TaxTMI 
TaxTMI 
TaxTMI 
2018 (2) TMI 1272
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....8-09 respectively. Shri Deepaka Chopra & Mrs. Manas Vini Bajpai, Ld. Authorized Representative appeared on behalf of assessee and Shri G.Hangshing, Ld. Departmental Representative appeared on behalf of Revenue. 2. All the appeals are disposed off by this common order for the sake of convenience. First we take up Revenue's appeal in ITA No.343/Kol/2009 for A.Y. 04-05. 3. Revenue has raised the following grounds of appeal. "1. That the CIT(Appeal) erred on act and in law in allowing the assessee to adjust unabsorbed depreciation of Rs. 6.67 crore in computing Book Profit u/s. 115J Beventhough the provisions are unambiguous in their ambit." 4. Sole issue raised by the Revenue in this appeal is that ld. CIT(A) erred in adjusting the unabsorbed depreciation of Rs. 6.67 crores while computing the book profit under section 115JB of the Act. 5. Briefly stated facts are that the assessee in the present case is a Limited company and engaged in the business of cellular mobile phone service. The assessee for the year under consideration has filed its return of income on 01.11.2004 declaring total income of Rs. 1,54,29,940/- under normal computation of income and declared book profit ....
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....s of section are not clear and therefore, a view favourable to the assessee must be accepted. It has relied on Circular No. 26 dated 7/7/1955 in support of its claim." However the AO disregarded the contention of the assessee for the claim made of the unabsorbed depreciation of Rs. 6,67,29,000.00 by observing as under: "the assessee will get the benefit of the "loss brought forward excluding depreciation" unabsorbed depreciation only when both of them are present. Even otherwise, there are several material differences between old section 115J and Section 115JB. 10(b) In view of the above it is held that the lower of "loss excluding depreciation "unabsorbed depreciation for AY 2002-03 will be nil. Therefore, the aggregate of lower of "loss excluding depreciation"/ unabsorbed depreciation upto AY 2002-03 will be Rs. 30,67,83,000/- 10(c) Therefore, an amount of Rs. 6,67,29,000/- is added to book profit." 7. Aggrieved assessee preferred an appeal before ld. CIT(A). The assessee before the ld. CIT(A) submitted that as per the provisions of the Act the lower of unabsorbed depreciation and brought forward loss was to be worked out for each year as per books. There can be profit i....
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....e unabsorbed depreciation as per books are required to be compared before allowing the set off. Such cumulative unabsorbed depreciation will include the unabsorbed depreciation of Rs. 6.67 crore of Assessment Year 2002-03 for the purpose of clause (iii) of Explanation 1 of section 115JB(2) for AY 2004-05. 6. In view of the above discussion, impugned order hold that the argument of appellant is correct. In AY 2002-03 there is positive profit before depreciation and the entire profit is set off by the depreciation of that year itself and there is still unabsorbed depreciation of Rs. 6.67 core after such setting off. It is not justified on part of assessing officer to invoke explanation (b) to clause (iii) of Explantion1 of 115JB(2) for the purpose of restricting the quantum of unabsorbed depreciation of Assessment Year z2002-03 from Rs. 6.67 crore to Nil when such unabsorbed depreciation was not used for setting off any further profit in that year under clause (iii) of Explanation 1 of section 115JB(2). The explanation (b) to clause (iii) of Explanation 1 of 115JB(2) comes into force to determine quantum of set off on the basis of comparison of brought forward loss or unabsorbed d....
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....ok profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent]. (2)------------ Explanation.-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- (a) -------- (b) (c) (d) (e) (f) if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by- 71[(i) ---- (ii) 72[(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or] A plain look at the above statutory provision makes it clear that the assessee is entitled to claim the deduction of either brought forward losses or unabsorbed appreciation whichever is less as per the books of accounts. In the case on hand w....
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....id to Life Insurance Corporation of India in respect of gratuity fund. 4. As interest under section 234B of the Act is not leviable in case of computation of income under the provisions of Minimum Alternate Tax, the learned AO be directed to cancel interest charged under section 234B of the Act. All the above grounds are without prejudice to each other. The appellant craves leave to add, amend, vary omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case." 11. First issue raised by assessee in this appeal is that ld. CIT(A) erred in confirming the order of AO by not adjusting the unabsorbed depreciation of Rs. 8,38,81,000/- while computing the book profit u/s 115JB of the Act. 12. The AO during assessment proceedings observed that "(b) the assessee has already claimed set-off of unabsorbed depreciation of Rs. 8,83,81,000/- in the AY 2003-04 out of total unabsorbed de of Rs. 37,35,12,000/- available in AY 2003-04. Yet the whole amount of unabsorbed depreciation of Rs. 37,35,12,0....
