TaxTMI 
TaxTMI 
TaxTMI 
2010 (3) TMI 888
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....ion of the Assessing Officer in not allowing the deduction under section 80-IA of the Act as claimed and allowable under the provision of the Act. (iii)On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in confirming the action of the Assessing Officer by wrongly interpreting the provisions of section 80-IA, whereby deduction is available in respect of income derived from providing telecom services on or 1-4-1995 and the appellant company being a service provider, its total income as such from providing telecom services shall be exempt. (iv)On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in not appreciating the contention of the assessee that the deduction available under section 80-IA being undertaking based, the computation of income eligible even otherwise has to be worked out for each undertaking at the rate of 100 per cent for first five years and at the rate of 30 per cent for the next 5 years from the date of setting up of such undertaking. (v)On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law, in rejecting the contention of the....
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....ion (4A) (v) Specific and Industrial Research Sub-section (4B) (vi) Telecommunication Services Sub-section (4C) (vii) Industrial Park Sub-section (4D) (viii) Refining of Mineral Oil Sub-section (4E) (ix) Housing Projects Sub-section (4F) 52.1 Thus, the conditions for each of the entities are exclusive conditions and it is not that the conditions other than those stated in particular sub-section shall be applicable to others also. Accordingly, in the case of the appellant which is providing telecommunication services, all it has to fulfil is the condition prescribed in sub-section (4C) of the Act which reads as under: '(4C) This section applies to any undertaking which starts providing telecommunication services, whether basic or cellular including radio-paging, domestic satellite services or network of truncking and electronic data interchange services at any time on or after the 1-4-1995 but before the 31-3-2000.' 52.2 The above is an exclusive clause applicable to telecommunication services and cannot be confused with the conditions which are applicable to industrial undertaking and specified in sub-section (2). It is important to note that there is no wor....
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.... that :- 1.The issue as such before the Hon'ble Tribunal is whether assessee will be eligible for total income and whether Assessing Officer was justified in apportioning the income in the manner he has done. 2.For this it is important to read section 80-IA and notice the important difference in sub-section (4C) which is applicable in respect of telecommunication services vis-a-vis exemption available in respect of other activities. 3.On reading of section 80-IA, it is be noticed that this section provides exemption to a different type of activities. Sub-section states these 9 activities in a narrative form. The exemption is with reference to the undertaking and the entire income which is derived from the business of the undertaking is eligible for exemption. Further, the percentage of income exempt for 9 different activities is stated in sub-section (5) and the number of years for which exemption is available have been stated in sub-section (6). 4.( i) There is no such condition in sub-section (4C) that undertaking should have come into existence after 1-4-1995. 5.There is no condition that such undertaking be 'new'. ( iii) There is no condition that undertaking should not h....
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....ruments and installation and introduction of new sophisticated ones. 14. Various add on services such as Datacom, Inet, DID PABX, voice mail, Radio paging and ISDN has been started after 1-4-1995. In addition to this phone plus facilities like dynamic locking, call waiting/call transfer, hot lines etc. has been extended to valued customers. Further in order to minimize human re-interface, important operator based special services have been automated with IVRS (Interactive Voice Response Systems). 15. It has started providing several other advanced and other add on services such as virtual card/account card calling, free phone, virtual private network, premium rate service, telewaiting etc. A new technique named DLC (Digital Loop Carrier system) has also been established. 16. Thus, 1995 onwards the assessee's industry has underwent a tremendous revolution resulting from the possibilities opened up by automatic self operated exchanges. This was not a change or modification but introduction of totally different facilities. It has inducted de novo systems and technology in place of outmode and antiquated system and technology. 17. Post new Telecom Policy 1994 it has invested a more....
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....ertain basic telecommunication services prior to 1-4-1995 started to provide various other types of basic telecommunication services on or after that date. Its activities, therefore, fall squarely within the language of section 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 telecommunication services, whether existing of earlier or introduced after 1-4-1995. For the reasons above discussed, I am of the view that the MTNL is eligible for the deduction under section 80-IA of the Income-tax Act, 1961." 27. Justice B.N. Kirpal (Chief Justice of India) after detailed analysis has opined as under : (Paper Book Pages 199-201) "On a careful analysis of the said provision it is evident that this section does not state that the benefit will be given if a new industrial undertaking comes into existence. The opening of section 80-IA(4)(ii) are "any undertaking which has started or starts providing.........." This would mean that an undertaking can either be a new one or an existing undertaking which starts providing telecommunication services, whether ....
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....f business is concerned, they are similar also. Since the taxation law has also been farmed by the same Government and since that Government has taken the view that BSNL is eligible for section 80-IA deduction, it is logical, fair and reasonable to hold that the same liberal view should be taken by the taxing authorities in regard to the allowability of section 80-IA in this case. It has always been the stand taken by the leading courts that the beneficial provision of tax laws should be construed liberally to enable the industry to receive the benefit intended for them. Moreover, there is no real loss to revenue as the assessee MTNL itself is owned by the Govt. of India." 33. In view of the above facts the Assessing Officer was not justified in treating exchange as an undertaking and treating the de novo exchanges based on entirely new technology as old exchanges. The appellant having being eligible for deduction as has been held by Assessing Officer himself. Its total income derived from the business of the undertaking as against individual exchanges worked out by the Assessing Officer shall be exempt. 34. On the other hand, learned DR contended that Assessing Officer has alrea....
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.... installed after 1995. It is pertinent to mention here that deduction under section 80-IA is to be computed on the profits of the eligible business and not on the basis of amount invested in plant and machinery in the form of telephone exchanges. Therefore, the profit accruing from telecommunication services is required to be taken into account while granting claim of deduction under section 80-IA. In this regard, we found that after 1995, there is a complete revolution in telecommunication industry and old exchanges if any had been totally revamped. It was not merely addition of the new exchanges but there was entire change in the set up, technology, instruments and equipments. The exchanges which were earlier operating on old technology whereby there was use of big cross bar exchanges with large telephone instruments of dialling numbers mechanically by rotating the dial. Since this technology has been totally abandoned and revamped, replacing the old, most of the income generated is attributable to such new technology exchanges. Merely on the number of old exchanges which were not in operation at all or had undergone totally revamped, income cannot be attributable to such old exc....