ITAT allows assessee's appeal, deletes additions for telecom license amortization and spectrum depreciation under sections 35ABB and 32

ITAT Delhi allowed the assessee's appeal against CIT(A)'s order under sections 154 and 250. The tribunal found that AO erroneously disallowed amortization of telecom license under section 35ABB and depreciation on telecom spectrum usage rights under section 32 through rectification order, failing to appreciate these were separate distinct claims. CIT(A) committed jurisdictional error by disallowing amount of Rs. 2,77,04,74,906 which was outside the scope of appeal before him and pertained to separate proceedings. The tribunal deleted additions made by both AO and CIT(A), ruling their actions were legally unsustainable.

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Issues:
1. Opportunity of being heard not granted by CIT(A)
2. Reference of two separate appeals in the order passed by CIT(A)
3. Disallowance of deduction under section 35ABB
4. Exercising jurisdiction beyond the scope of appeal by CIT(A)

Analysis:

Issue 1: Opportunity of being heard not granted by CIT(A)
The Assessee appealed against the order of the Ld. CIT(A) for Assessment Year 2016-17, citing that no opportunity of being heard was granted, thus violating the principles of natural justice. The Appellant argued that the appeal was disposed of ex-parte without granting a fair hearing.

Issue 2: Reference of two separate appeals in the order passed by CIT(A)
The Assessee contended that the CIT(A) erred by referencing two separate appeals in the order, leading to confusion regarding which appeal was being addressed. The CIT(A) failed to clarify the issue in dispute and did not decide on the grounds of appeal filed against the order passed under section 154 read with section 143(3) of the Income-tax Act.

Issue 3: Disallowance of deduction under section 35ABB
The Assessee made two claims in the return for Assessment Year 2016-17, one for amortization of telecom license and the other for depreciation on the right to use telecom spectrum. The AO disallowed the depreciation claim but allowed an alternative relief under section 35ABB. However, a rectification order was passed alleging excess deduction under section 35ABB. The CIT(A) declared the appeal as "Allowed" without deciding on the issue, leading to the Assessee filing the present appeal.

Issue 4: Exercising jurisdiction beyond the scope of appeal by CIT(A)
The Assessee raised additional grounds of appeal, arguing that the CIT(A) exceeded its jurisdiction by disallowing an amount that was part of a separate appeal proceeding and not within the scope of the current appeal. The CIT(A) had disallowed an amount that had already been allowed to the Assessee in a previous order, which was beyond the subject matter of the current appeal.

In conclusion, the Tribunal allowed the Assessee's appeal, finding errors in both the AO's order and the CIT(A)'s decision. The Tribunal held that the AO and CIT(A) failed to recognize the separate nature of the Assessee's claims, leading to incorrect disallowances. The CIT(A) was found to have gone beyond the scope of the appeal by disallowing an amount not under consideration in the current proceedings. As a result, the Tribunal allowed the appeal and deleted the additions made by the AO and CIT(A).

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