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....ded to book profit." 13. Aggrieved, assessee preferred an appeal before ld. CIT(A). The assessee before the ld. CIT(A) submitted that the provisions of the Section 115JB are to be applied at the end of a relevant year and accordingly, the book loss or unabsorbed depreciation as on that date needs to be classified to compute the 'book profits'. Adjustment on account of earlier year's reduction from the unabsorbed depreciation is not called for. The provision of Section 115JB envisages 'the amount of loss brought forward or unabsorbed depreciation, which is less as per books of account'. If in any earlier year, reduction from book profits is made on account of unabsorbed depreciation, no adjustments are made in the books of account of the assessee. Accordingly, the loss carried forward and the unabsorbed depreciation remains unaltered in the books of account. For any subsequent years, what is required by section 115JB is loss brought forward or unabsorbed depreciation as per books of account. However, in view of the fact, that no adjustment is made in the books of account, while claiming the unabsorbed depreciation in earlier years, the position of unabsorbed depreciation and loss ....
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....ue has been decided by me against the appellant in AY 2005-06 vide order dated 9/1/2009 for the said appeal. Following my own decision, I hold that claim made in respect of set off of profits of Rs. 8.84 crore in Assessment Year 2003-04 under clause (iii) of the explanation to section 115JB(2) cannot be ignored by the appellant in AY 2004-05, ie, the instant assessment year." Aggrieved by this, the assessee has come up in appeal before us. 14. The ld. AR reiterated the submissions that were made before the ld. CIT(A). The ld. AR relied on the order of Hon'ble ITAT in the case of DCIT Vs. Binani Industries Limited reported in 178 TTJ 658. He stated that the issue may be decided on merit. On the other hand, Ld DR before us vehemently supported the order of lower authorities. 15. We have heard the rival contentions of both the parties and perused the material available on record and the case law relied upon by the assessee. In the instant case the assessee has shown profit of Rs. 8,83,81,000/- for the AY 2003-04 after the depreciation. The assessee claimed to have adjusted the same i.e. Profit of Rs. 8,83,81,000/- against brought forward losses. However, the AO adjusted the same a....
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.... claim the deduction of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. In the instant case before us the assessee has claimed that the profit earned during the assessment year 2003-04 for Rs. 8,83,81,000/- was adjusted against the unabsorbed brought forward losses in the books of accounts. The Ld DR has not advanced any argument to controvert the arguments submitted by the Ld AR. Therefore, we are of the view that the assessee is very much entitled to claim the deduction of the unabsorbed depreciation of Rs. 37,35,12,000/- without adjusting the amount of profit for Rs. 8,83,81,000/-. In holding so, we find support and guidance from the order of this Hon'ble Tribunal in the case of Binani Industries Limited (supra) reported in 178 TTJ 658 which reads as under:- "We have heard the rival submissions and perused the materials available on record. We are in agreement with the arguments of the Learned AR that the losses (both cash loss and depreciation loss) would continue to remain in the books of accounts till it is wiped off by earning profits by the assessee company and accordingly the same would be available for reduction from boo....
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....l before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the depreciation was claimed on computers as per the rates specified in the Appendix-1 of the Income Tax Rule, 1962. The assessee without prejudiced to the above also submitted that incase depreciation is allowed @ 25% only then the opening WDV should be accordingly modified as discussed above. However, Ld. CIT(A) allowed the appeal of assessee for statistical purpose by observing as under:- "2. Assessing Officer has followed theism order of A.Y 2003-04 and has allowed depreciation at a rate of 25% instead of 60%. The rate of depreciation was decided in AY 2003-04 on the basis of submission of insufficient details in respect of the nature of the asst under dispute. The appeal against the order of AY 2003-04 is lying before CIT(A)-VI-Kolkata ad the CIT has not yet decided this appeal. Therefore it is not possible to decide the Ground No. 3 of appellant on the basis of record of only AY 2004-05. However, the assessing officer is directed to apply the same rate of depreciation as may be decided by CIT(A)-VI-Kolkata for AY 2003-04. 3. The arithmetical calculation in respect of cost of asset n AY 2003-04 and the dep....
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....icate the issue accordingly. As none of the party has brought to our notice about the outcome of the order passed by Ld. CIT(A) in the immediate preceding Assessment Year. Therefore, we are inclined to restore the matter back to the file of AO for fresh adjudication in accordance with law and after providing reasonable opportunity of being heard to assessee and after considering the direction of Ld. CIT(A) issued in the immediate preceding Assessment Year 2003-04. We also note that the ld. CIT-A in the instant case has given very clear & unambiguous direction for adjudication of the impugned issue of depreciation. Therefore we do not find any infirmity in the order of ld. CIT(A). Thus, the ground of assessee is allowed for statistical purpose. 21. Next issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs.5,69,248/- paid to LIC on account of contribution in respect of gratuity fund. 22. The assessee, during the year, has contributed a sum of Rs.5,69,248/- towards gratuity fund maintained with LIC. However, the AO during the course of assessment proceedings observed that the gratuity fund has not been a....
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....e of taxtool (supra), the relevant extract of the judgment is reproduced below:- "Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal. True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the Section, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act. (See : Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585/23 Taxman 37 (SC). From a bare reading of Sectin 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimatel....
