TaxTMI 
TaxTMI 
2018 (12) TMI 400
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....oversy first. The background and facts in brief leading to making of an addition of the aforesaid sum by way of short term capital gains are being recapitulated here as under: 3.1 The assessee company was incorporated on 24.02.2012 as, "M/s Telewings Communications Services Pvt. Ltd." which is a part of Telenor Group. The appellant was engaged in the business of providing telecommunication services. The assessee is a subsidiary of Telenor South which held 74% of shareholding of in the assessee company. The appellant and M/s Unitech Wireless (Tamilnadu) Private Limited are group companies of the foreign parent company namely, Telenor ASA (in which Government of Norway held majority shares) ('Telenor Group'). M/s Unitech Wireless (Tamilnadu) Private Limited (herein after referred to as 'UW'), an Indian company, was engaged in the business of providing telecom services in India. It had been stated that the majority shares of UW were held by Telenor Group which is a Norway based company engaged in the telecommunication business. In the year 2008, "UW" and its affiliates had been granted 22 unified access service licenses ('UASL') by Department of Telecommunications ('DoT') in 22 circl....
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....original entry level Pan India license fee of Rs. 1506.82 crore (along with interest from the date of payment of such license fee) which was paid for acquiring the licenses, which are quashed by the Hon'ble Supreme Court for no reason attributable to a licensee, should be allowed to be set off against the earnest money required to be paid for participating in the new auction and against the successful bid amount in the event of a successful bid. In the event there would be any shortfall in the money required to be paid by xxx on successful bid and the license fee already paid to you in respect of the quashed 21 UASL, xxx shall obviously pay such additionally. A set off is allowed against the Earnest Money and the payment due in the event of spectrum being won in this auction. The total amount of such set off shall be limited to the total entry fee paid by the entity for all its licenses which have been quashed by the Supreme Court. No interest will be due on this amount. 3.4 It was pointed out before us that, earlier to the fresh auction, the appellant and Telenor Group also addressed several letters to DoT seeking clarification in respect of the transfer of business of UW to the....
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.... in its business as a going concern, other than "excluded assets" and "excluded liabilities". "Excluded Assets and liabilities" were defined in the BTA. 'Excluded assets' did not include all the UASLs etc. which were either incapable of being transferred or which may be transferred with consent, but such consent had not been received on or before the completion date. The relevant extract of the agreement was as under: "(a) All the UASLs, ILD license, NLD license and any other statutory license acquired by the seller in the due course of business which are either (i) incapable of being transferred, or (ii) which may be transferred with consent, but such consent has not been received on or before the Completion Date. (b) Spectrum allotted to the seller by the DoT in each circle; *** (e) all causes of action (including counterclaims) and defences against third parties relating to any of the Excluded Assets or the Excluded Liabilities as well as any books, records and privileged information relating exclusively thereto (the Excluded Claims)." 3.6 The appellant, as noted above had also entered into another agreement namely, "Actionable claim agreement", wherein UW had agre....
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....tort or contract, arising under or in connection with all warranties and representations , implied or express, all actions , indemnities and guarantees against the DoT relating to the grant by the DoT of the UASLs to Unitech Wireless and the payment of the License Fee for the UASLs granted to Unitech Wireless by the DoT in 2008 shall together constitute Actionable" 3.8 The consideration for transfer of such actionable claim had been agreed at 50% of the amount of set off allowed to appellant. It was also stated in the said agreement that, if the DoT rejects or fails to provide its approval on the set off of license fee to the appellant by 18.01.2013, the Actionable Claims shall be transferred back to UW and the agreement shall expire. On 06.12.2012, the appellant intimated the DoT about the execution of the BTA and Actionable claim agreements and requested DOT to grant an approval for the implementation of business transfer and also to allow a set-off of entry fee paid by UW to the appellant it being successor-in-interest of UW. On 11.11.2013, DoT addressed a letter directing the appellant and UW to provide an indemnity bond and undertakings for approval of business transfer agre....
