TaxTMI 
TaxTMI 
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2006 (2) TMI 224
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....sh, maintain and work telecommunication services within the territorial jurisdiction of the Union Territory of Delhi and areas covered by the Municipal Corporation of Bombay, New Bombay and Thane. This licence was effective from 1st April, 1986 and was for a period of 5 years. The licence fee fixed for the same was Rs. 101 per annum. The appellant-company purchased the fixed assets for a total consideration of Rs. 900 crores vide sale agreement entered by the appellant-company and the President of India. The sale consideration was discharged by allotment of shares of Rs. 599,94,84,000 to the President of India. Balance sale consideration was treated as unsecured loan. As per the agreement entered by the appellant-company and the DoT, charges payable for the use of the national network are fixed at a percentage of gross income booked for the year. The national network charges are part of the operation expenses. The licence fee and national network charges were allowed as expenses and there is no dispute on this issue till asst. yr. 1993-94. 4. Later on the DoT vide letter dt. 2nd March, 1989, imposed a rural levy of 7 per cent of the gross amount of the revenue. This levy was incre....
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....plicable at that point of time. 7. A similar issue arose in asst. yr. 1997-98. The AO disallowed the claim of the appellant on account of the licence fee of Rs. 234.70 crores. The disallowance in this year has been made by the assessing authority for the same reasoning that the payment was nothing but sharing of revenue between DoT and this assessee. Since the appellant-company has stopped payment under the rural levy charges, there was substantial increase in the licence fee from Rs. 101 per annum to Rs. 234.70 crores which is nothing but rural levy charges. For this purpose the AO referred to a communication addressed by the DoT, dt. 22nd Sept., 1993 whereby the chairman-cum-managing director (CMD) of the appellant-company was invited for discussion at the convenience of the CMD. The AO in support of his contention also prepared a chart year-wise to highlight the fact that rural levy charges were substantially high when the licence fee was nominal. However, after the stoppage of the rural levy charges, the licence fee has been increased substantially. On the basis of the above, the AO was of the view that there was no justification or rationale for the DoT to increase the licenc....
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....r passed in the case of Videsh Sanchar Nigam Ltd., ignoring the fact that the stand of the assessee was quite opposite to the stand taken before the learned CIT(A). It was further stated by the AO that the Tribunal has failed to construe the true import of the plea of the Department in not referring to the relationship between the assessee-company and the DoT. The Department's stand that the abnormal hike in the licence fee without any rationale behind the same was accepted by the assessee without any demure, not because of any business consideration but because of its position under the DoT. On the basis of above reasoning and the reason given in the earlier assessment orders, the AO disallowed the claim for the assessment year, i.e., asst. yr. 2001-02 as well. The order in appeal for asst. yr. 2001-02 had since been passed by the Tribunal on 11th Oct., 2004. 10. At the time of the hearing of this appeal for asst. yr. 1998-99, the Revenue raised a preliminary objection that there is a difference of opinion between the decision of the Hon'ble Tribunal in the case of the appellant in the order passed for the asst. yrs. 1995-96 and 1996-97 and the order passed by the Tribunal for th....
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.... as covered by earlier orders of the Tribunal. He supported the contention that disallowance of licence fee is justified. The learned Authorised Representative on the contrary submitted that the issue is squarely covered in favour of the appellant by the earlier orders of the Tribunal. On merit it was contended by the learned Authorised Representative that the licence fee is an expenditure incurred for carrying on the business and is allowable under the provisions of s. 37 of the Act. As per provisions of s. 4 of the Indian Telegraph Act, the Central Government has the exclusive privilege of establishing, maintaining and working telegraphy. Sec. 4 simply declares the sovereign right of the Central Government and does not create such a right in it. The Central Government has granted a licence to the appellant-company in terms of the proviso to s. 4 of the Indian Telegraph Act which authorises the Central Government to grant licence on such conditions and in consideration of such payment as it thinks fit. Thus, obtaining of a licence is a condition precedent to the carrying on of the business. Further, the consideration, as clearly provided in the proviso, is to be determined by the ....