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.... 2005-06 28. The Revenue has raised the following grounds of appeal:- "1. That the learned CIT(Appeal) erred on fact and in law in allowing the assessee to adjust unabsorbed depreciation of Rs. 37,35,12,000/- in computing Book Profit u/s.115JB even though the provisions are unambiguous in their ambit. 2. That the learned CIT(Appeal) erred in holding that the assessee was liable to get the benefit of deduction u/s. 80IA to the extent of 100% CIT(Appeal) has also erred in holding that the assessee has the option to choose any continuous period of ten years out of the fifteen years. In the assessee's case the initial assessment year 1996-97 and at the point in time, there was no such option to the assessee and the period of ten years automatically started from the initial assessment year. 3. That the learned CIT(Appeal) has erred in holding that the assessee was eligible to get deduction u/s. 80IA on the following receipts a). Interest on margin money - Rs.4,74,875/- b). Provision / liabilities written back - Rs.26,73,408/- c). Bad Debt recovered - Rs.7,77,123/- d). Bounce cheque charges - Rs.4,11,440/- e). Cellsite sharing revenue - Rs.2,85,000/- &....
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....peal ITA 377/Kol/2009 29. The First issue raised by the Revenue in this appeal is that ld. CIT(A) erred in adjusting the unabsorbed depreciation of Rs. 37,35,12,000.00 while computing the book profit under section 115JB of the Act. 30. At the outset it was observed that the impugned issue has already been decided in favour of assessee by this Hon'ble Tribunal in the case of Binani Industries Limited (supra) reported in 178 TTJ 658 which reads as under:- "We have heard the rival submissions and perused the materials available on record. We are in agreement with the arguments of the Learned AR that the losses (both cash loss and depreciation loss) would continue to remain in the books of accounts till it is wiped off by earning profits by the assessee company and accordingly the same would be available for reduction from book profits u/s 115JB of the Act. We hold that the least of the cash loss or depreciation loss once adjusted / reduced from book profits in earlier assessment years, do not vanish out of the books until it is wiped out by profits in subsequent years. Till such time, the losses would only continue to remain in the books. We hold that for the purpose of computati....
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....o why the deduction should not be allowed @ 30% as discussed above. In compliance thereto the assessee submitted that the amended provisions of section 80IA of the Act provides that the profits of an undertaking providing telecommunication services after 1st day of April, 1995, but before the 31st day of March, 2005 shall be eligible for 100% deduction for first five years in respect of profits derived from such business out of the ten years and 30% for subsequent five years. Section 80IA was originally inserted by the Finance (No.2) Act, 1991 w.e.f. April, 1 1991 which was subsequently divided into section 80IA and 80IB by the Finance Act, 1999 w.e.f. 1, 2000. Clause (ii) of sub-section (4) of amended section 80IA which reads as under:- "Any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domes satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 21'st day of March, 2005." Further Clause 2(A) of amended section 80IA reads as under:- "Notwithstanding anything contained in sub-section (1) or sub-section (2), th....
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....iods as specified in sub-section (2). Thus, an assessee has the liberty to opt for a consecutive ten years exemption out of the period of 15 years. 32.1 It is settled law that the law to be applied is that enforce in the relevant assessment year. For this proposition reliance is placed on the following decisions: Maharajah of Pithapuram vs. CIT (13 ITR 221) (PC); Karim Tharuvi Tea Estate Ltd vs. State of Kerala (60 ITR 262) (SC) Reliance vs. CIT (120 ITR 921) (SC) Goslino Mario vs. CIT (241 ITR 314) (SC) The Hon'ble Supreme Court in Bajai Tempo's case (196 ITR 188) held that the provision granting deduction, exemption or relief should be construed liberally and in favour of the assessee. The above test has also been laid down in the following case: CIT vs. South Arcot Soc. (176 ITR 117, 119) (SC) Ct vs. UO Co-op Fed. (176 ITR 435, 441)(SC) Broach Soc. vs. CIT (177 ITR 418,422)(SC) In view of the foregoing discussion the assessee humbly submitted that hundred per cent deduction be allowed for A.Y 2005-06. However the AO during the assessment proceedings made certain observations as detailed under:- "16(a) As stated above the assessee-company is claiming deduct....
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....ust be remembered that by Finance Act, 1999, w.e.f. 1st April, 2000, old Section 80IIA has been completely replaced by new section 80IA. The use of the phase "any undertaking which has started or starts providing telecommunication services. In clause (ii) of Section 80IA(4), in respect of those services which started from 01.04.1995. if this was not done then the telecommunication services which started in1995 would have lost deduction totally. 16(e) It must be once again remembered that the facility of option to chose a period of ten assessment years out of fifteen assessment years has not been granted with retrospective effect. In fact the new section 80IA puts telecom services on a rather lower pedestal as compared to other infrastructure services. As per the provisions of Section 80IA as they stand w.e.f. 01.04.2000, all the infrastructure services such as roads, highway projects, railway system, irrigation projects, ports, air ports, undertaking in EZs etc are eligible for 100 percent deduction for a period of ten years out of fifteen assessment years. However, section 80IA(2A) restricts deduction to the undertakings providing telecommunication services @ 100 percent for on....