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....ut on the principle of equal restitution when the Government took a policy decision. This contention of the assessee had been supported by "Report No. 55 of 2015" of the Comptroller and Auditor General of India which had been tabled before both the Houses of Parliament. In the said report, it was submitted before us that in the said report CAG had itself held that M/s Telewings Communications Services Private Limited had no right on set-off from the earlier licence paid which was cancelled by the Hon'ble Supreme Court. The appellant's alternative submission before the AO was, the amount of set off was a capital receipt since the set off allowed, was in the nature of concession and had not resulted by way of independent business transaction. 4. The learned AO however held that on the execution of business transfer agreement, does not give rise to a taxable event during the year in the hands of the assessee company but execution of the actionable claim agreement gave a rise to a taxable event. He held, that the appellant had acquired all the rights, title, risk and interest of UW against DoT by entering into an actionable claim agreement which included a right of set off of the entr....
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....license fee and subsequent set off allowed by the DoT against the license fee payable for fresh licenses, is adventure in the nature of trade and commerce and it is covered u/s 28 of the Act and as such is taxable under the head profits and gains from business and profession. 6. Before us, learned Senior Counsel Mr. C. S. Aggarwal ahd not argued the case at length not only orally but also in writing which briefly are set out as below:- (a) There existed no right of set off with UW. It had been submitted that UW had in the year 2008 paid onetime nonrefundable entry fee and soon the licenses got cancelled, all rights, title and interest in the said licenses got terminated with no right of refund to it. This is well demonstrated from the agreement entered into by the appellant with DoT. He contended that the learned CIT (A) has erred in his order when he observed that there was no agreement entered into between UW and Government of India, which is factually incorrect. (b) That the appellant on 06.12.2012 had entered into two agreements. Under the business transfer agreement, it had acquired the business operations of UW as an ongoing concern and the amount of set off arose on acq....
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....due from the appellant was not as per approval of empowered group of Ministers. (g) It was further contended by him that the appellant had not acquired any right to claim a set off which right of set off could only be acquired by it from the Government which alone was capable to grant such a set off had been allowed. (h) That the amount stated to have been set off was an amount waived off by the Government in part and not that the appellant had acquired any right in capital asset which could have been transferred by it. (i) The learned Counsel further submitted that in the absence of any enforceable right in law to claim refund or set off being in existence been with UW, no capital asset much less stated to have been held by the UW, it could not have been held by the revenue, that the assessee had acquired any right of set off. He had emphasized that the right must be such a right which is enforceable in law. He contended that there being no enforceable right of set off with UW, in law, as such set off allowed in any case cannot be equated with any right which was in the nature of capital asset held by UW and was acquired by the appellant under an actionable claim agreement. ....
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.... in 2008 stood quashed and all the rights, title and interest in the said licenses were terminated. As per the terms of the agreement between UW and DOT, the one-time entry fee paid by UW in respect of such licenses was non-refundable. Further, there being no provision, under the agreement, for claiming of a refund or set off of such entry fee. It could not been held that there was any vested right with the license holders to seek either a set off or a refund thereof. Accordingly, there being no right with UW to claim a set off or refund of such entry fee from DOT, which could be stated to be enforceable in law. The Hon'ble Supreme Court in its order dated 02.02.2012 had neither dealt with issue of the Entry Fee paid to Government of India by those 122 License holders nor it had dealt with process of claiming the refund of such amount or adjustment, if any, which is to be made in future in respect of spectrum fee deposited by license holders. Further, it is evident from the various press releases, notifications issued by the DOT that no party had any inherent or vested right to seek refund or set off of entry/spectrum fee of quashed licenses. 9. During the course of hearing, w....
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....egulatory norms and commercial reasons, the part of the DoT's claims over UW and UW's claim over DoT were kept under the agreement of actionable claims though the same were part of the overall business operations which had been transferred to the appellant. In effect, both the agreements were composite and integral to each other which relates to the transfer of business with lock, stock and barrel including contingent assets and liabilities of UW. Accordingly, the set off allowed by DoT to the appellant is part of the overall transaction of acquisition of business of UW and was not a separate independent transaction which was in the nature of acquisition of any capital asset. 12. The learned Senior Counsel had emphasized that the such a set off was allowed by DoT to the appellant not by virtue of the agreement entered with UW but as per the policy decision taken by the Empowered Group of Ministers (EGoM) based on the principle of equal restitution which was in the nature of a concession bestowed upon it by the Government. It was submitted by the Senior Counsel that the DoT in line with directions of Hon'ble Supreme Court made fresh auction. It further clarified its pos....
