TaxTMI 
TaxTMI 
2016 (1) TMI 1120
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by way of this common order. 2. Facts in brief:- The assessee is a Government Company and was incorporated on 15.09.2000 under the Companies Act, 1956. Prior to the incorporation of the assessee company, the telecommunication services were being provided by Government of India, Ministry of Communication through its two departments namely Department of Telecom Services ('DTS') and Department of Telecom Operations ('DTO'). The assessee company was incorporated pursuant to the policy of the Government of India (National Telecom Policy 1999) to hive off its business of providing telecom services and operate the same though a corporate entity. The assessee company was constituted as a wholly owned Government of India enterprise for taking over the business of providing telecommunication services from DTO and DTS. The assessee company started functioning w.e.f. 01.10.2000. 2.1. The Assessing Officer passed the assessment order by making a number of additions and disallowances. The Ld.CIT(A) in his appellate order granted part relief to the assessee. Aggrieved with the order of the Ld.CIT(A), both the assessee as well as the revenue filed these appeals before us. As there are a num....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 the assessee company does not have specific details by which deviation of estimated license fee in respect of NLD could be determined with reference to the actual amount of license fee available and that it is not possible to determine the NLD revenues earned during the year, which forms part of the AGR. He restricted the disallowance to 15% of the total amount claimed under this head on adhoc basis. On the alternative ground of disallowance made by the AO u/s 43B of the Act, he followed the decision of Hon'ble Calcutta High Court in the case of CIT vs. Vares International Pvt. Ltd. 225 ITR 831 and held that, the license fee in question cannot be treated as tax, duty, cess or fees as has been envisaged u/s 43B of the Act and hence a disallowance cannot be made under this Section. Aggrieved with this order both the assessee as well as the Revenue have filed appeals. 4.4. After hearing rival contentions we find that the issue in question is no more res integra. The ITAT Mumbai "D" Bench in the case of Videsh Sanchar Nigam Ltd. v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 in its Profit and Loss a/c has not been disputed till date and that the quantification by B.S.N.L. has been accepted by the government. When a particular amount of license fee is calculated and paid as a full and final payment by the assessee to the government and when the government has not disputed the same till date, the question of holding that the amount is not ascertainable at this length of timedoes not arise. As regards invoking the provisions of S.43B of the Act, we uphold the findings of the First Appellate Authority. The quantum of the license fee paid is neither tax, duty, cess or fees. The Ld.CIT(A) has rightly relied on the decision of Hon'ble Calcutta High Court in the case of CIT vs. Varas International Pvt.Ltd. reported in 225 ITR 831. The 'license fees' being a charge received by the government for parting with rights, is neither a tax, nor a duty, nor a fees, nor a cess within the meaning of S.43B of the Act. Hence this Sec.43B cannot be applied. 4.8. In view of the above discussion we allow the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the shares, the reserves represent a subsidy, grant or reimbursement for meeting the cost of assets transferred. We find no basis for such an assumption. We are hard pressed to imagine as to how free reserves and surpluses of a company can be considered anything but as part of shareholders funds. The Assessing Officer erred in completely ignoring that reserves and surpluses of a company are a part of shareholders funds and the book value of equity share consists of not only the paid up capital but also the reserves and surpluses of the company. The format of the balance sheet as prescribed under Schedule VI of the Companies Act, 1956 also clearly indicates that reserves and surpluses are a part of shareholders fund. The balance sheet of the petitioners company also reflects the reserves 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,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the petitioner had escaped assessment and proceedings initiated on the basis of such reasons are liable to be quashed. " The above decision of the Hon'ble High Court has been accepted by the Income Tax Department and no appeal has been preferred before the Hon'ble Supreme Court. The appellant therefore submitted that since the issue has attained finality, tax depreciation should be allowed to the appellant on the written down value of the assets as reported in the Income Tax return of the respective year. Thus this issue stands settled in favour of the assessee. 6.3. Respectfully following the above decision, the A.O. is directed to allow the depreciation as claimed by the assessee. 6.4. In the result these grounds of the assessee is allowed. 