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....the AY 2005-06 and therefore, the restriction of the deduction to 30% should be lifted. Thus, if the view taken by the AO that since the Appellant has started its operation in AY 97-98, the old section 80IA has to be applied, it would render the aforesaid Supreme Court decisions redundant. Section 80-IA was originally inserted by the Finance (No.2) Act, 1991 w.e.f. April 1, 1991, which was subsequently divided into section 80IA and 80IB by the Finance Act, 1999 w.e.f. April 1, 2000. Clause (ii) of sub-section (4) of amended section 80IA reads as under: 'Any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1std day of April, 1995, but on or before the 21st day of March, 2005' Further Clause 2(A) of amended section 80IA reads as under:- Notwithstanding anything contained in sub-section (1) or sub-section (2), the deduction in counting the total income of an undertaking providing telecommunication services, specified in clause (ii) of subsection( 4), shall be hundred per cent of the profits of t....
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....003-04. In view of specific provisions of section (2) to section 80IA, the Appellant would be eligible to claim deduction for 'any ten consecutive years' out of 'initial fifteen years'. Accordingly, the Appellant had started claiming deduction for the first time from AY 2004-05. Thus, the Appellant would be entitled to claim 100% deduction upto AY 08-09 and thereby would claim 30% deduction only for AY 09-10 and 10-11. Moreover, the assessee also relied on the decision of Mohan Breweries and Distilleris Ltd. vs. ACIT (24 SOT 170) wherein the Tribunal in the context of section amended 80IA (2) has held that 'section 80IA as enacted by the Finance Act, 1999 w.e.f. 1std April, 2000 gives as option to the assessee w.e.f. 1st April 2000 to claim relief under this section for any 10 consecutive assessment years out of 15 years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility etc. It is left to the assessee at its will to claim this relief from the first assessment year, or from the second or from, the third or so as it might think, fit. Once the assessee has opted for the first year of relief then it contin....
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....ld be construed liberally and in favour of the assessee. The above test has also been laid down in the following cases: * CIT v. South Arcot Soc (176 ITR 117, 119) (SC); * CIT v. UO Co-op. Fed. (176 ITR 435, 441)(SC); * Broach Soc. V. CIT (177 ITR 418, 422) (SC); In view of the foregoing, the Appellant humbly summarizes as under: * Following the ratio laid down by the Supreme Court in 120 ITR 921, the AO cannot go to the old section 80IA of the Act and accordingly, cannot rely upon the definition of the 'initial assessment year' in erstwhile section 80IA of the Act; * Considering the language of the amended act, the legislative intent as can be gathered from the Explanatory Memorandum and settled legal position in Bajaj Tempo's case; * The definition of the term "initial assessment year" has no applicability since that provision was deleted much before the Appellant started its claim for the deduction u/s. 80-IA In view of above the assessee prayed to allow deduction u/s. 80IA of the Act @ 100% as claimed by it. However the ld. CIT(A) after considering the submission of the assessee has allowed the deduction u/s 80-IA of the Act by observing as under : "4. The fact....
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.... operations on or after 1.4.1995 and due to substantial capital investment were not able to make profits in the initial few years of operation. The instant case of appellant squarely falls within the intention of legislature and therefore if in Assessment Year 2004-05 appellant has claimed the deduction u/s. 80IA for the first time then for all practical purposes it has expressed its option of choosing the period of 10 years out of 15 years for the first time in Assessment Year 2004-05. Appellant has to take a choice of the period of 10 years out the six options available to it as under:- (i) Assessment Year 1996-97 to Assessment Year 2005-06 (ii) Assessment Year 1997-98 to Assessment Year 2006-07 (iii) Assessment Year 1998-99 to Assessment Year 2007-08 (iv) Assessment Year 1999-00 to Assessment Year 2008-09 (v) Assessment Year 2000-01 to Assessment Year 2009-10 (vi) Assessment Year 2001-02 to Assessment Year 2010-11 In the written submission the appellant has clearly stated that it would be claiming the deduction u/s. 80IA till Assessment Year 2010-11. Therefore app has clearly made a choice of 10 years as per provisions of section 80IA(2) of IT Act and this c....
