Supreme Court modifies order to include Question 'B' for consideration. Procedural aspect emphasized.

The Supreme Court allowed the appeal, modifying the High Court's order to include Question 'B' for consideration. The judgment focused on the procedural aspect of admitting the appeal for Question 'B' without expressing any opinion on the merits of the submissions, which will be independently reviewed.

---

---

Issues:
1. Disallowance of depreciation claimed on account of Asset Reconstruction Cost (ARC).
2. Disallowance of interest under Section 36(1)(iii) for installation of cell site towers.
3. Disallowance made under section 40(a)(ia) for misbranding discount as commission.
4. Rejection of comparable used in benchmarking international transaction.
5. Remanding issue of AMP expenses for fresh consideration.
6. Refusal to consider the extension of business argument as a substantial question of law.

Issue 1: Disallowance of depreciation claimed on account of Asset Reconstruction Cost (ARC):
The Tribunal upheld the disallowance of depreciation on ARC claimed by the appellant. The questions raised included whether the disallowance was justified and if deduction for such expenditure should be allowed in the year of lease execution or over the lease period. The High Court's judgment under appeal was in Income Tax Appeal No.660 of 2018.

Issue 2: Disallowance of interest under Section 36(1)(iii) for installation of cell site towers:
The Tribunal held that the installation of cell site towers constituted an extension of the existing business, leading to a proportionate disallowance of interest under Section 36(1)(iii). The High Court concurred with this view, stating that the objective was to reach more customers and increase the subscriber base, justifying the disallowance. The appellant's argument that it only aimed to improve efficiency was deemed unpersuasive.

Issue 3: Disallowance made under section 40(a)(ia) for misbranding discount as commission:
The Tribunal upheld the disallowance made by the Assessing Officer under section 40(a)(ia) for misbranding the discount offered to pre-paid sim card distributors as commission. The appellant's contention was rejected, leading to the disallowance being upheld.

Issue 4: Rejection of comparable used in benchmarking international transaction:
The Tribunal rejected the comparable used by the appellant in benchmarking its international transaction of royalty payment, citing that the agreement between two foreign parties was not functionally comparable. The rejection led to a dispute regarding the proper benchmarking of the royalty payment transaction.

Issue 5: Remanding issue of AMP expenses for fresh consideration:
The Tribunal remanded the issue of advertising, marketing, and promotion (AMP) expenses for fresh consideration, despite the appellant having placed all relevant materials on record. This decision raised questions about the necessity for further examination of the AMP expenses.

Issue 6: Refusal to consider the extension of business argument as a substantial question of law:
The High Court refused to consider the appellant's argument that the installation of cell site towers did not amount to an extension of existing business as a substantial question of law. However, the Supreme Court found this to be a substantial question meriting consideration, leading to the modification of the High Court's order to include Question 'B' for further examination.

In conclusion, the Supreme Court allowed the appeal, modifying the High Court's order to include Question 'B' for consideration. The judgment focused on the procedural aspect of admitting the appeal for Question 'B' without expressing any opinion on the merits of the submissions, which will be independently reviewed.

---