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....f the liability in respect of the payment of royalty for obtaining eucalyptus and pinewood trees from the forest belonging to the State Government. The assessee was liable to pay royalty as determined by the Government. It was held that the said liability is a statutory liability, not a contractual liability. The Court observed that in the case in hand, the Government is the authority to decide the rate of royalty and that can be revised. The assessee can only make a request for a lower rate of royalty. Had it been a contractual liability, how can the power of fixation of the rate of royalty be with the Government only? Similarly in the case of Hukumchand Jute & Industries Ltd. vs. CIT (2000) 158 CTR (Cal) 28 : (2000) 241 ITR 517 (Cal) it has been held that the State Electricity Board is constituted under the statute and any liability fixed by the State Electricity Board shall be statutory liability. Similarly in the case of CIT vs. Swadeshi Mining & Manufacturing Ltd. (1978) 112 ITR 276 (Cal) it has been held that the liability to pay additional price for the sugarcane purchased was governed by the provisions of Sugarcane (Control) Order, 1955, and as such it was statutory liabili....
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....ute is that the assessee-company, MTNL, a public sector undertaking, was incorporated on 28th Feb., 1986 under s. 4 of Indian Telegraph Act, 1885. DoT vide memorandum dt. 27th March, 1986 transferred the management, control and operations of telecommunication in Delhi, Mumbai, Navi Mumbai and Thane Districts to the assessee-corporation along with all the assets and liabilities of the said telephone Districts for a consideration of Rs. 900 crores pursuant to agreement between the President of India and MTNL w.e.f. 1st April, 1986. 16. The sale consideration was discharged by way of allotment of 59,99,48,400 shares of Rs. 10 each to the President of India for consideration other than cash and the balance sale consideration was treated as unsecured loan to MTNL carrying interest @ 14 per cent per annum. Licence to establish, maintain and work telephone services in metros of Delhi, Mumbai, New Mumbai, Thane was granted to MTNL w.e.f. 1st April, 1986 initially for a period of 5 years. In the aforesaid licence, MTNL was required to pay licence fee of Rs. 101 per annum. 17. DoT vide its letter dt. 2nd March, 1989 imposed 7 per cent levy called national network charges on the gross amoun....
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....nce Minister's communication to the Minister of Telecommunication pointing out that it is not just and correct that MTNL, a Government company, does not pay its fair share of the tax. 21. MTNL for the asst. yrs. 1987-88 onwards till 1992-93 paid Rs. 101 per annum as licence fee to DoT. The said amount was never claimed as expenditure. However, for the asst. yr. 1994-95, Rs, 1,24,85,60,000 was claimed as deduction on account of licence fee for the first time. This deduction has been claimed on the basis of OM dt. 13th May, 1994 issued by DoT. In this OM, it is stated that licence fee @ Rs. 800 per working DEL w.e.f. 1st April, 1993 will be payable by MTNL to DoT. The said OM does not state and describe the nature of the licence fee and why suddenly it has been increased to a substantially huge amount from Rs. 101 per year. The assessee was paying Rs. 101 per year as licence fee from 1986 onwards till 1994. It may also be relevant to mention that the office memorandum is dt. 13th May. 1994 i.e. after close of the accounting year and closing of books of account on 31st March, 1994. 22. DoT by another office memorandum dt. 5th May, 1995 "provisionally subject to review/revision" aske....
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.... 1997-98 8822542428 2347015500 - 1998-99 10239976824 2711091600 - 1999-00 110911893393 3066066000 - 2000-01 10504170000 3288550000 - 2001-02 11316630000 3615300000 - 2002-03 7335090000 6652420000 - 2003-04 1099544000 6162371483 - ----------------------------------------------------- 24. A cursory glance at the abovementioned table will show that after the rural levy was withdrawn, almost simultaneously after a period of one year, the token amount of licence fee was enhanced to Rs. 124 crares. It was more than fortuitous coincidence. 25. As has been indicated earlier the assessee's claim under the head licence fees was disallowed for the first time in asst. yr. 1996-....