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....terated the submissions as made before the ld. CIT(A) The ld. AR relied on the order of ld. CIT(A) for allowing the deduction under section 80-IA of the Act @ 100%. 35. We have heard the rival contentions of both the parties and perused the materials available on record. In the instant case the assessee was entitled to claim deduction u/s 80-IA of the Act from the AY 1996-97 but it did not do so as there were carried forward losses. The assessee did not claim any deduction u/s 80IA of the Act up to AY 2003-04 in view of the carried forward losses. However, the assessee claimed the deduction u/s 80-IA of the Act for the first time in the AY 2004-05. As per the assessee, it was entitled to choose any year for claiming the deduction under section 80-IA of the Act out of the block of 15 years. In this regard we find that the Hon'ble ITAT has already held that it is at the discretion of the assessee to choose the initial year for the purpose of claiming the deduction under section 80-IA of the Act in the case of Mohan Breweries and Distilleris Ltd. vs. ACIT (24 SOT 170) wherein the Tribunal in the context of section amended 80IA (2) has held that 'section 80IA as enacted by the Finan....
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....he CBDT has clarified the term 'Initial Assessment Year' in relation to section 80IA of the Act which reads as under: "The matter has been examined by the Board. It is abundantly clear from subsection (2) that an assessee who is eligible to claim deduction u/s 80-IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen ( or twenty) years, as prescribed under that sub-section." Similarly for the issue raised by the assessee we hold that the assessee has the discretion to choose the initial year out of the block of 15 years. Thereafter the assessee would claim the deduction as per the provision of section 80-IA of the Act for the remaining year but subject to the block of 15 years. In view of the ground of appeal filed by the Revenue is dismissed and the ground of appeal filed by the assessee is allowed. 36. The next issue raised by the Revenue in ground no. 3 is that ld. CIT(A) erred in allowing certain receipts as deduction u/s 80-IA of the Act. 37. The assessee inter-alia has shown certain receipts of Rs. 1,20,84,621.00 in its profit & loss account and claimed the deduction for the....
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.... "attributed to" or "referable to" and, therefore, only those receipts which have direct and immediate nexus with the industrial undertaking will be eligible for deduction u/s. 80IA. In fact same is the case in respect of other sections granting deduction such as, Section 80HH, Section 80HHC etc. 37.1 The AO also observed that the assessee has claimed deduction u/s 80IA on interest receipt in the year under consideration whereas in the immediately preceding assessment year i.e. AY 2004-05, the assessee had considered that interest income as income from other sources and had not claimed deduction u/s. 80IA. The assessee itself has stated that this interest has been earned on the surplus fund kept in the bank. The interest earned has no immediate nexus with the industrial undertaking whose activity is providing telecom services. The AO also observed in respect of provisions for liabilities written back and bad debt recovery, these expenses were claimed in the earlier years and since they have been recovered in the current year, it has become the income of the current year. The total income under the Income-tax Act is to be computed on year to year basis. This income has not been de....
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....) ... ...". Thus, it can be observed that while deduction under Sec. 80HH requires the income to be derived from industrial undertaking, the provision of Sec. 80- IA requires the income to be derived from any "business" by the undertaking. Having regard to the clear shift in language of the provision, the intention of the legislature is clear that all income derived from the business of the undertaking should be eligible for deduction. The AO himself has taxed interest income as income under the head "business" and not under the head "other sources". It is submitted that the decision of the Supreme Court in Pandian Chemical's case, which relates to section 800HH, cannot be applied to the provision of sec. 80-I which is differently worded. In fact, attention is drawn to a recent decision of the Delhi High Court in CIT v. Eltel SGDS P. Ltd. 300 ITR 6 (Del), where it has been held as under: 'A perusal of the above would show that there is a material difference between the language used in Section 80-HH of the Act and Section 80-IB of the Act. While Section 80-HH requires that the profits and gains should be derived from the industrial undertaking, Section 80-IB of the Act requir....
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.... that interest and certain other receipt can be regarded as income derived from the business and hence eligible for the deduction, the same would equally hold good also for the post-splitted sections. The old benefits are not intended to be taken away but are retained. Further, had the intension of the legislature was to exclude such interest receipts, it would have inserted an explanation, similar to explanation (baa) to section 80HHC(3) of the Act. Having regard to the above, the Appellant most humbly submits that interest income beheld as income derived from the business by the telecom undertaking and hence eligible for deduction u/s. 80IA Without prejudice, the Appellant prays that if at all the action of the AO is confirmed, then in that case, the interest income ought to be adjusted against interest expenses, as also the expenses incurred for earning such interest income, and the disallowance be restricted to net interest income only, if any, following the principle laid down by the Delhi High Court in Shree Ram Honda (289 ITR 475) 2 & 3, Provisions/Liabilities written back - others and Bad debts Recovery The Appellant is in the sole business of the providing cell....
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.... section 80-I of the Act. the reliance on the general meaning of the term interest as well as raising distinction between the source of sale proceeds and the source of interest is erroneous in law.' 6. Cell Site sharing Revenue: For rendering services to various subscribers, availing/subscribing for cellular services of the Ape, the Appellant has to develop the sites. At these sites, the Appellant constructs infrastructure facilities in the form of civil work, setting up of towers, installation of batteries, air conditioners and D.G sets and such other assets which are used for providing network connection to the Appellant's subscribers. These are regarded as passive/supporting assets in the business of telecommunication services. At these sites, additionally the Appellant is required to install antenna and BTS so that network connection becomes functional and would carry verbal date from one subscriber to other subscriber and vice-versa, through such antennas. These are regarded as active / functional assets. The Appellant has developed various sites in the circles allotted to it in the state of West Bengal. The other operators have approached the Appellant to make use of ....