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.... set off to the appellant. Therefore, in substance, the set off was allowed to appellant not by virtue of the agreement it entered with UW, but as per the policy decision of Government of India. Accordingly, the amount of set off bestowed upon the appellant by the Government of India is not in the nature of a capital asset which could be transferred by UW or acquired by the appellant under an agreement. 13. The Senior Counsel further submitted that the amount of set off allowed by the DoT to appellant against the fresh spectrum fee is not chargeable to tax as the same arose in the capital field and on account of the reason that the appellant being successorin-interest in the business of quashed licenses of UW which had been statutorily recognised by the DoT and Government of India. Therefore, the amount of set off of Rs. 1,658.57 crores from the license fee payable by the appellant to DoT, was on account of spectrum fee can alone be construed to be an amount that has been borne by another person for the purpose of acquiring the spectrum licenses which could only be considered as grant or reimbursement of cost of fresh spectrum fee. Accordingly, the appellant had rightly reduced t....
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....e amount allowed by the DoT to be set off with fresh spectrum fee only had an effect to reduce the cost of spectrum allotted in fresh auction, which resulted into reduction in the cost of spectrum cost eligible for depreciation under section 32 of the Act. Thus, the effect of the completion of the transactions under the Business Transfer Agreement and Actionable Claim Agreement that both had become part of the single transaction i.e. transfer of the business of UW in favour of the appellant on going concern basis. It had been further submitted that the appellant has already reduced the amount of set off by claiming depreciation on lower value and hence the amount in question cannot be held chargeable to tax either as short capital gain or as an income from business and the treatment accorded by the appellant for the tax purposes deserves to be accepted as proper and valid. His submission was that the set off has been bestowed upon the appellant by the Government of India as a policy decision taken on the basis of principle of equal restitution and accordingly, the same cannot be considered as a right acquired by the appellant through an agreement which is in the nature of a capital....
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.... cannot, by any stretch of imagination, be construed in the revenue field or sum chargeable to tax under the head PBGBP. It has been held by the Apex court in number of cases that to determine the nature of receipt (i.e. either capital or revenue), it is important to carry out a purpose test i.e. a purpose for which the amount is being received by an assessee. The Learned Senior Counsel placed reliance on the case of CIT v. Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392 (SC). The purpose of such set off is merely to obtain benefit in the capital field and that is allowed by the Government voluntary by taking policy decision. 18. The proposition that, whether the sum is receipt in the nature of capital or revenue is well defined, i.e., as a general rule, a receipt is capital in nature when it is relatable to fixed capital and on the other hand, revenue receipt is a receipt when it is relatable to circulating capital. In the present case, the entire expenditure incurred by the appellant under the Business Transfer Agreement and Actionable Claim Agreement was incurred out of fixed capital to acquire and create capital asset on infrastructure that was to be provided before the comme....
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....h agreement was void. The mere fact that there was some negotiation going on between the appellant and UW and possibility of Government decision on said issue, there exist no right which was transferrable and as such in the absence of any right being in existence there could have been no right acquired by the appellant nor could there have been any transfer made by UW. The letter dated 31.03.2014 merely shows that DoT on its own volition had set off the entry fee paid by UW against the payable bid amount by the appellant company when it directed the appellant that, the amount equated annual installment of Rs. 200,45,84,952/- will be paid. It was a mere concession given by the Government and there was no right, title or interest had been acquired by it from UW as an asset which was transferrable. In short, the learned Senior Counsel for the appellant contended that the amount of non -refundable sum as a license fee paid by UW to DOT was not a debt owed by DOT towards UW. 20. He further supported his submission when he sought to place reliance on the judgement in the case of Bancharam Majumdar v. Adyanath Bhattacharjee (1969) 36 Cal 936 where it has been laid down that a "debt" is a....
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....s that property of any kind may be transferred, except as otherwise provided by the TP Act or by any other law in force for the time being. Clauses (a) to (i) which immediately follow enumerate what cannot be transferred. Clause (e), with which is relevant in the given case, states that 'a mere right to sue cannot be transferred'. Accordingly, in the given case, upon termination of contract between UW and DoT, the only right which survived with UW was a right to sue for damages/compensation on breach of contract. This right was not an actionable claim within the meaning of section 3 of the TP Act, since it could `not be said to be a debt or a beneficial interest in movable property not in the possession of UW. It was a mere right to sue which could not be transferred by virtue of section 6(e) of the TP Act. In view of the aforesaid, the appellant has neither acquired any capital asset within the meaning of Section 2(14) of the Act under the aforesaid actionable claim agreement from UW nor there was any transfer as envisaged in Section 2 (47) of the Act. 22. The learned Senior Counsel also relied upon the decision of Hon'ble Gujarat High Court in the case of Baroda Ce....
