various receipts.7. TDS on domestic roaming charges.Issue-wise Detailed Analysis:1. Adjustment of Unabsorbed Depreciation:The Revenue challenged the CIT(A)'s decision to allow the adjustment of unabsorbed depreciation of Rs. 6.67 crores while computing the book profit under section 115JB for AY 2004-05. The Tribunal upheld the CIT(A)'s decision, stating that the assessee is entitled to claim the deduction of either brought forward losses or unabsorbed depreciation, whichever is less, as per the books of accounts. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.2. Depreciation Rate on Computers:The assessee contested the AO's decision to allow depreciation on computers at 25% instead of 60%. The Tribunal noted that the CIT(A) had directed the AO to apply the same rate of depreciation as decided for AY 2003-04. Since the outcome of the CIT(A)'s order for AY 2003-04 was not brought to the Tribunal's notice, the matter was remanded back to the AO for fresh adjudication. The Tribunal allowed the ground for statistical purposes.3. Deduction of Contribution to LIC for Gratuity Fund:The assessee claimed a deduction for a contribution of Rs. 5,69,248 to the LIC for a gratuity fund, which was disallowed by the AO as the fund was not approved by the IT Department. The Tribunal, following the Supreme Court's judgment in the case of Textool Co. Ltd., allowed the deduction, stating that the contribution to the LIC for the gratuity fund should be allowed even if the fund is pending approval.4. Levy of Interest under Section 234B:The assessee argued that interest under section 234B is not leviable in the case of computation of income under the provisions of Minimum Alternate Tax (MAT). The Tribunal dismissed this ground, following the Supreme Court's judgment in the case of JCIT vs. Rolta India Ltd., which held that interest under section 234B is leviable even when income is computed under MAT provisions.5. Deduction under Section 80IA for Telecommunication Services:The Revenue argued that the assessee should not be allowed to choose the initial year for claiming deduction under section 80IA. The Tribunal upheld the CIT(A)'s decision, allowing the assessee to choose any ten consecutive years out of fifteen years for claiming the deduction. The Tribunal found that the amended provisions of section 80IA allow such an option and dismissed the Revenue's appeal.6. Deduction under Section 80IA for Various Receipts:The Revenue contested the CIT(A)'s decision to allow deduction under section 80IA for certain receipts such as interest on margin money, provision/liabilities written back, bad debt recovery, bounce cheque charges, and cell site sharing revenue. The Tribunal, following the judgment of the Delhi High Court in the case of BSNL, allowed the deduction for these receipts, stating that they are eligible for deduction under section 80IA as they are derived from the business of providing telecommunication services.7. TDS on Domestic Roaming Charges:The assessee challenged the disallowance of Rs. 44,31,05,283 on account of non-deduction of TDS on domestic roaming charges under section 40(a)(ia). The Tribunal, following its earlier decision in the assessee's own case for AY 2007-08, held that the payment of roaming charges does not fall under the ambit of TDS provisions under sections 194C, 194I, or 194J, and directed the AO to delete the disallowance.Summary of Appeals:- ITA No. 343/K/2009 (Revenue) dismissed.- ITA No. 356/K/2009 (Assessee) partly allowed for statistical purposes.- ITA No. 377/K/2009 (Revenue) dismissed.- ITA No. 357/K/2009 (Assessee) allowed.- ITA No. 482/K/2010 (Revenue) dismissed.- ITA No. 485/K/2010 (Assessee) allowed.- ITA No. 673/K/2011 (Assessee) allowed.- ITA No. 431/K/2012 (Assessee) allowed.