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....as the expression "profits and gains attributable to industrial undertaking nor is it as narrow as the expression: profits and gains derived from industrial undertaking" it is somewhere in between. Therefore each receipt is analyzed on this principle as under:- Fact that the interest income has been earned out of surplus funds Out of total sources of fund of Rs. 550.4 core, appellant had Rs. 273.30 crore of surplus funds. The detail of interest income was called for during the appellate proceedings and the appellant has submitted the details as under:- Nature of interest income Amount (in Rs) Interest on fixed deposits with banks on temporary investment out of surplus funds arising out of normal course of business. 66,96,909 Interest earned on margin money of Rs. 53,85,000 against guarantee given to customs under EPCG Scheme 4,74,875 TOTAL 71,71,784 Appellant has submitted that the interest income is earned mostly out of the fixed deposits in bank made out of surplus funds. Therefore there is apparently no cost for earning such interest. A surplus fund may be earned out of an eligible business. However, if it is subsequently invested in a bank for the p....
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....tted to it in the state of West Bengal. The other operators make use of its sites and various supporting assets which are installed at these sites. These other operators pay certain charges for using various supporting assets at these sites, for having access to a network of their own, by setting up their own antennas, BTS at such sites; whereby they can render telecommunication services to the subscriber of their networks. In short, the Cell Site haring income is an income from subletting of the business asset to other operators and is a necessary requirement in this kind of business. Appellant has submitted that in income tax return this income has been considered as "business income". Therefore assessing officer is directed to include Rs. 2,85,000 of Cell Site Sharing income in "profits and gains derived from bus of Cellular services". Other Receipts: Appellant has not submitted any argument in respect of these receipts even during the appellate proceedings. Therefore I approve the view of assessing officer to exclude other receipts of Rs. 7,65,866 from "profits and gains derived from business of Cellular services". 5. In view of the above discussion the amount which is re....
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....eduction claimed by the assessee but denied by the AO in respect of certain receipts as discussed on the ground that these receipts were not derived from the Industrial undertaking. However, the Ld. CIT(A) granted relief in part to the assessee by allowing the deduction u/s 80-IA of the Act. 41.1 We find that similar issues were raised by the Revenue in the case of BSNL Vs. DCIT reported in 156 ITD 847 as detailed under:- 1. "The ld. CIT(A) has erred in law and on facts in holding that receipts amounting to Rs. 76,71,90,000/- on account of liquidated damages are entitled for deduction u/s 80-IA of the I.T. Act ignoring the fact that it is necessary to prove that the receipt generated should be of first degree source of special activity, but not of ancillary and incidental activity of the undertaking. 2. The ld. CIT(A) has erred in law and on facts in holding that receipts amounting to Rs. 16,86,63,72,000/- on account of excess provision written back are entitled for deduction u/s 80-IA of the I.T. Act ignoring the fact that write back of provision pertaining to earlier years which is no longer required is not an income derived from the business operations of the undertaking f....
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.... or enterprises providing telecommunication services. 13.9 A further reading of the said sub-section makes it clear that the deduction in computing the total income is available only to an undertaking which is providing telecommunication services and that too which have been specified in clause (ii) of sub-section (4). Thus by virtue of this sub-section, a specified class of undertakings have been identified and the fact that the assessee falls under this category is an accepted fact and thus not an issue in the present proceedings. Reverting back to the said sub-section it is seen that the legislature sets out that the deduction is to be allowed at hundred per cent of the profits and gains "of the eligible business" for a period of five years as opposed to the enterprise/undertakings in sub-sections (1) and (2) wherein hundred per cent 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 per cent of the amount available for deduction. Having over-ridden the requirements of sub-sections (1) and (2) by use of the words "profits and gains of eligible business" in....
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....t for enterprise/undertaking falling in sub-section (2) and the proviso thereto only keeping in mind the nature of the enterprises/undertakings contemplated under sub-section (2) the option of claiming deduction in any ten consecutive years is given to be claimed from the first fifteen years of beginning operation is given. 13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, wherever it wanted to curtail the timeline during which deduction can be claimed and also addressing 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 subsections (1) and (2) in the openi....
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....um of authoritative forms in which it is expressed. Interpretation differs from construction, whereas interpretation is finding out the true sense of any form, construction would mean drawing of a conclusion in respect of subjects that lie beyond the direct expression of the text. 13.14. It is well understood that the Court only interprets the law and cannot legislate. Even if a provision of law is presumed to be misused and subjected to the abuse of the process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary as held in Padmasundara Rao (supra) at pages 154 to 155 (SC); Prakash Nath Khanna v. CIT [2004] 266 ITR 1/135 Taxman 327 (SC); Union of Indiav. Rajeev Kumar AIR 2003 SC 2917. 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 v. Union of India [2003] 4 SCC 753. 13.15 A legal fiction treating something not done as done, requires legislative authority and without it, ....