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.... privilege of establishing, maintaining and working of telecommunication within India has been given to the Central Government (DoT) which, in turn has issued licence to the assessee and the consequences of breach of the terms and conditions of the said licence or default in payment of any consideration payable thereunder by the assessee would incur liability of revocation of the said licence under s. 8 of the Act. It was also submitted that the learned assessing authority had overlooked the fact that the character and nature of the so-called revenue sharing under the Act is to be judged by terms and conditions of the licence issued under the Act and cannot be confused with terms under which VSNL makes the payment to DoT, which are totally different. It was further submitted that in the case of VSNL, the licence fee is a consolidated amount determined as a function of usage of telephone line, i.e., Rs. 3 per minute of usage whereas licence agreement entered into by the Central Government with the assessee under the provisions of the Act provide a separate collection by the assessee for and on behalf of Central Government (DoT) to which the specified share as per agreement accrues a....
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....olicitor General of India, Sh. Harish Salve. He advises that there being a difference between the natures of licence fees paid by VSNL from that of the MTNL, the two are not on par." In any event, the writ petition filed by MTNL against the Department is currently pending before the Supreme Court on this issue. 33. The assessee-company also filed a representation before the CBDT and it was claimed that the facts of the case of VSNL and MTNL are identical and since the CBDT had withdrawn the Departmental appeal filed before the Mumbai (Bombay) High Court, the appeal in the case of MTNL should also be withdrawn. The CBDT considered the representation of the MTNL and stated that "the basic facts involved in your case, in terms of your available infrastructure, the terms of agreement(s) with the DoT, the nature of licence fees payable by you, etc. are different from those involved in the case of VSNL. Accordingly, the CBDT is of the considered view that it is not possible to issue any directions in your case, particularly in view of the substantial question of law to be decided by the judicial authorities. 34. The intention of the DoT in this regard is also clear from the letter dt. ....
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.... DoT and reduce the assessee's taxable income. Payment made to DoT was only money spent out of profits earned and not expenditure incurred to earn profits. 38. The assessee's claim is also negated by the provision of s. 40(a)(ii) of the IT Act, which says "any sum paid on account of rate or tax levied on the gross profit or gain of any business or profession or assessed at proportion thereof or otherwise on the basis of such gross profit or gain is not allowable as deduction." The alleged licence fee has been levied by DoT only on the basis of gross profits and gains of the assessee and thus not allowable as a deduction. 39. It can be seen that the subject and reference given in the OMs starting from 13th May, 1995, cannot be correlated with the reference given by DoT while granting the original licence and their further extension. 40. Hence the nomenclature of "licence fee" used in these OMs can be directly correlated with the withdrawal of rural levy that was communicated by Minister of Finance's OM dt. 7th Feb., 1992 (Mrs. Archana Ranjan) and DO of the Finance Minister dt. 23rd June, 1993. It is in this context that an internal communication between DoT and MTNL is very relev....
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....fact this distinction becomes more apparent, if the cases of other entities and operators like reliance telecom are seen, where licence fee was taken at a single stroke, and thereafter deduction under s. 35ABB. However, in the case of MTNL it has been the stand of the Department that the provisions of s. 35ABB are not attracted, as this section deals with the tax treatment to be given in respect of expenditure that had actually been incurred to obtain licence. In the instant case, MTNL came into existence in the year 1986, and from its inception it was paying licence fee @ Rs. 101 per annum. As such the subsequent increase in the fee from asst. yr. 1994-95 onward cannot be treated as an amount paid to obtain the licence. In this background it may be pointed out that in cases of other operators the factual position is as under: (vi) In the case of Reliance Telecom the basic telephone services commenced from March, 2000, and the licence fee paid upto 31st March, 2000 was Rs. 1,79,08,58,630. The licence period remaining in the year ended 31st March, 2000 was 17 years, and the licence fee was apportioned over the remaining 17 years. Thus, there is no dispute over the Department and th....
