TaxTMI 
TaxTMI 
2025 (2) TMI 1070
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.... landline services and other associated value added services and internet service. During the relevant year ending on 31.03.2020, the assessee company gave effect to the demerger of consumer mobile business undertaking of M/s Tata Tele Services Ltd. with the assessee on 1st July, 2019 being the effective and the appointed date of the scheme of arrangement u/s 230 to 232 of the Companies Act, 2013. The case of the assessee was selected for complete scrutiny assessment through CASS for various reasons and statutory notices were issued. In the mean time, reference to the TPO was made by the National Faceless Assessment Centre after getting necessary statutory approval for determination of arm's length price for the international transaction undertaken by the assessee during the year under consideration. 3. Thereafter, due to restructuring of case for the reasons of merger, amalgamation, demerger, etc., it was transferred out of Faceless Assessment Centre u/s 144B(8) of the Act to the jurisdictional Assessing Officer. The assessment was completed on 10.10.2023 by adjustments recommended by the TPO u/s 92CA of the Act making addition of Rs. 457,64,80,114/-. Further, Ld. AO has made a....
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.... law, the order dated 19.01.2024, passed by the Principal Commissioner of Income Tax, Delhi - 1 ['PCIT'], under section 263 of the Income Tax Act, 1961 ('the Act') enhancing the assessment (on some issues) and setting aside the assessment (on some other issues)is without jurisdiction, illegal, bad in law, void ab initio and liable to be quashed. 2. That on the facts and circumstances of the case, the impugned order having been passed by the PCIT in undue haste without: (a) affording reasonable opportunity of being heard; (b) considering the request for deferment to file submissions on certain issues (in particular residuary issues (referred infra); (c) considering the supplementary submissions filed; (d) first disposing off the legal objections by passing a separate speaking order; (e) issuing any show-cause notice of the proposed addition/ variation; and (f) granting oral/ personal hearing, is illegal, bad in law and liable to be quashed/ set aside. 3. That the PCIT erred on facts and in law in exercising revisionary powers under section 263 of the Act on various issues in the impugned order, without satisfying the twin jurisdictional conditions of the assessment....
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....g/ directing disallowance of interest and penalty on delayed payment of license fee and SUC aggregating to Rs. 30,574 crores, without appreciating that the same was allowable in its entirety as revenue expenditure and no part thereof could be regarded as capital in nature. 8.3. That the PCIT erred in holding/ directing disallowance of SUC of Rs. 2,975 crores, without appreciating that the decision of the apex Court in CIT vs. Bharti Hexacom: (2023) 458 ITR 593(SC) was applicable only in respect of variable license fee and that SUC was always, without any dispute, allowed as revenue deduction. 8.4. That the PCIT erred in holding/ directing disallowance of entire variable license fees of Rs. 5,082 crores, without appreciating that substantial part thereof, including but not limited to fees relating to expired licenses, was allowable as deduction in its entirety. 8.5. That the PCIT erred in not: (a) considering the rectification application filed, suo-motu, by the appellant before the assessing officer appropriately modifying the claim of deduction in respect of variable license fee in light of the decision of the apex Court (supra); (b) issuing any show-cau....
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....Act; and (b) issuing any show-cause notice and/ or granting hearing. 9.5. Without prejudice, the PCIT failed to appreciate that the eligibility of unabsorbed business losses/ depreciation, in any case, ought to be tested in the subsequent year(s) of its actual set off and therefore, the PCIT had no jurisdiction to direct its denial in the year under consideration. 9.6. That the PCIT erred in mechanically initiating penalty proceedings under section 270A for 'misreporting of income' perversely alleging that the appellant made a fraudulent claim. Qua Alleged gain on acquisition of business 10. That on the facts and circumstances of the case and in law, the PCIT erred in enhancing the income by directing addition of Rs. 1,230.01 crores under section 56(2)(x) of the Act on account of alleged gain on acquisition of consumer wireless business of TTSL. 10.1. That the PCIT erred in making aforesaid addition without even issuing any show-cause notice indicating any such proposal and/ or setting out the conclusion sought to be drawn on the aforesaid issue and without affording any opportunity to the appellant. 10.2. That the PCIT erred in....
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.... PCIT erred in dictating the assessing officer to disallow expenses on which tax has not been deducted following stand of the revenue on those issues, which is not permissible. 12.4. That the PCIT erred in passing the aforesaid directions, without issuing any show-cause notice on the aforesaid issue and/ or affording opportunity of hearing to the appellant. Qua Residuary Issues 13. That the PCIT erred in vaguely directing the assessing officer to make disallowance under section 14A of the Act read with Rule 8D of the Income Tax Rules. 14. That the PCIT erred in vaguely directing the assessing officer to verify the following transactions: (a) Claim of depreciation made by the assessee; (b) Violation of section 269SS of the Act; (c) Huge expenses claimed by the assessee; (d) Liabilities, to ascertain whether the same are genuine. 15. That the PCIT erred in alleging that no objection was raised by the appellant against invocation of revisionary jurisdiction in respect of the aforesaid issues. 16. That the PCIT failed to appreciate that the revisionary jurisdiction under section 263 of the Act is ....
