TaxTMI 
TaxTMI 
2012 (8) TMI 972
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....jected. CIT(A) also confirmed the action of the Assessing Officer. 4. Submissions made before authorities below were reiterated herein before the Tribunal by ld. AR. On a query from the Bench that how these expenses were incurred by assessee, which are treated as revenue in nature. At this point of time, ld. A.R. stated that detail is not available. Accordingly, an alternate request was made that at least depreciation should be allowed as department has treated the same on capital account. On these submissions of ld. A.R., the ld. D.R. also fairly agreed that depreciation can be allowed. 5. In view of the above facts and circumstances, we reject the ground of the assessee for treating the expenses on revenue account. However, we direct the Assessing Officer to allow depreciation on this amount being the same on capital account for purchase of machinery/ hand set. We order accordingly. 6. Ground no. 2.1, 2.2 & 2.3 were not pressed for the reason that the initial payment of three years paid for obtaining license is enduring in nature, therefore, deduction u/s 35ABB was allowable which have already been allowed by the Assessing Officer . However, it was submitted that after t....
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....nal licence fee hence, the licence fee payable from 4th year onwards was substantially higher than the minimum fee stipulated under the agreement. A separate bank account was required to be opened to which revenue from the activities of the company shall be credited as DOT reserved a lien of 30% on the amounts of funds credited to this account. 10. The Assessing Officer after considering the explanation of the A.R. did not accept the same. It was observed by the Assessing Officer that merely because the quantification of licence fee was done on a specified formula and is linked to the revenue earned by the assessee does not ipso facto make the licence fee a revenue expenditure. Assessing Officer further observed that it is the aim and object of the expenditure which determines the character of the expenditure. The assessee had acquired a right to carry on the business on a long term basis hence the additional license fee debited by the assessee to P&L A/c was disallowed and appropriate deduction was allowed u/s 35ABB of the Act. 11. The contentions raised before Assessing Officer were reiterated by learned A.R> before CIT(A). Reliance was placed on the decision of Hon'ble Sup....
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....o the provisions of Sec. 35ABB. 14. In reply, the counsel of the assessee stated that the decision on which reliance has been placed by ld. DR supports the case of the assessee. It was further submitted that provisions of sec. 35ABB clearly say that where capital expenditure is incurred then provisions of sec. 35ABB are attracted. The expenditure incurred by the assessee is directly in respect of generation of revenue, therefore, the character of the expenditure is revenue in nature and on revenue account provisions of sec. 35ABB cannot be attracted. 15. We have heard rival submissions and considered them carefully. After considering the submissions and perusing the material on record we find that assessee deserves to succeed on this issue. We have gone through various clauses of the agreement and found that assessee is liable to pay a certain license fee on the basis of 100 subscribers or part thereof. Initial fees is to be computed @ Rs. 5 lacs per 100 subscribers and thereafter a formula has been given. This license fees has been paid annually as per clauses of agreement from the fourth year as for first three years a fixed license fee has to be paid by the assessee just t....
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....re Tribunal, the Tribunal by observing that "license granted enabled the assessee to carry on the business subject to payment of license fee. This license fee also enabled the assessee to access the INSAT Satellite owned by the Govt. of India so as to carry on its business. The ld. CIT(A) held that since the license was granted, which was right to carry on the business and was granted for a period of 10 years, was an enduring benefit and hence capital expenditure. No doubt the license was granted for a period of ten years but the license fee is payable annually. Therefore, the benefit available by making the payment of annual license fee will last for that year only. If the assessee choose to carry on the business in terms of license agreement, license fee is payable for subsequent year also. Therefore, the benefit of license fee paid during the year endures only till the end of the relevant financial year and does not extend to subsequent financial year". By these observations, the Tribunal held that license fee paid by the assessee is allowable as revenue expenditure u/s 37(1) of the Act. 17. Similar view has been expressed in case of MTNL Vs. Addl. CIT (2006) 8 SOT 376 (Del.)....
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....nd is against upholding the disallowance of Rs. 66,17,92,963/- made by the Assessing Officer towards notional interest on investments in an advances made to subsidiary company. 21. Assessing Officer disallowed a sum of Rs. 67.17 crores and odd by observing that assessee has made advances to its subsidiaries without charging any interest whereas assessee is paying interest. It was also observed by Assessing Officer that assessee was required to file the details of loans taken and loans advanced. However, the details were not filed, therefore, he calculated the interest @ 18.32% on the various investments and advances made to its subsidiary and made a disallowance of Rs. 66.17 crores and odd. 22. Before CIT(A) various details, which were required by the Assessing Officer , were filed. Chart of investment/ advances made by company during last so many years was also filed. It was submitted that assessee had paid only Rs. 27 crores and odd as interest, however, Assessing Officer has disallowed Rs. 66 crores and odd. Working of the loan taken from the bank and advanced to the subsidiary company was also filed. Since these details were not filed before Assessing Officer , accordingl....
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....96- 97; which increased to Rs. 2,333,845 during F.Y. 1997-98, whereas total investment or advances are made only Rs. 1,563,819 up to F.Y. 1997-98 and remaining amount of Rs. 547,000 was advanced in the current year. Accordingly, it was explained that the amount advanced to the subsidiary was from its own funds and therefore, no addition on account of notional interest is chargeable. It was also reiterated that assessee has paid only 27.24 crores on its loans. Therefore, for this reason also notional interest computed at Rs. 66.17 crores and odd is without any basis. It was also explained that total funds raised by assessee through equity up to A.Y. 1999-2000 were Rs. 613 crores 92 lacs and 94 thousand, which is much more than the amount advanced to its subsidiary. Hence, no disallowance is warranted. 25. In support of this contention, reliance is placed on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Bharti Televenture Ltd. Reliance Utilities & Power Ltd. 331 ITR 502 (Del.) and the decision of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd. 313 ITR 340 (Bom.). 26. It was further submitted that issue is squarely covered by th....