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.... Dr. V. Gauri Shankar's opinion again wherein, he has stated that the payment of licence fee by MTNL is diversion of income by overriding title and hence is deductible. But such questions have not at all been considered by the Tribunal. 45. We have heard the parties and perused the material on record and precedents referred. The Revenue through a written note dt. 30th March, 2005 made a prayer to pass a judicial order making reference to the President, Tribunal, to constitute a Special Bench in view of the divergent views, between earlier Benches of the Tribunal. For asst. yrs. 1995-96 and 1996-97, the first Tribunal held that the income had already accrued to the MTNL before the revised charges were created in MTNL by OM dt. 5th May, 1995 for financial year 1994-95 and OM dt. 6th Sept., 1996 for financial year 1996-97 of DoT issued after the relevant accounting year. In other words, the OM had been issued not only after the accrual of income but even after the liability to tax has arisen for that year. In such circumstances, the Tribunal directed to allow deduction in respect of amounts which are relatable to the decisions and agreements which had taken place prior to or during t....
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.... (3) of s. 255 of the Act and thus the prayer made by them stood rejected at the time of hearing when the parties were directed to address the issues on merit of the case and the appeal was heard in various sittings in the backdrop of submissions and facts narrated by both the parties set out hereinbefore. 46. The learned Departmental Representative has also argued that the decision taken by the earlier Tribunal in the asst. yrs. 1995-96 and 1996-97 should have been accepted for the reason of consistency as facts and circumstances remained the same. However, in the present case in appeal, we find that the subsequent Tribunal took its own decision to hold the liability as statutory liability in the asst. yrs. 1997-98 and 2001-02 after considering the earlier decision for asst. yrs. 1995-96 and 1996-97 and thus there are conflicting decisions of the Tribunal of co-ordinate jurisdiction. That being so, it is now well settled that an earlier decision which is binding between the parties loses its binding force if between the parties a second decision decides to the contrary. In the third litigation, which is now before us, the decision in the second one shall prevail and not the decis....
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....efforts made by the Revenue, we consider it our onerous duty to adjudicate on the issue as to whether the licence fee paid was an expenditure incurred for the purpose of earning the income by the appellant and whether there was any business necessity or obligation on the part of MTNL to make such a payment as necessary expenditure eligible for deduction under s. 37 of the Act. 47. During the year under consideration, the claim for deduction of licence fee of Rs. 2,71,10,91,600 paid to the Department of Telecommunication is stated to have arisen from office memorandum No. 26/10/TA-I dt. 29th Sept., 1997 issued by Government of India, Ministry of Communication, Department of Telecommunications, received by the appellant much before the close of relevant financial year. A copy thereof is also placed at Departmental paper book p. 87, whereby a decision to the assessee was conveyed as under: "Licence fee of Rs. 900 per working DEL with MTNL as on 1st April of each of the financial year also is payable by MTNL for the year 1997-98, 1998-99, 1999-2000." The above decision was conveyed pursuant to licence granted to it vide letter No. 1-101/85/MTAC/PHB, dt. 27th March, 1986 by the Depar....
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....from time-to-time for maintenance or working of a telegraph within any part of India irrespective of the fact that all the assets and liabilities along with management, control and operation of telecommunications in Delhi, Mumbai, Navi Mumbai and Thane District stood transferred to the assessee-corporation for a consideration of Rs. 900 crores at the time of setting up of its business. The expression "licence fee" used in the office memorandum is not merely a nomenclature used for the first time for replacement of rural levy charges in the year 1992-93 or thereafter but such a fee though was nominal, were being charged from the assessee right from the inception though its quantum has undergone a great variance. It is, however, for the Government to see as to what is commensurate with the obligation that flows while parting with the privilege which has been exclusively vested in the Central Government by the Act. Merely because the quantum of licence fee has undergone a change from the asst. yr. 1992-93 onwards, there lies nothing in the mouth of the Revenue to say that rural levy charges have been classified as licence fee moreso when the assessee was under obligation to pay a fee ....
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....e of the appellant's claim for deduction under s. 80-IA(4C) of the IT Act. As per the AO, the assessee filed a revised return on 19th Jan., 2000 claiming deduction under s. 80-IA(4C) of the Act. A note was appended to the said return justifying the above claim on the ground that s. 80-IA was introduced to provide incentive for industrial growth and as such a liberal interpretation of the provisions of s. 80-IA should be taken. The AO, however, rejected the claim of the appellant on the ground that firstly this s. 80-IA(4C) stipulates certain conditions such as the company should be registered in India and it should enter into an agreement with the Central or State Government for developing, maintaining, operating new infrastructure facilities. Further, the AO held that s. 80-IA applies to a company which starts providing telecommunication services on or after 1st April, 1995. Since in this case, the company has not started providing telecommunication services at any time on or after 1st April, 1995, it is not entitled to deduction under s. 80-IA(4C). 50. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A) who confirmed the order of the AO on the ground....