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....ce the discussion on this issue by bringing some vital facts on record, though same may seem superfluous, in the light of effect giving order narrowing the controversy, but still remain vital. The appellant, as stated above, is engaged in the business of providing telecommunication services and was granted permission/ license to operate cellular services under Section 4 of the Indian Telegraph Act, 1885 on payment of license fees. As per the license agreement entered into by the appellant with the Department of Telecom (DoT), the Telecom companies are required to pay license fee (LF) and Spectrum Usage Charges (SUC) to DoT. Further in terms of the National Telecom Policy, 1999 (NTP)/ Agreement with DoT, the License fee and SUC are paid on revenue sharing basis, being a fixed percentage of Gross Adjusted Revenue ('AGR'). The computation of license fees and SUC payments was subject matter of divergent interpretation between the telecom companies and DoT since beginning whereby the telecom industry believed that the license fees and SUC rates should be applied to telecom revenues only while DoT was demanding it on entire revenue of telecom companies. The Telecom Disputes Settlement an....
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....errors and payments already made by the appellant in past periods not considered by DoT while raising the demands. Subsequently, the Hon'ble Supreme Court vide order dated 01.09.2020, directed that demands raised by DoT in respect of AGR dues based on order dated 24.10.2019 and 18.03.2020 shall be final and there shall not be any dispute raised by any of the Telecom operators. Accordingly, during the financial year 2020-21, the appellant provided for the balance additional charge of Rs. 10,689 crores (which included interest of Rs. 556 crores from 01.04.2020 to 30.06.2020) in the statement of profit & loss account which was disclosed as an exceptional item. Thus it is apparent that the appellant had initially claimed the above amount(s) of Rs. 28,498 crores and Rs. 10,689 crores in the return of income filed for assessment year(s) 2020-21and 2021-22 respectively. However, during the course of assessment proceedings, the appellant, in view of the fact that the additional liability actually stood crystallized pursuant to the first order of the Hon'ble Supreme Court vide order dated 24.10.2019 and the subsequent order dated 01.09.2020, merely re-affirmed the view, filed letter dated 1....
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....in terms of section 35ABB of the Act. Thus, as per ld. Sr. Counsel the assessing officer, rightly allowed the claim of additional license fee and SUC and initiation of impugned revisionary proceedings on the said issue was without jurisdiction, unwarranted and bad in law. 10. Thus, this issue arises out of allowability of payment of license fee, spectrum usage charges (SUC), interest/penalty thereon (hereinafter referred to as AGR issue). PCIT held that the judgment of the Supreme Court in CIT vs. Bharti Hexacom: (2023) 458 ITR 593(SC) leaves no doubt that expenditure claimed under license fees is a capital expenditure and is to be allowed over a period of time as provided in section 35ABB. PCIT further observed that the assessing officer has allowed this expenditure without applying mind. PCIT further observed amount of interest or penalty arising on account of non-payment of license fees cannot have a different character and the said expenditure is also capital in nature. Accordingly, the order passed by the AO was held to be erroneous and prejudicial to the interests of the Revenue. 10.1 In the consequential assessment order passed u/s. 143(3)/ 263, the assessing officer h....
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.... order passed by the apex Court decision in the case of CIT vs. Bharti Hexacom: (2023) 458 ITR 593(SC) holding variable license fee (VLF) to be capital expenditure to be amortized as per section 35ABB of the Act. It is pertinent to note that the issue of allowability of interest or penalty or nature of the same (capital v. revenue) was undisputedly not the question before the apex Court nor the said judgement deals with the said issue. The apex Court merely dealt with the nature and allowability of VLF and not interest/ penalty on delayed payment thereof. In view of the aforesaid, assumption of jurisdiction to disallow, inter alia, interest and penalty on the basis of the aforesaid judgement of the apex Court is invalid and bad in law. (b) In so far as interest/ penalty, the PCIT initially in the SCN observed that the same was penal in nature and disallowable in terms of Explanation 1 to section 37 of the Act. However, in the impugned order finally concluded that interest and penalty shall acquire the same character as principal payment and therefore, held the same to be capital in nature. In this regard it is submitted as under: * Interest and penal inte....
