TaxTMI 
TaxTMI 
2016 (5) TMI 813
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.... adjudication of the Ld. CIT(A)-V, New Delhi vide order dated 24.09.2012. 1.2 All these appeals were heard together and they are being disposed of through this common order. Now we take up these appeals one by one. I.T.A. Nos. 2196 & 2799/2012 2. Return of income declaring a gross total income of Rs. 8656,56,00,000/- was filed on 31.10.2005. The Net income after the claim of deduction under the provisions of chapter VI-A of the Act was Rs. 787,37,00,000/- and the taxable book profit u/s 115JB of the Act was calculated at Rs. 10145,50,00,000/-subject to tax @7.5%. Subsequently, the income was assessed at Rs. 4389,77,00,000/- under the normal provisions of the Act and the book profit was assessed at Rs. 15334,02,00,000/- vide order dated 27.12.2007 passed u/s 143(3) of the Act. Later on, penalty proceedings were initiated and a penalty of Rs. 1153,15,65,282/- u/s 271(1)( c) of the Act was imposed. The penalty was imposed with respect to the following additions/disallowances:- (I) Depreciation disallowed Rs.2268,05,00,000/- (II) Disallowance of assets written off 1,00,000/- (III) Disallowance of deduction u/s 80IA on the following items of income:- 1. Inter....
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....he Ld. AR submitted that Finance Act, 2009 had made a retrospective amendment in section 115JB w.e.f. 1st April, 2001 inserting clause (i) in Explanation 1 to section 115JB and considering this retrospective amendment, the assessee had not pressed the ground in the quantum proceedings but in view of the order passed by ITAT Delhi in the case of Escorts Construction Equipment (I.T.A Nos. 5313 & 5314/Del/2012), the penalty ought not to have been imposed wherein it has been held that penalty u/s 271(1)(c) of the Act was not imposable on claims made but negated by a subsequent amendment. 5. The Ld. DR placed reliance on the order of the Assessing Officer and submitted that the penalty had been imposed correctly. 6. We have heard the rival submissions and have perused the material on record. As far as the penalty on the issue of disallowance of depreciation is concerned, we find that the quantum has been deleted by the ITAT in I.T.A. Nos. 2162/Del/2007 and 2176/Del/2008 by following the judgment of the Hon'ble Delhi High Court in the assessee's own case for assessment year 2001-02 and reported in 355 ITR 188 (Del). Accordingly, penalty is not imposable on this issue and ground....
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.... year 2009-10. The grounds of appeal raised by the Department are as under:- "1. The Ld. CIT(A) has erred on facts and in law in directing the AO to treat the following receipts as eligible profits for the purpose of deduction u1s 801A of the IT Act: (a) Liquidated damages amounting to Rs. 215,37,00,000/-. (b) Excess provision written back of Rs. 1170,14,00,000/- (c) Rent of Quarters amounting to Rs. 12,96,00,000/-. (d) Sale of Scrap amounting to Rs. 43,39,00,0001-. (e) Other receipts including. sale of directories, publications, forms, waste paper, etc. of Rs. 188,40,00,000/-. "(i) The Ld. CIT (A) has erred on facts and in law in holding that the aforementioned receipts as eligible profits for deduction for deduction u/s 80IA of the Act as the Hon'ble Supreme Court in the case of Liberty India Ltd., 317 ITR 218 has held that it is necessary to prove that the receipt generated should be of first degree source special activity, but not of ancillary and incidental activity of the undertaking. Merely crediting certain sum as revenue receipt cannot ipso facto be eligible for deduction u/s 801A the Act. 2 The Ld. CIT (A) has erred on facts and in law in delet....
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....license fees and spectrum charges. 8. That on the facts and circumstances of the case and in law the learned CIT (A) has erred in not accepting the contention of the appellant that the interest allowed earlier to the appellant u/s 244A had been wrongly withdrawn and interest u/s 234D has been wrongly charged. 9. That the order passed by CIT (A) is bad in Law and contrary to the facts & circumstances of the case." 10. The Ld. AR submitted that ground nos. 1 to 5 are covered by the decision of the ITAT 'A' Bench, New Delhi in assessee's own case in I.T.A. Nos. 3304 & 3386/Del/2010 for assessment year 2004-05. He submitted that in terms of the non-obstante clause used in section 80IA(2A), deduction for telecommunication services is available in respect of 'profits of eligible business' and is not restricted to 'profits derived from eligible business' as mentioned in section 80IA. He submitted that ground nos. 1 and 1.1 of the Department's appeal are also covered by the decision of the ITAT (supra). The ld. AR further submitted that ground no. 6 of the assessee's appeal pertaining to disallowance of depreciation is also covered in assessee's....