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....urther leeway of exercising its option in any of the ten consecutive years from the first twenty years instead of fifteen years as contemplated under sub-section (2) of section 80-IA from the beginning developing or operation and maintaining the infrastructure facility. Thus the legislature in its wisdom giving due consideration to still longer gestation periods which may be required by such high investment infrastructure related enterprises which 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 ....
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....n sub-section (2A) the term used is "profits and gains of eligible business" juxta posed with the glaring fact that the sub-section (2A) starts with a non-obstante clause namely "Notwithstanding" qualified further by the use of the words "anything contained in". In the face of the clear and unambiguous statutory provisions we find ourselves unable to agree with the arguments advanced by the Ld. CIT DR however valiantly as what the law is has very clearly been enunciated and set out in the relevant provision giving cause to no debate whatsoever. 13.19 We find that in the course of the arguments both the sides have advanced their case duly supported by case laws, relying on principles of interpretation as settled by the Magnum Opus of Justice G.P. Singh's "Principles of Statutory Interpretation" and Kanga Palkivala & Vyas "The Law and Practice of Income Tax" and various decisions of the Courts wherein applying those yardsticks the decisions have been rendered. Reference to the specific principles invoked and the proposition of law and the ratio laid in the decisions relied upon are not being separately addressed as in the facts of the present case, we find that the meaning of ....
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....me academic. Accordingly the departmental appeal is dismissed, Grounds No. 1 to 3 raised in assessee's appeal also in view of our detailed finding in Ground No. 4 become academic as the assessee succeeds in its preliminary arguments canvassed under Ground No. 4. 15. In the result, assessee's appeal is allowed to the extent as mentioned above on the preliminary issue and the departmental appeal is dismissed." 41.1 We also note that the order of Hon'ble Tribunal in the case of BSNL Vs. DCIT reported in 156 ITD 847 was subsequently affirmed by the Hon'ble Delhi High Court reported in 388 ITR 371. The relevant extract of the order is reproduced below:- "10. The assessee filed appeals and the revenue filed cross-appeals before the ITAT. The ITAT in the impugned orders concluded that with sub-section (2A) beginning with a non-obstante clause, the legislative intention of making available to an undertaking, providing telecommunication services, the benefit of deduction of 100% of the profits and gains "of the eligible business" was explicit. Indeed, the legislature appears to have made a conscious departure in adopting for sub-section (2A) a wording different from that appe....
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.... question might arise whether such an enterprise would be able to seek deduction both under section 80-IA(2A) as far as the telecommunication business is concerned, and under section 80-IA(1) as far as any other eligible business is concerned. 13. In the first place as far as the present appeals are concerned, the above issue as posed by learned counsel for the revenue is purely hypothetical. In any event, section 80-IA(2A) treats an undertaking providing telecommunication services as a separate species warranting a separate treatment as is evident from the non-obstante clause with which it begins. The Court sees no reason why such an undertaking would not be able to take the benefit of deduction in terms of section 80-IA(2A) notwithstanding that the enterprise of which it forms part may have other eligible businesses for which the deduction would have to be calculated in terms of section 80-IA(1) of the Act. 14. The Court finds no reason to differ from the view expressed by the ITAT in the impugned orders as far as the interpretation of section 80-IA(2A) of the Act is concerned. 15. No substantial question of law arises for consideration. The appeals are dismissed." The....
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....standing of the Learned AO that such loss once adjusted in earlier year is no longer available for set off is misconceived. Hence we do not find any infirmity in the order of the Learned CIT(A) in this regard. The Ground No.2 raised by the revenue is dismissed." In view of above, we have no hesitation to hold that the assessee can claim the deduction either of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. Consequently, the ground of appeal filed by the assessee is allowed. 44. The second issue of the assessee is that ld. CIT(A) erred in giving finding that the assessee has to necessarily claim the deduction u/s 80-IA of the Act for 10 consecutive years. The assessee also assailed the order of ld. CIT(A) by submitting that the impugned issue for 10 consecutive years deduction is not arising from the order of AO. 45. We have already dealt this issue elaborately while adjudicating the ground of appeal of Revenue in ITA No.377/Kol/2009 and since we have dismissed this ground of appeal of Revenue following the same analogy we also allow this ground of appeal of assessee. 46. The 3rd issue raised by the assessee is that ld. CIT(A) ....
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.... full ten consecutive years in block of 15 years, thereby holding that the Appellant necessarily needs to start claiming tax holiday from Assessment Year 2001-02, in complete disregard to the non-obstante provisions of section 80IA(2A) of the Act, which specifically provide for deduction for ten consecutive years commencing at any time during such fifteen years. 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in exceeding his jurisdiction by giving a finding (referred to in Ground No. 2 above) on an issue which was not a subject matter of appeal before the learned CIT(A). 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in excluding the following income / receipts from the profits of the eligible business, while computing deduction under section 80IA of the Act: (i) interest income amounting to Rs. 2,327,265 (ii) other receipts amounting to Rs. 710,000; and (iii) provision/liabilities no longer required written back amounting to Rs. 22,140,000 (comprising of Rs. 8,470,000 booked under the head 'other income' and Rs. 13,670,000 booked under the head 'mi....