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....m of cross bar exchanges. Later on, analogue exchanges were introduced. Toward the end of 1994, the industry underwent a tremendous revolution resulting from the possibilities opened up by electronically operated automatic exchanges. This was not a minor change or modification but constituted the introduction of basically and totally different types of facilities. The progress of MTNL in this regard has been discussed earlier. It is clear that MTNL, has since 1st April, 1995 inducted de novo systems and technologies in place of the outmoded and antiquated system and technology that existed earlier and this was in pursuance of the same new telecommunication policy that gave birth to the insertion of this part of s. 80-IA. It is very clear that MTNL, which was providing certain basic telecommunication services prior to 1st April, 1995 started to provide various other types of basic telecommunication services on or after that date. Its activities, therefore, fall squarely within the language of s. 80-IA(4C). Once this condition is fulfilled the enterprise is entitled to a deduction of the specified percentage of all its profits and gains derived from its business of providing basic te....
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....each type of business for being eligible to claim deduction as tabulated below: ------------------------------------------------------- (i) Industrial undertaking Sub-s. (2) prescribes the condition to whom it shall be applicable (ii) Hotel Sub-s. (3) (iii) Operation of a ship Sub-s. (4) (iv) Developing, maintaining Sub-s.(4A) and operating any infrastructure facility (v) Scientific and Sub-s. (4B) &....
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.... Had the intention of the legislature been to allow deduction only to a new undertaking, then these two conditions that the undertaking should not be formed out of a business already in existence and the undertaking should not use plant and machinery previously used would have been there. Absence of these two conditions changes the whole concept. An undertaking for claiming deduction can be formed out of a business already in existence and it can also use old plant and machinery. It was this interpretation on the basis of which in the two opinions submitted before the AO as well as the CIT(A), the appellant company is entitled to deduction in respect of whole of its income. The word "starts providing" have to be interpreted in the above context and cannot be interpreted in isolation. 53. Further, the appellant-company has started providing telecommunication services by putting up new exchanges to the new subscribers. As such these services have been started providing after 1st April, 1995. These services which have been started after 1st April, 1995 meet both the conditions of the new undertaking as well as that of starting services after 1st April, 1995, though there is no such c....
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.... started providing services thereafter, the appellant-company shall still be eligible to claim deduction in respect of the profit derived from the undertaking which starts providing telecommunication services on or after 1st April, 1995. As explained in the note by way of legal opinion, the appellant-company has since 1st April, 1995 inducted de novo systems and technologies and set up new undertakings and telephone exchanges which were electronically operated automatic exchanges. These were entirely different from the earlier exchanges which were using crossbar exchanges and were operating on electricity. An idea of the new undertakings and the telephone exchanges which started providing telecommunication services on or after 1st April, 1995 can be had from the following: --------------------------------------------------------- Year Total No. of Investment undertakings/  ....
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....ctive of the services which it started providing on or after 1st April. 1995. On this basis, the appellant company shall be entitled to following deduction under s. 80-IA(4C), in respect of profit derived from undertaking which has started providing telecommunication services on or after 1st April, 1995: ---------------------------------------- Asst. yr. 1998-99 Rs. 341.322 crores Asst. yr. 1999-2000 Rs. 473.737 crores Asst. yr. 2000-01 Rs. 441.551 crores Asst. yr. 2002-03 Rs. 692.894 crores ---------------------------------------- 54. In support of the above contention, reliance has been placed on the following judgments: (i) CIT vs. Indian Aluminium Co. Ltd. (1977) 108 ITR 367 (SC) (ii) International Instruments (P) Ltd. vs. CIT (1979) 9 CTR (Ker) 291 : (1979) 123 ITR 11 (Ker) (iii) CIT vs. Premier Cotton Mills Ltd. (1999) 154 CTR (Mad) 538 : (1999) 240 ITR 434 (Mad) (iv) CIT vs. Shree Digvijay Cement Co. Ltd. (1983) 144 ITR 532 (Guj) (v) CIT vs. Bhilai Engineering Corporation (P) Ltd. (1982) 133 ITR 687 (MP) (vi) Textile Machinery Corporation Ltd. vs. CIT 1977 CTR (SC) 151 : (1977) 107 ITR 195 (SC) (vii) C....
