TaxTMI 
TaxTMI 
2016 (5) TMI 813
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....nt year 2009-10, challenging the findings and 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) Disallow....
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.... of disallowance/adjustment of book profits on account of provision for bad and doubtful debts was concerned, the 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 assess....
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....2 & 6459/Del/2012 8. These are cross appeals by the Department and the assessee respectively and pertain to assessment 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. Mer....
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....ase and in law the learned CIT(A) erred in confirming the disallowance to the extent of Rs. 396.95 crores, as estimated by the assessing officer, at 15%, of the total expenses of Rs. 2646.35 Crores .incurred on account of 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....
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....tal principle of interpretation is therefore to examine the language employed in the Act and where the words are clear and plain, the Court is bound to accept the expressed intention of the legislature. Hence we need to examine the scheme of the relevant 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 v....
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.... deduction available as hundred percent for ten years. 13.4. Proceeding to a perusal of sub-clause (2) of section 80-IA it is seen that the said sub-section gives the assessee the option that the profits so computed complying with the mandate of sub-section (1) of section 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....
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....at the meaning and intent of sub- section (1); (2) and the proviso to sub-section (2) of section 80-IA is clear and unambiguous. It is seen that the legislature having set out the referent enterprise/undertaking as developing/starting infrastructure, telecommunication or industrial park/ SEZ etc. the duration in sub-section (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 a....
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....to the said sub-section it is seen that the legislature sets out that the deduction is to be allowed at hundred percent of the profits and gains "of the eligible business" for a period of five years as opposed to the enterprise/undertakings in sub-section (1) and (2) wherein hundred percent of deduction is available for ten consecutive 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 ....
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....ssing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/enterprise who fall under sub-section (2A) to claim 100% deduction of profits and 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....
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....it, if deemed necessary as held in Padma Sundara Rao vs State of Tamil Nadu (2002) 255 ITR 147 at pages 154 to 155 (SC); Prakash Nath Khanna vs CIT (2004) 266 ITR 1 at page 9 [SC]; Union of India vs Rajeev Kumar AIR (2003) SC 2917 at 2923. Courts cannot reframe the words used by the legislature as they have no powers to legislate. A matter which, for the sake of an argument, 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). ....
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....may need more time for generating profits. However, the requirements of "derived from" as set out in sub-section (1) has not been done away with. When juxta-posed with this the language used in sub-section (2A) is considered the legislature has been very clear in its mandate and has consciously used not only the well- accepted and judicially well-settled phrase of "Notwithstanding" but has also 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 ....
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....y been enunciated and set out in the relevant provision giving cause to no debate whatsoever." (Emphasis supplied) 13. We find that this order was followed by coordinate Bench of ITAT, Delhi in assessment years 2003-04 to 2008-09 also. Consistent with the view taken therein, we direct the Assessing Officer to allow the claim of the assessee and allow ground nos. 1 to 5 of the assessee's 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 t....
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....s and surpluses as a part of shareholders' funds. The relevant portion of the balance sheet of the petitioner company as on 31.03.2001 is quoted below:- "Shareholders' Funds Capital A 50,000,000 Preference 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 b....
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.... 4.1. This issue arises in the assessee's appeal as ground no.2 for the A.Y. 2003-04 and as ground no.1 for the A.Y. 2005-06 to 2007-08, as ground no.4 for the A.Y. 2008-09. This issie also arises in the revenue's appeals. 4.2. The A.O. disallowed the amount on the ground that the expenditure incurred on license fee was not allowable u/s 37 of the Act. He noted that for the earlier years the Ld. CIT (A) allowed the claim of the assessee on the basis of an ITAT decision 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 m....
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....e as licence fee in assessment year under consideration and debited to profit and loss account was disallowed by Assessing Officer holding that it was nothing but -substitute of DOT levy in revised revenue sharing formula - Whether payment made by assessee, by whatever name called, was for making use of network owned by DOT and for services utilised for purpose of business and, hence, could never be considered as non-business expenditure - Held, yes - Whether, therefore, DOT levy, irrespective of opinion 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....