7. The next issue is with respect to the adjustment made on account of excess claim of depreciation, while computing book profits u/s 115 JB of the Act. This issue arises in the following grounds : (a) in assessee's appeals ground no.10 for the A.Y. 2003-04, ground no.7 for the A.Y. 2004-05, ground no.9 for the A.Y. 2005-06, ground no.13 for the A.Y. 2007-08; (b) in departmental appeals as ground no.9 for the A.Y. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e A.Y. 2011-12 has treated a similar amount as received on capital account does not persuade us to reverse the order of the Ld.CIT(A) for the reason that, the addition is based on the fact of non filing of the required evidences. Hence we dismiss this ground of the assessee i.e. ground no.3 for the A.Y. 2003-04. 9. The next ground is ground no.9 in appeal for the A.Y. 2003-04 which is an adjustment made by adding the above said loan granted by the Government of India while computing book profits u/s 115 JB of the Act. In our view no such adjustment can be made to the profits determined under Schedule VI of the Companies Act, as the item in question i.e. loan received from government is not that which is specified in Explanation II to S.115 JB of the Act. In our view reliance placed by the assessee on the judgement of Hon'ble Apex Court in the case of Apollo Tyres reported in 255 ITR 273 (S.C.) applies in this case. In the result ground no.9 of the assessee's appeal for the A.Y. 2003-04 is allowed. 10. The next issue is disallowance of interest on MTNL Bonds. This ground appears as ground no.5 in the departmental appeal for the A.Y. 2003-04. The addition was made by the A.O. b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... He held that the assessee had no option but to write off the same in the accounts as not recoverable and hence such losses are allowable expenditure and allowed the claim of the assessee. Aggrieved the Revenue is in appeal. 12.1. After hearing rival contentions, we are of the view that as the fact that the income in question is not recoverable and that i is written off is not in dispute. The Ld.CIT(A) was right in allowing the claim of deduction of reversal of income. Hence this ground of the Revenue is dismissed. 13. The next issue is regarding the adjustment made to book profits u/s 115 JB of the Act with respect to reversal of excess income booked. This ground is taken by the assessee in its appeals as ground no.8 for the A.Y. 2003-04, as ground no.5 for the A.Y. 2004-05, as ground no.7 for the A.Y. 2005-06 to 2006-07, as ground no.11 for A.Y. 2007-08 and as ground no.5 for the A.Y. 2008-09. The assessee has debited an amount of Rs. 484,63,13,000 as provision for doubtful debts and bills. The amount was added back by the assessee in its computation of income, but no adjustment was made while computing book profits u/s 115 JB of the Act. The AO added the amount to the book....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sideration of the facts, we are of the considered opinion, that the Ld.CIT(A) should have admitted the additional evidence under Rule 46A, as the assessee was not put to notice of this disallowance to be made by the A.O. When the assessee has pointed out that in the tax audit report the actual figure is Rs. 11.32 lakhs, it is not correct on the part of the Ld.CIT(A) to confirm the disallowance made by the A.O. of Rs. 113.26 crores. In view of the above discussion, we set aside the matter to the file of the AO for fresh adjudication, in accordance with law, after considering the evidence to be produced by the assessee. 15.2. In the result this ground of the assessee is allowed for statistical purposes. 16. The next issue is on disallowance of Rs. 15,17,400/-. The assessee's claim is that, this was expenditure incurred on partitions in the office premises and hence allowable as a deduction. The A.O. relied on the tax auditor's report and held that the expenditure is capital in nature. 16.1. The other issue in this ground is disallowance of Rs. 2,56,00,981/-. The assessee's contention is that the same is added back suo moto by it in the computation of income and hence it is a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure for the reason that he recorded that the assessee's accounts were subject to CAG audit, statutory audit, internal audit, tax audit etc. and that there was no adverse observation in any of these audits etc. As there is no justification for the Ld.CIT(A) to retain disallowance of 20%, we delete this disallowance and allow this ground of the assessee. 19. The next issue is with respect to write off of assets. This issue arises in assessee's appeal as ground no.4 for the A.Y. 2003-04, ground no.2 for the A.Y. 2004-05, ground no.3 for the A.Y. 2005-06. In the departmental appeals, this ground appears as ground no.1 for the A.Y. 2006-07, 2007-08 and as ground no.2 for the A.Y. 2008-09. 19.1. After considering rival submissions, and perusing the papers on record, we find that there is no dispute on the issue as to whether the amounts in question written off, could be disallowed or not. The assessee claims that it has suo motto disallowed these amounts and the disallowances made by the A.O. results in double disallowance. The Ld.CIT(A) for the A.Y. 2003-04, 2004-05, 2005-06 directed the A.O. to verify as to whether it is a case of double disallowance and rectify the assessment. W....