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....ant Section in order to determine the true meaning of the words used in any one or more of the sub-sections. The provisions cannot be taken in an isolated or detached manner dissociated from the context where the "referents" i.e. the business undertakings or enterprises to whom it is said provisions are to be applied are clearly specified and distinguishable from one another. Yet, it is necessary to determine first whether the language used is plain or ambiguous for which purpose the provisions of section 80-IA would be required to be read as a whole. Ambiguity could be said to arise only where a provision contains a word or phrase which, in the particulars context, is capable of having more than one meaning. 13.1. We find from the submissions of the parties that both the sides have canvassed that the intention of the legislature is very clear on a literal reading of the Section, though both the parties have taken a contrary view on the manner in which the words used in the provision are to be construed in the context for imposition of tax or allow deduction. 13.2. On a reading of sub-section (1) of section 80-IA, we find that the legislature specifically uses the words meaning....
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....on 80-IA may be claimed for ten consecutive assessment years out of fifteen years beginning from the first year in the case of the defined enterprise/undertakings etc. It is relevant to note that the restrictive meaning put to the available profits as only those profits which come under the ambit of first degree nexus continues to remain in play as is evident from the opening line itself. The said sub-section retains hundred percent deduction for a period of ten years but provides an option to claim the deduction for ten consecutive years from the expanded period of 15 years beginning from the year in the case of enterprises and undertaking develops and begins to operate any infrastructure facility or starts providing tele-communication service or develops an industrial park or develops a special economic zone etc. Upto this stage, we find that there is no ambiguity as the legislature giving due weightage to the long gestation periods, for certain infrastructural activities where profits available for deduction may not be there in the initial 5 years also permits the option to claim deduction for the period of ten consecutive years from the first 15 years. Thus full play of the res....
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....ction (2) for the purposes of deduction for ten years is retained at hundred percent for those profits of eligible business as could show first degree nexus. The existence of the said requirement is well-understood by one and all and there is no ambiguity arising on a reading of the above as the profits and gains contemplated for deduction are "derived from" as the clear reference to sub-section (1) in the very first line makes it clear. The intention that the deduction can be claimed for ten consecutive years from the first fifteen years depending upon the referred to enterprises/undertaking falling under sub-section (2) and for 20 years for those undertaking/enterprise falling under the proviso to sub-section (2) is well understood. The purpose may have been guided by the fact that certain enterprise/undertaking may show profits after a considerably longer time is also plainly clear. 13.8. A plain reading of sub-section (2A), it is seen shows that it starts by giving effect to the legislative intent by inserting the well understood word "Notwithstanding". The meaning and the consequent legislative intent can clearly be understood by the subsequent words used "anything contained....
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....ive years. The deduction after five years in the case of an assessee in section (2A) is to be for the remaining five years upto 30 percent of the amount available for deduction. Having over-ridden the requirements of sub-section (1) and (2) by use of the words "profits and gains of eligible business" in sub- section (2A) and not "profit and gains derived by an undertaking or an enterprise from" as used in unequivocal terms in sub-section (1) and (2) the legislature makes its intention known loud and clear. The fact that after specifying the period and apportionment of the profits available for deduction as hundred percent in the first five assessment years and thereafter thirty percent for the next five assessment years it is seen that the legislature also alive to the nature and extent of deductions wanted to give to specified enterprise or undertaking therefore makes a conscious reference to the ousted sub-section (2) in the opening lines for the purposes of bringing into play the extended timeline of 15 years for exercising the option contained in sub-section (2) by making a specific reference to it. Thus conscious of the fact that sub- section (1) and (2) had completely been ov....
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....d gains of eligible business for the first five years and upto 30% for the remaining five years in the ten consecutive assessment years out of the fifteen years starting from the time the enterprise started its operation. The legislature having ousted applicability of sub-section (1) and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be "derived from". The requirements of the first degree nexus of the profits from the eligible business has not been brought into play. 13.12. The cardinal Rule of Interpretation is that the statute must be construed according to its plain language. Neither should anything be added nor anything be subtracted therefrom unless there are adequate grounds to justify the inference that the Legislature clearly so intended. It is also well settled that in a taxing statute one has to look merely at what is clearly stated. The meaning and extent of the statute must be collected from the plain and unambiguous expression used therein rather than from any notions whic....
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....rgument, should have been provided for in a statute cannot be supplied by the Courts as to do so will be an act of legislation and not of interpretation. Reliance may be placed on Smt. Kanta Devi vs Union of India (2003) 4 SCC 753 & 757. 13.15. A legal fiction treating something not done as done, requires legislative authority and without it, it can neither be indulged in by Courts not it can be created by an administrative order. No doubt, it is the bounden duty and obligation of the Court to interpret the statute but the duty is to interpret, the statute as it is and not by adding or supplying words to it. It is contrary to all rules of construction to read words into statute which the legislature in its wisdom has deliberately not incorporated as held in CIT vs Tara Agency [2007] 292 ITR 444 at 464 (SC). 13.16. The true function of the Court is to interpret the law not to make it. It is well-settled that even if the legislature falls short of the mark, the Court can do nothing more than declare it be thus, giving its reasons, so that the Legislature may take notice and promptly remedy the situation. Reliance can be placed on Standard Chartered Bank vs Directorate of Enforce....