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....ct by one party and the other party did not keep it alive but acquiesces in the breach and decides to receive compensation thereof, the injured party could not have any right in the capital asset which could be transferred by extinguishment to the defaulter for valuable consideration. That was because a right to sue for damages not being an actionable claim, a capital asset, there could be no question of transfer by extinguishment of the assessee's rights therein since such a transfer would be hit by section 6(e). In any view of the matter, the impugned sum received by way of compensation by the assessee was not consideration for the transfer of a capital asset. Moreover, if the revenue fails to show that the assessee had incurred a cost as in the present case, it would be impossible to compute the income chargeable to tax under the head 'Capital gains' and what the revenue would be charging would be the capital value of the asset and not any profit or gain. Accordingly, the sum received as compensation was not liable to capital gains tax." In light of the above, it was contended by him that it is evident on the facts of the case that, UW has merely transferred its r....
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.... best, the amount allowed to be set off by DoT was mere advance of money to appellant and could not be termed as transfer of capital asset namely alleged set off of spectrum fee. As per the actionable claim agreement, bunch of assets and liabilities had been acquired by appellant from UW. As a precondition for approving the BTA, DoT sought an undertaking from the appellant, where it was required to assume various contingent liabilities of UW, including dues owed to the DoT. The appellant recorded the said fact in the amendment agreement dated 30.12.2013 that the consideration for transfer of actionable claim was revised due to various liabilities assumed by the Appellant by way of giving undertaking to DoT for the cancelled licenses. Accordingly, the payment of Rs. 100 crores was merely a part payment for actionable claims and the remaining amount shall be payable to DoT as and when it was demanded instead of UW on account of undertaking given to DoT. Also, it was stated that there is defined procedure laid down in TP Act that how the assignment of actionable claim would be effected between the parties including assignor, assignee and other person. It was submitted that Section 132....
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....counter claims are settled by the DoT and not in the piecemeal manner. 25. With respect to the last contention that there is no transfer of any asset as envisaged under section 2(47) of the Act, the appellant contended that the AO and the Ld. CIT (A) were incorrect in making a finding that upon exercise of right to set off by the appellant on 31.03.2014, the capital asset acquired from UW under the actionable claim agreement was extinguished which constituted as transfer as per section 2(47) of the Act. On this his submission was that the appellant had exercised such right by way of surrender as per the contractual and policy decision of the Government of India, and thus, could not be termed as extinguishment of rights therein or exchange as alleged by the AO and Ld. CIT(A). Surrender of rights does not amount to 'transfer' within the meaning of section 2(47) of the Act. Also, once the set off has been allowed to it by the DoT, the alleged capital asset i.e. right to set off the license fee itself has been destroyed. Where asset is extinguished by its destruction, there can be no transfer of the asset. It has been contended that there was no extinguishment of any right. Si....
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....titution. He stated that the transaction entered by the assessee was commercial transaction based upon the payment of Rs. 100 crores to UW. He further submitted that the appellant is trying to push the non-existing fact, there was a contract between UW and Government of India as per Indian Contract Act 1872 and what was transferred by UW to the appellant was a right to set off of refund and not any right to sue. (c) His further contention was that the reliance placed by the appellant on CAG's report that the same was tabled before the Parliament on 11.03.2016 and was thus not available upto the date of filing of return which is subsequent event and cannot be affect taxability of the amount in the year under consideration. It was stated by him that subsequent report cannot be stated to be that the amount was contingent liability on the date of filing of return of income. In support of his contention that the exercise of the right of set off of the license fee was not in the nature of extinguishment which constitutes transfer u/s 2(47) of the Act, he read the findings of the CIT(A) in paras 5.3 to 5.5.4. It was held that set off of refund was a capital asset as per the provisio....
