TaxTMI 
TaxTMI 
2009 (1) TMI 314
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.... Asst. yr. Asst. yr. 2000-01 2001-02 (i) Licence fee to the Department of Telecommunication 2,22,04,500 5,11,68,232 (ii) WPC charges 30,58,667 45,15,050 assessee company was incorporated on 10th Nov., 1993. As per its memorandum and articles of association, its main object is of providing domestic and international services including but not limited to voice, data and any other value added service etc. and to provide consultancy and technical services in the field of telecommunications, including systems integration and systems design. The assessee company was granted a non-exclusive licence by the Department of Telecommunications ....
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....e terminal (VSAT). It means that if a person with many outlets or offices spread over the country wants private connectivity through satellite, operating with the help of INSAT, owned by the Government of India is able to provide this facility of connectivity amongst the closed user group. The customer of the assessee is VSAT subscriber. The Government of India provides for the use of special segment of its satellite. Therefore, it translates to right to use services on a transponder on an INSAT satellite. This type of services requires obtaining specific licence under s. 4 of the Indian Telegraph Act, 1885. In terms of Indian Telegraph Act. the assessee applied for licence which was granted on 22nd Aug., 1994. The licence granted is for a period of 10 years and can be revoked at any time. Therefore, it is a limited right. The assessee can charge tariff as approved in terms of the licence from the VSAT subscriber. The ceiling is put in the said tariff as a part of the licence agreement. Government of India reserves its right to review the ceiling on the tariff. Therefore, the right to charge fee is only a limited right and not an unfettered right. The licence as granted to the asse....
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....laced on the decision of Tribunal, Mumbai in the case of Videsh Sanchar Nigam Ltd. vs. Jt. CIT (2000) 69 TTJ (Mumbai) 882 : (2002) 81 ITD 456 (Mumbai) and on the decision of Tribunal, Delhi in the case of Mahanagar Telephone Nigam Ltd. vs. Addl. CIT (2006) 100 TTJ (Del) 1 : (2006) 8 SOT 376 (Del). Shri Bhalla also submitted that for all the earlier years the payment has been considered as revenue expenditure and allowed while framing the assessment under s. 143(3) of the Act. There is no change in the facts. Hence applying the rules of consistency as propounded by various Courts in the following cases, for the years under appeal also the payment should be allowed as revenue expenditure: (1) Director of IT (Exemption) vs. Apparel Export Promotion Council (2000) 163 CTR (Del) 131 : (2000) 244 ITR 734 (Del); (2) Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC); and (3) Director of IT (Exemption) vs. Lovely Bal Shiksha Parishad (2004) 186 CTR (Del) 384 : (2004) 266 ITR 349 (Del). 7. The learned Departmental Representative, Shri V.K. Tiwari relied upon the impugned orders. He submitted that the payment is for obtaining licence so as to establish, ....
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....reunder. 8. The approved tariff, to be charged from the VSAT subscribers of the service as given in Sch. 'D1' annexed hereto. However, for charging lower tariffs DOT's approval is not required. 10. The licensee will not assign or transfer its rights in any manner whatsoever under the licence to a third party or enter into any agreement for sub-licence and/or partnership relating to any subject-matter of the licence to any third party. 12. It is further agreed and declared that notwithstanding anything contained hereinbefore, that (i) The licence is issued on non-exclusive basis i.e., other vendors may be granted licence for same service at the discretion of the licenser. (ii) The licenser reserves the right to modify at any time the terms and conditions of the licence covered under Schs. 'A', 'B', 'C', 'D' and 'E' annexed hereto, if in the opinion of the authority it is necessary or expedient to do so in the interests of the general public or for the proper conduct of telegraphs or on national security consideration. (iii) The licensee is not permitted to sub-lease the licence in any manner. (iv) The authority reserves the right to revoke the licence in case of....
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....so to sub-s. (1) of s. 4 of Indian Telegraph Act provides that the Central Government may grant a licence on such conditions and in consideration of such payments as it thinks fit to any person to establish, maintain or work telegraph within any part of India. As per sub-s. (2) of s. 4 of Indian Telegraph Act, the Central Government may delegate to the telegraph authority all or any of its powers under the first proviso to sub-s. (1) of s. 4 of Indian Telegraph Act. In terms of Indian Telegraph Act, Department of Telecommunications granted licence to the assessee to establish, maintain and operate closed users group domestic 64 Kbps data network via INSAT Satellite System using VSAT. The licence was granted for 10 years initially. As per the terms of licence the assessee is required to pay licence fees. The licence fees are payable every year on quarterly basis. For financial year 1999-2000 relevant to asst. yr. 2000-01 the assessee made four quarterly payments totalling to Rs. 222.04 lakhs. As per cl. 6 of the licence agreement, the licenser may at any time by giving 30 days notice can revoke the licence on the breach of any of the terms or in default of payment of licence fee pay....
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....ich are otherwise revenue in nature and allowable under s. 37(1). The decision in the case of Triveni Engineering Works Ltd. relied upon by the learned Departmental Representative on the contrary, supports the case of the assessee. In the said case the Hon'ble Delhi High Court held that the payment for technical know-how and services for a period of 10 years was not capital expenditure but revenue expenditure. We, therefore, delete the disallowance made for both the years. 10. In the result, both the appeals are allowed. 11. We shall now take up the appeals of the Revenue. The first ground of appeal for asst. yr. 2000-01 is against deletion of disallowance of Rs. 10,48,133 being stipend paid. The AO held that the expenses for imparting of practical training under the practical training stipend scheme and programme of apprenticeship training (PAT) are not allowable as no statutory obligation is caused on the employer under these two training schemes. 12. Before the learned CIT(A) it was contended that the assessee employs fresh engineering graduates with professional qualification. The employment for the first year is on the probation basis. On completion of probation pe....
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....towards import of parts are only on replaced parts brought which were given free of cost by the original vendor. Therefore, the expenses are revenue in nature. 17. After considering rival submissions, we find that the expenses have been incurred for replacement of faulty parts like mini circuits, batteries etc. The parts of machinery are replaced by vendors situated abroad but for bringing such parts, the assessee has incurred customs duty and freight expenses. These parts are supplied by vendors free as being within warranty period. The amount paid is for acquisition of replaced parts and is not for the machinery as such but only for some of the parts which fits into the larger machine. The Hon'ble Supreme Court in the case of C1T vs. Saravana Spinning Mills (P) Ltd. (2007) 211 CTR (SC) 281 : (2007) 293 ITR 201 (SC) held that where each machine was an independent and separate machine capable of independent and specific function, the expenditure incurred for replacement thereof would not come within the meaning of "current repairs". However, in the present case what is replaced is not the independent and separate machine but only parts of such machine. Therefore, the expenditure....
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.... on whether the assessee requires full, half or quarter transponder on the satellite. The payment is annual and for that particular year only. The payment was an integral part of profit earning process and not for acquisition of an asset or a benefit of enduring nature. The utilization of transponder is inextricably linked with the services provided by the assessee to its customers. Therefore, payments are allowable as such. 25. After considering rival submissions, we do not find any infirmity in the order of the learned CIT(A). The payment having been made for allocation of space segment charges and for the use of satellite does not bring into existence any capital asset. The fees being payable for the use of facility and not for the facility itself are allowable as revenue expenditure. 26. Next ground of appeal is against deletion of disallowance of Rs. 15 lakhs on account of management fees paid to Max India Ltd. The assessee paid a sum of Rs. 36 lakhs to Max India Ltd. on account of consultancy and advisory services on legal, company secretarial services, commercial services and taxation services. The AO held that since Max India Ltd. is joint venture partner of the asses....