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....o underlined the import and extent of the over-ride provided by adding the word "anything contained in sub-section (1) or sub-section (2)" in its opening lines thereby removing all doubts. There was nothing stopping the legislature to use the term "notwithstanding sub-section (1) or sub-section (2)" and proceeded to lay down the period and apportion the percentages to the extent of which deduction was to be allowed. The use of the term "anything contained in" pre-fixed by notwithstanding by the legislature makes the meaning and intention of the legislature crystal clear. The arguments to the contrary advanced by the Revenue relying on case laws based on different sets of provisions is of no help as the clear meaning of the words used by the legislature leads to only one conclusion namely that sub-section (1) and (2) of section 80-IA for the purposes of an undertaking providing telecommunication services which are covered under clause (ii) of sub-section (4) have to be ignored and have no play. There is no doubt that the assessee falls under clause (ii) of sub-section (4) and is such an enterprise providing telecommunication services. After having over- ridden the requirements of su....
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....appeal and dismiss ground nos. 1 and 1.1 of the Department's appeal. As far as ground no. 6 of assessee's appeal is concerned, it is seen that this issue is covered by the judgment of the Hon'ble Delhi High Court in assessee's own case for assessment year 2001-02 (reported in 355 ITR 188 (Del). This judgment has attained finality as the Department has not approached the Apex Court against this judgment. The relevant paragraphs of the judgment of the Hon'ble Delhi High Court are paragraphs 23 to 25 and the same are being reproduced below for ready reference:- "23. In view of our decision above, it is not necessary to examine the question whether the configuration of the capital structure of the petitioner could by itself provide a reason for the Assessing Officer to believe that provisions of Explanation 10 to Section 43(1) of the Act were applicable and the book value at which the assets were vested with the petitioner were required to be reduced to the extent of the reserves of the company. However, having heard the counsel for the parties on this issue, it is apposite that we consider the same. 24. Explanation 10 to Section 43(1) of the Act is as under: ....
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....nce Capital pending allotment (Refer Note 2.3 on T) 75,000,000 Reserves & Surplus B 339,079,523 Loan Funds Secured Loan C 5,100,000 Unsecured Loans D 107,983,258 Total 577,162,781" 26. The scheme of hiving off the business of telecom services by Government of India to a corporate entity entailed incorporation of a wholly owned government company (i.e, the petitioner company) and the transfer of the business as a going concern along with all its assets and liabilities to the company. The net assets were transferred at book value, which was agreed to be at least Rs. 63,000/- Crores and in consideration of this the petitioner company accepted a liability of Rs. 7500 Crores and issued both equity and preference share capital of the face value of Rs. 5000 Crores and Rs. 7,500 Crores, respectively. The balancing figure was reflected as reserves which is an integral part of the shareholders funds. The Government of India has transferred the assets to the petitioner company at their book value i.e., the value at which thesaid assets are reflected in the books of DTS and DTO and the book value of the Government of India's holding in the petition....
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....cision in the case of MTNL, but as the Revenue has not accepted this decision, the addition is being made. Alternatively he held that license fee and spectrum fee were statutory liabilities and had to be paid by the assessee without any option before the due date specified for such payment. He held that the amount cannot be allowed in view of S.43B of the Act, for the reason that, the amount of Rs. 1,332.05 crores was paid after the due date of filing of the return and as a difference of Rs. 85.05 crores remained unpaid. 4.3. On appeal the First Appellate Authority held that as far as spectrum charges and national long distance license fee are concerned, there is a categorical qualification made by the auditors of the assessee company in their audited report, that the amount in question was not in line with the agreement and that the effect there of could not be determined and that such claim ;was made merely based on estimates without any specific scientific method adopted by the assessee and therefore in view of these facts and in the absence of such details, the claim of the assessee that the entire amount should be allowed as deduction cannot be accepted. He further held that....
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....n of CBDT, was allowable and rightly allowed in assessment years 1988-89 to 1991-92 as business expenditure - Held, yes - Whether, similarly, licence fee was undisputedly paid for use of facilities provided by DOT and payment was inextricably bound up with very business of assessee and directly related to actual utilisation of network facilities and, therefore, licence fee paid by assessee was anallowable expenditure under section 37(1) - Held, yes 4.5. The above decision has been followed by Delhi F Bench of ITAT in the case of MTNL vs. JCIT in ITA No.377/Del/2001 for the A.Y. 1997-98 and in ITA Nos. 3448, 3449 and 3450/Del/2003 and 2919/Del/2004 for the AY 1998-99 to 2002-03 vide order dt. 3rd Feb., 2006. 4.6. Further the AO himself for the A.Y. 2004-05 did not make any disallowance of licence fee paid by following the opinion given by the Attorney General of India who had given an opinion in favour of the assessee. 4.7. The contentions of the Ld.D.R. that he amount of license fee is not ascertainable has been answered by the assessee by giving an affidavit before this Bench, wherein it is stated that the amount paid to the government as license fee and debited by the BSNL....