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.... of the CAG was extensively relied upon by him to supports the said view. Also, the Ld. CIT (DR) also not disputed the finding of the CAG and DoT stated in the CAG Report. Also, the contention of the Ld. CIT(DR) that there is no agreement between UW and Government of India was factually incorrect and devoid of any merit as the Government of India through DoT had entered into an agreement with UW vide agreement dated 29.02.2008 which constituted a valid contract as per the provisions of Indian Contract Act, 1872 which was placed on record by the appellant. Further, the Ld. CIT(A) failed to appreciate that UW had no other right except right to sue Government of India for breach of contract. Even such rights have been invoked by other persons, though not successfully. The appellant placed the judgement of TDSAT in the case of Loop Telecoms on record. The submission of the Ld. CIT (DR) that CAG Report has been tabled subsequently and was not available up to the date of filing of return of income had no relevance and completely misconceived. In respect to the same, the Senior Counsel submitted that the report of the CAG has been tabled much before the completion of the assessment proce....
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....ht to seek a set off of the spectrum fee paid by UW. It was submitted by Senior Counsel that on the face of it such a contention was fanciful. It was submitted that by making an application with DoT, the Assessee had not get vested with the right to set off. The Assessee could not adopt two course of action, one by threatening to sue and other by seeking benevolence. The all what assessee did was seeking a benevolence which benevolence was in the nature of waiver or concession in the amount of spectrum fee payable to DoT in respect to the fresh licenses. Decision 29. We have considered the rival submissions, perused the relevant material placed on record including the written submissions filed by both the parties and the orders of the lower authorities. The first issue before us, is about the taxability of Rs. 1658.57 crores under section 45 of IT Act in respect of an amount, allowed to the appellant on 31.03.2014 "without prejudice", as a set off being non-refundable entry fee paid by the UW to DOT in the year 2008 against the allocation of licenses to the appellant against the fresh spectrum fee payable in respect of the newly acquired spectrum of six circles in an auction cond....
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....ompany was incorporated on 24.02.2012 in which the Telenor Group held 74% equity and remaining shares was held by an Indian Company, Lakshyadeep Investment & Finance Limited. vii. That the appellant had been incorporated to act as telecom operator in India with intention to provide telecommunication services in India. viii. That on the directives of the Hon'ble Apex Court, DOT had issued a Notice Inviting Applications (NIA) in public domain on 28.09.2012 and further it had subsequently published responses to the Queries to NIA on 12.10.2012 of the telecom companies who had desired to participate in the fresh auction. Such responses made by DOT were broadly, to decide the issue, namely eligibility of the participant's technical and financial qualification bidder and with respect telecom operator whose licenses were quashed by the Apex Court. (query no. 23) Further also, the transfer of business of quashed licenses in case to successful bidder including in favour having group entities (Query No. 31 to 35 and clarification dated 12.10.2012 issued by DOT in respect of Query 31) was responded. Finally, the Set off one time nonrefundable fee paid by quashed license holder in 2008 (qu....
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.... of Rs. 1658.57 crores by DoT on 31.03.2014 and was without prejudice basis. The aforesaid sum has been brought to tax as short term capital gain. In order to attract the provisions of section 45 of the Act, it is axiomatic that there has to be an income derived by the assessee on transfer of a 'capital asset'. In the instant case in our opinion the appellant had not acquired any capital asset from UW under an agreement dated 06.12.2012, since UW had no such asset held by it at any point of time. The 'asset' in the instant case, is stated to be a 'right' in a property. There is no dispute that right in a property is an asset u/s 2(14) of the Act. However in the instant case, UW had no such right, title, interest in the amount of non-refundable entry fee paid by it to DoT in the year 2008. In fact, UW had exploited said licenses from the year 2008 till the date when said licenses were quashed, i.e., for a period of 4 years. In such circumstances, one time non-refundable entry fee, after the licenses were exploited by it, UW had been left with no right, title, interest in the amount paid as license fee paid to DoT. Further, having gone through the agreement entered by UW with DoT, we....