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....on from the profits and gains of an enterprise carrying on the business of providing telecommunication services, whether basic or cellular, for the initial five assessment years and thereafter twenty-five per cent (thirty per cent in case of companies) of such profits and gains for subsequent five years. The deductions shall be available to an undertaking which begins to provide the telecommunication services (whether basic or cellular) at any time during the period beginning on 1st April, 1995 and ending on 31st March, 2000. The amendment will take effect retrospectively form 1st April, 1996 and will, accordingly, apply in relation to the asst. yr. 1996-97 and subsequent years.' In view of the clear statement of intent and the wording of the provision, there is no doubt that the appellant who started providing telecom services way back in 1986 is not entitled to the tax exemption contained in s. 80-IA(4C) of the Act. Accordingly, the AO's conclusion is confirmed. This ground of appeal fails." The matter was taken up in further appeal before Tribunal by the appellant. The Tribunal dismissed the claim of the appellant with the following observations: "Para 35 of Tribunal's orde....
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....rovides for hundred per cent deduction from the profits and gains of an enterprise carrying on the business of providing telecommunication services, whether basic or cellular, for the initial five assessment years and thereafter twenty five per cent (thirty per cent in case of companies) of such profits and gains for subsequent five years. The deductions shall be available to an undertaking which begins to provide the telecommunication services (whether basic or cellular) at any time during the period beginning on 1st April, 1995 and ending on 31st March, 2000. 34.3 The amendment will take effect retrospectively from 1st April, 1996 and will accordingly apply in relation to the asst. yr. 1996-97 and subsequent years.' In view of the clear statement of intent and the wording of the provision, there is no doubt that the appellant who started providing telecom services way back in 1986 is entitled to the tax exemption contained in s. 80-IA(4C) of the Act. Accordingly, the AO's conclusion is confirmed. This ground of appeal fails." While confirming that the deduction is not available to the assessee-company in this assessment year, the Hon'ble Tribunal has observed that "this ground....
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....is being carried on ......, but is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on ..... but in some altered form to continue the undertaking in such manner as that the person now carrying it on will substantially continue to carry it." It is further held in the case of Travancore Rayons Ltd. vs. CIT (1997) 139 CTR (Ker) 190 : (1996) 220 ITR 201 (Ker) that an industrial unit which is an expansion of the existing business is not eligible for deduction under s. 80J. Applying the same ratio to this case, mere up gradation of existing exchanges or their replacement introducing new technologies and adding new services would only amount to continuation of same business, and it cannot be said that a new undertaking has come into existence. Accordingly, the assessee-company would not be entitled for deduction under s. 80-IA on this account also. "Para 7.4. Sec. 80-IA(4C) was introduced by the Finance Act, 1997, with retrospective effect from 1st April, 1996. This section reads as under: This section applies to any undertaking which starts providing telecommunication services whether basic or cellular (including radio paging, d....
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....being heard shall be afforded to the appellant before taking decision in accordance with law. 61. The third ground in appeal for asst. yr. 1998-99 is regarding disallowance of an amount of Rs. 47,45,62,757 prior-period expenditure over and above the Rs. 30,18,37,243 suo motu added back by the appellant in its computation of income. As per the AO, the assessee-company was asked to reconcile the figure of the prior-period adjustment as per the P&L a/c amounting to Rs. 17,18,26,550 with the amount of prior-period depreciation amounting to Rs. 30,18,37,243 added back by the assessee itself in the computation of income. It was clarified by the assessee that the prior-period expenditure represents that expenditure in respect of which items of expenditure crystallised during the year. The AO further noticed that the prior-period figures stated in the annual accounts for the year under consideration are not matching with the figures of the annual accounts for the last year. Further, the AO noticed that there is a change in the accounting policy during the year whereby income and expenditure for more than Rs. 1 lakh are treated as prior-period items of expenditure as compared to Rs. 1,000 ....