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....s and circumstances of the case and in law, the learned CIT(A) has erred in exceeding his jurisdiction by giving a finding (referred to in Ground No. 1 above) on an issue which was not a subject matter of appeal before the learned CIT(A) and had no relevance for the assessment year under consideration." Other grounds of appeal filed by the assessee are as under:- "2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in excluding the following income/receipts from the profits of the eligible business, while computing deduction under section 80IA of the Act: (i) interest income amounting to Rs. 2,327,265; (ii) other receipts amounting to Rs. 710,000; and (iii) provision/liabilities no longer required written back amounting to Rs. 22,140,000 (comprising of Rs. 8,470,000 booked under the head 'other income' and Rs. 13,670,000 booked under the head 'miscellaneous receipts') 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not allowing set-off of Rs. 72,148,000 under clause (iii) of Explanation 1 to sub-section (2)....
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....Assessment Years ('AY') 2005-06 and 2006-07 and giving a finding that the Appellant is necessarily required to claim deduction for full ten consecutive years under section 80-IA of the Act, during the block of fifteen years thereby directing that for AYs 2006-07 to 2010-11 deduction under section 80-IA would be available to the Appellant @ 30% of the eligible profits. In doing so, he has also disregarded the non-obstante provisions of section 80-IA(2A) of the Act, which specifically provide for deduction for ten consecutive years commencing at any time during such fifteen years. 1.1 The learned CIT(A) ought to have held that the deduction under section 80IA in respect of profits and gains of the business of providing cellular services should be available @ 100% for AYs 2004-05 to 2008-09 and @ 30% thereafter for next five years. 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in exceeding his jurisdiction by giving a finding (referred to in Ground No. 1above) on an issue which was not a subject matter of appeal before the learned CIT(A) and had no relevance for the assessment year under consideration." 66. The first issue raised b....
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....usiness of providing cellular services should be available @ 100% from AYs 2004-05 to 2008-09 and @ 30% thereafter for next five years. 1.2 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in observing that the Appellant stared providing telecom services in the Assessment Year 1996-97, whereas the Appellant started rendering cellular services in Assessment Year 1997-98, and accordingly Assessment Year 1997-98 needs to be considered as the initial assessment year of the Appellant for the purpose of deduction under section 80IA of the Act. 2. Ground No. 2 - The appellant is liable to deduction under section 80IA on interest income. 2.1 On the facts and in the circumstances of the case and in law, the leaned CIT(A) has erred in upholding that interest income of INR 66 lakhs is required to be reduced from the profits of the eligible business while computing the deduction under section 80IA of the Act. 3. Ground No. 3 - The Appellant is not liable to deduct tax on roaming charges. 3.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition on account of domestic roaming ....
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.... the ground of appeal No. 3 of Revenue in ITA No.377/Kol/2009 and since we have dismissed this ground of appeal of Revenue following the same analogy we also allow this ground of appeal of assessee. AO is directed accordingly. 74. The last issue raised by the assessee is that ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance for Rs. 44,31,05,283.00 on account of non-deduction of TDS on domestic roaming charges under section 40(a)(ia) of the Act. 75. At the outset, it was observed that the impugned issue has already been decided in favour of assessee in its own case by this Hon'ble jurisdictional Tribunal in ITA No. 1864/Kol/2012 wherein it was held as under:- "We hold that 194C is applicable only where any sum is paid for carrying out any work including supply of labour for carrying out any work. Thus, 'carrying out any work' is the substance for making the payment relating to such work, liable for deduction of tax at source u/s 194Cof the Act For carrying out any work, manpower is sine qua non and without manpower, it cannot be said that work has been carried out. Under section 194C each and every work/service is not covered, hence the natur....
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....her there was any transfer of a right to use any goods by providing access or telephone connection by the telephone service provider to a subscriber. Referring to section 4 of the Telegraph Act, 1885, which respect of exclusive privilege gives in telecommunication and the power to grant licences to the Central Government, it was contended by the service providers that they provided only a service by the utilization of telegraph licensed to them for the benefit of the subscribers. The Supreme Court proceeded on the assumption that incorporeal rights may be goods for the purpose of levying sales tax and posed to itself the question whether the electromagnetic waves through which the signals are transmitted can fulfill the criteria for being described as "goods". The court held that the electromagnetic waves cannot be called goods. They were held to be merely the medium of communication; the waves are neither abstracted nor consumed, they are not delivered, stored or possessed, nor are they marketable. What was transmitted is not an electromagnetic wave but the signal through such means. The Supreme Court thereafter gave a more basic reason to hold that the electromagnetic waves ca....