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....re, wish to execute this agreement to record the terms thereof. .... TRANSFER OF ACTIONABLE CLAIMS .... "1.2 All claims judgments, demands, lawsuits, causes of action, choses in action, rights of recovery and other rights of Unitech Wireless, whether arising under tort or contract, arising under or in connection with all warranties and representations , implied or express, all actions , indemnities and guarantees against the DoT relating to the grant by the DoT of the UASLs to Unitech Wireless and the payment of the License Fee for the UASLs granted to Unitech Wireless by the DoT in 2008 shall together constitute Actionable Claims. ... 2. CONSIDERATION ..... 2.2 The consideration has been computed on the basis that Unitech Wireless which shall cease to have any business operations effective from 18 January, 2013, will not have any opportunity to claim the set off of License Fee and the process involved in seeking the set off will be preliminary driven by the efforts of Telewings" 31. The said agreement had been modified by way of an amendment letter dated 30.12.2013 as the appellant had given indemnities and undertakings sought by DoT for approval of BTA. After givin....
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....answer to the issue involved, in our opinion is that, since UW had no right, title, interest in the said non-refundable entry fee or it was not entitle to make any claim from DoT for set off of the said license fee, UW could have not transferred any such right so as to enable the appellant to acquire such an alleged right. 33. Further, the fact that the appellant had paid Rs. 100 crores to acquire such a right, under the actionable claim agreement, itself shows, when there existed no right, the amount so paid by the appellant was apparently by way of abundant precaution to safeguard its interest. However, in our opinion, it cannot be held that the assessee had acquired any capital asset which was transferred by it by way of extinguishment in favour of DOT, as held by the Revenue on mere fact that the appellant had paid Rs. 100 crores which in our opinion is not a decisive factor. 34. Our aforesaid opinion further gets supported by the CAG's Report No. 55 of 2015 which has been heavily relied upon by the Ld. Sr. Counsel before us, for the sake of convenience, is being extracted herein below: "...It was seen in audit that M/s VTL, M/s ICL, M/s TCSPL4 and M/s SSTL were allowed set....
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....rom them. On the same date (i.e. on 05 March 2013) a note for the EGoM was prepared and the same was approved in the meeting of the EGoM held on 06 March 2013. Audit observed that the 'supplementary note' to EGoM prepared on 05 March 2013 did not include the facts regarding suppression of vital information at the time of submission of their application, submission of false certificate and misrepresentation of facts, etc. by Unitech group though these were brought out by the C&AG in Report No. 19 of 2010-11 and also the decision taken by the DoT that no setoff of the non-refundable entry fee was permissible to TCSPL. Further, TCSPL was incorporated on 24 February 2012 only, well after the decision of Hon'ble Supreme Court of India (02 February 2012) on cancellation of UAS licenses. On this being pointed out, the DoT replied (October 2013) that, * The CAG cannot comment on and object to the matter of policy. * As regards the criminal liability of the M/s Unitech Wireless, the matter is still pending before the various courts, without establishing the same there is no legal basis for taking civil action. Besides, in the operative part of its order, the Hon'ble Supreme Court ....
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....aim for refund with interest for the pro-rata amount for the balance period as stated by the DoT does not arise. * Even the revenue of ` 7741.65 crores earned by these companies from the quashed licenses since 2008 was not considered by DoT while preparing the note for EGoM for setoff of non-refundable entry fee. In this way the licensees appear to have been rewarded for losing their licenses, as for the period of operation of the license (2008-12), no entry fee was levied on the licensees due to set-off allowed. Thus, set-off of the non-refundable entry fee of ` 5476.30 crore, paid by licensees whose license was declared illegal and quashed by the Hon'ble Supreme Court, against the auction price payable for spectrum in 1800 MHz/800 MHz held in November 2012 / March 2013 was inappropriate and deprived the Government of the revenue to that extent. 34. In short, the conclusion of CAG in respect of the set off allowed to appellant is summarized as below: - i. That the set off allowed by the DOT to the quashed license holders was inappropriate and thus deprived the Government of the revenue. ii. CAG's report confirms the fact that the entry fee paid in respect of quashed licen....
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....controversy arising on account set off of non refundable entry fee to various telecom operators. He further submitted that the Article 151 of Constitution of India is binding on all executive and statutory authorities and thus revenue's stand is contrary to the report of the CAG which is impermissible both on facts and in law. 36. We are in tandem with Mr. Aggarwal on the point that the CAG Report which was available in public domain and also placed before CIT (A) has to be given due weightage. The objection of the ld. CIT DR that the taxability of the amount cannot be judged on basis of CAG report which was tabled before the Parliament after the filling of return of income is not acceptable. Further, the power of CAG and case law relied upon by the appellant, we agree that CAG being a Constitutional Authority, the findings as noted in the Report cannot be disputed and consequently its findings in the Report cannot be ignored. We observe that there is no inconsistency between the facts stated in CAG report regarding the event which lead to the set off of such amount and submission made by the appellant before us. Therefore in the absence of any contrary material, we consider it ....