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....es on the basis of the ratio of Rs. 17.81 crores to Rs. 33.50 crores is stated to be absolutely wrong. It was further submitted that the assessee itself has made a disallowance of Rs. 33,50,34,346 and there was no need for the AO to make a disallowance of Rs. 77.64 crores which has been made by totally misunderstanding the figures. As regards the impact on account of the change in accounting policy, it was submitted that as per para 1.1 of p. 55 of the paper book, this policy has been discussed and it has been stated that profit before tax has gone higher by Rs. 548.63 lakhs instead of profit being reduced. Consequently, because of the change in policy instead of there being a negative impact on the profit there is a positive impact and this has gone to increase the profit rather than reduce the profit of the company. Further, even otherwise this is a bona fide change in the accounting policy which is being followed consistently in the subsequent year and as such no adverse inference can be drawn on this basis. 63. We have considered the above submission and find that the AO has not appreciated the facts correctly. He has assumed that the figure of Rs. 33,50,34,346 of the prior-pe....
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....(Guj). The learned Departmental Representative, however, placed reliance on the order of the authorities below. 66. We have considered the arguments of parties with reference to material on record. The AO was not justified in considering only one part of the report and ignoring the other part. The learned Authorised Representative is correct in saying that a document cannot be read in part; it has to be read in totality. As such the addition made by the AO on this account is set aside and matter is restored to him for taking decision afresh in accordance with law. A reasonable opportunity of being heard shall be allowed. 67. For parity of reasons and facts being identical, similar issues in ground No.3 for asst. yrs. 1999-2000 and 2000-01 are set aside and restored to the AO for taking decision afresh after affording opportunity of being heard to the assessee. 68. Ground No.5 in appeal for asst. yr. 1998-99, ground No.8 for asst. yr. 1999-2000, ground No.9 for asst. yr. 2000-01 and ground No.6 for asst. yr. 2002-03 are general and no prejudice having been projected, the same are dismissed. 69. Ground No.6 for asst. yr. 1998-99, ground No.9 for asst. yr. 1999-2000, ground No. 10....
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....nts are clearly shown as forming part of the total other income of Rs. 2,26,83,30,614 included in the P&L a/c. 73. Having heard the parties and on the perusal of material on record, we find that this is a factual error committed by the AO. The assessee having included these amounts in its income there was no justification in adding the same amounts again to the income so disclosed by the appellant. That being so, we direct the AO to delete these additions. Accordingly the ground Nos. 4, 5 and 6 in appeal stand allowed. 74. Ground No.7 in appeal for asst. yr. 1999-2000, relates to disallowance of an amount of Rs. 30,992 representing late deposit of employees' contribution to the provident fund. The said addition has been made by the AO by invoking the provisions of s. 43B of the Act. This issue (is) stated to be covered by the judgment of the Delhi Tribunal delivered in the case of Addl. CIT vs. Vestas RRB (India) Ltd. (2005) 93 TTJ (Del) 144 : (2005) 92 ITD 1 (Del) where it has been held that the amendment carried out by the Finance Act, 2003 is clarificatory in nature. After the amendment no disallowance for late payment can be made even if the same is made beyond due date presc....
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.... by the learned Authorised Representative that it was a clear case of duplicate income and the AO has simply not applied his mind. The learned Departmental Representative has placed reliance on the order of the authorities below. 77. We have considered the factual position explained by the learned Authorised Representative. The tax audit report Annex. VIII is very clear where the auditor has stated that these amounts have been credited to the P&L a/c. The profit on P&L a/c has been taken as basis of computation of income for the year under appeal. As such there was no justification on the part of the AO to make these additions. We, therefore, direct the AO to delete these additions and these grounds in appeal stand allowed. 78. Ground No.8 in appeal relates to the addition of Rs. 5,50,00,000 representing provision for loss on abandoned assets. The AO has made the above addition in the computation of income and the same has been confirmed by the CIT(A) without much discussion. It was contended by the learned Authorised Representative that this amount of Rs. 5,50,00,000 is part of the loss on sale of assets of Rs. 5,66,20,053 which has been added in the computation of income as is ....