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....udication. Accordingly, the action of the AO and Ld. CIT (A) is reversed on this count. 39. Having dealt with chargeability of such amount as short term capital gain, we are left with the alternative contention of the Revenue that the such sum is chargeable to tax as income from business as the activity of entering into agreement of actionable claim and subsequently getting set off of entry fee is an income by way of "adventure in nature trade and commerce". Since, we have already expressed as aforesaid our opinion that the amount in question which has been allowed as set off being by way of administrative and policy decision of Government of India unilaterally and there is no quid pro quo, between the appellant and DOT for such decision, therefore same could not be held adventure in the nature of trade and commerce. The ld. CIT DR had relied upon the finding of the CIT (A) in its order and did not make any further submissions. On the other hand, Mr. Aggarwal had submitted the transaction is on capital account and as such there is no question, it could be taxed as revenue receipt. He had further drawn our attention with respect to the fact that the even the licenses issued by the....
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....n, the Appellant had reported a revenue from operations amounting to INR 1,263.4 crores in its audited financials. The subscription received which remained unutilised at year end amounting to INR 220.80 crores has been disclosed as Unearned Revenue as a Current Liability under the head "Other Liabilities" in the audited financials and has been offered to tax in the succeeding year when the said sum was accrued to it as income. In other words, the aggregate receipt by the appellant which included unearned revenue, aggregates to Rs. 1484.20 crores. The AO held that unearned revenue of Rs. 220.80 crores is also the income accrued to the Appellant during financial year 2013-14 relevant to AY 2014-15 (i.e. the year of receipt of the said amount by the Appellant) since the conditions for revenue recognition stipulated in AS- 9 are unequivocally satisfied and no additional efforts are required by appellant to keep on providing services. Also, he held that there is no ambiguity regarding the quantum and collection of revenue and that there is no further obligation of the appellant, to refund the money to the subscribers. The Ld. CIT (A) has confirmed the order of AO. 43. The submission of....
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....aced reliance on decision of Hon'ble Delhi High court in the case of CIT v Dinesh Kumar Goel [2011] 331 ITR 10 (Delhi) where it is specifically held that under AS-9 revenue is recognized only when the services are actually rendered. If the services are rendered partially, revenue is to be shown proportionate with the degree of completion of the services. Also, the Appellant had placed reliance on the decision of this Tribunal in the case of ACIT vs. Shyam Telelinks Limited (2013) (151 TTJ 464) wherein on the identical facts, the additions made by the AO on account of unearned revenue is deleted by the Tribunal. 44. The findings of the AO that no additional efforts are required to keep on providing the services to the customers with respect to such unused talk time is incorrect since in the subsequent year, the appellant has to incur operational cost for providing such services which indeed has been incurred and had been stated of Rs. 342.24 crores on an estimated basis. Further, the Ld. CIT (A) has also erred in our opinion in observing that the accrual of income takes place at the time of selling of recharge vouchers. The Ld. CIT(A) had also in fact directed the Appellant to ....
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....he decision of this Tribunal in the case of ACIT vs. Shyam Telelinks Limited (Supra) which was subsequently followed in the case of DCIT vs. Sistema Shyam Teleservices Ltd. (ITA No. 3926/Del/2014). In addition to this, it was submitted that the appellant has duly recognised such amount as income in the next financial year (i.e. FY 2014-15) and offered the same to tax in the relevant assessment year. Therefore, the said additions only resulted in a timing difference and the overall taxable income remains the same and as such, there is no loss to the Revenue. The CIT (DR) relied upon the order of AO and Ld. CIT (A) based on the contention that the amount had accrued to the appellant in the captioned year and the AO had rightly brought to tax the same in the hands of the Company. We find that the facts of the present case are identical to the facts and circumstances of the case of ACIT vs. Shyam Telelinks Limited (Supra) and is squarely covered by the decision of this Tribunal wherein on the basis of identical facts the ITAT deleted the additions made by the AO. The relevant paras of the order of ITAT are reproduced as below: "The very premise on which the Assessing Officer has pro....