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....llowance of the interest/ penalty cannot thus be alleged to have resulted in an error causing prejudice to the Revenue, so as to warrant exercise of revisionary jurisdiction. * It is emphatically reiterated that the issue of allowability of interest/ penalty was not at all agitated before/ is not dealt with by the apex Court in 458 ITR 593 (SC). Therefore, the judgment rendered by the Apex Court cannot, in any case, be a legitimate ground to justify exercise of revisionary jurisdiction by the PCIT in respect of interest/ penalty on variable license fees. * For the aforesaid cumulative reasons, allowability of deduction of interest and penalty under section 37 of the Act cannot, in our submission, be doubted, much less resulting in any prejudice to the Revenue. Being so, the original assessment order allowing deduction of the same cannot be treated as 'erroneous' causing any prejudice to the Revenue for justifying exercise of revisionary jurisdiction by the PCIT. * That apart and more importantly, considering the substantive reasons/ grounds/ explanation set out herein-above, it is clearly evident that the view taken by the assessing officer accepting/ all....
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....he appellant vide reply dated 16.09.2023, filed comprehensive response to the query raised in the notice dated 11.09.2023. (@ pages 2593 to 2621 & 3111 to 3364 of paper book Vol. III) Thereafter, the appellant vide reply dated 19.09.2023, filed justification in support of claim of deduction while relying upon the Hon'ble Supreme Court judgement. (@ pages 3365 to 3370 of paper book Vol. III) Post assessment, in light of the Supreme Court verdict vide CA No. 11128 of 2016, order dated 16.10.2023 the appellant vide rectification letter dated 25.10.2023 recalculated the amount allowable under section 35ABB of the Act. (@ pages 3371 to 3503 of paper book Vol. III) In para 22.2, the assessing officer has accepted the claim of the appellant. (@ page 30 of AO order) * That apart, it may thus be noted that the appellant had initially claimed the above amount(s) of Rs. 28,498 crores and Rs. 10,689 crores in respect of variable license fee, SUC charges and corresponding interest and penalty in the return of income filed for assessment year(s) 2020-21and2021-22respectively. * However, during the course of assessment proceedings, the appellant, in view of the fact that the ....
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....ecompute the amount of variable license fee allowable in terms of section 35ABB of the Act. * Considering the aforesaid facts, it is respectfully submitted that all the necessary facts were on record before the assessing officer and the original assessment was completed after conducting extensive enquiries and verification. * It is trite that where an issue has been examined by the TPO/AO, the PCIT cannot set aside the assessment merely because according to the PCIT enquiries should have been conducted in a particular manner and/ or further enquiries ought to have been conducted by the TPO /AO. PCIT cannot substitute his opinion in place of that of the TPO/AO as to the manner and the form in which the enquiries should have been conducted during the course of assessment. * CIT vs. Sunbeam Auto Ltd: 332 ITR 167 (Del) * CIT v. International Travel House: 344 ITR 554 (Del) * CIT vs. Vikas Polymers: 341 ITR 537 (Del) * Gulmohar Finances Limited: 170 Taxman 483 (Del.) * Fab India Overseas vs. CIT: 244 CTR 380 (Del.) * CIT vs. Vodafone Essar: 212 Taxman 184 (Del.) * CIT vs. DLF Ltd.: 350 ITR 555 (Del) ....
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....5ABB of the Act, and the variable annual license fee payable on revenue sharing basis after 1 August 1999 should be treated a revenue expenditure and in that context only the Hon'ble Supreme Court had examined the agreement signed under the Policy of 1994 letter issued by the DOT proposing the migration to the Policy of 1999 and the amendments made to the existing license agreement with effect from 1 August 1999 and laid down that variable annual license fee to be paid on the basis of the annual gross revenue. It was held that the reliance placed by the Hon'ble High Court in cases of Jonas Woodhead and Sons India Limited v. CIT [1997] 224 ITR 342 (SC); CIT v. Best and Co [1966] 60 ITR 11; Southern Switch Gear Limited v. CIT (1998) 232 ITR 359 (SC) was misplaced, as these cases do not deal with a single source or purpose to which the payments in different forms have been made. The purpose of the payments in the said case was traceable to different subject matters. In the instant case, the license issued under section 4 of the Telegraph Act is a single license issued for establishing, maintaining and operating the telecommunication services. The license is not granted for divisible r....
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....s paid under the Policy of 1994 were treated as capital expenditure and were duly amortised. There is no basis of reclassifying the under the new Policy of 1999. The nature of payment that was made for the same purpose cannot have different characterization merely because of change in the manner of the payment. The High Court is not right in apportioning the expenditure partly as capital expenditure and partly as revenue expenditure. In view of the above, the one-time entry fee as well as the variable annual license fee paid by the taxpayer under the Policy of 1999 were held capital in nature and were to be amortised in accordance with section 35ABB of the Act. It is pertinent to mention that these very findings have been considered by the PCIT and reproduced on page 87 of the impugned order and have been made basis to form a different opinion, as formed by AO. 10.6 We are of considered view that aforesaid conclusions in Bharti Hexacom's case (supra), have been considered out of context by the PCIT thus there was inherent fallibility in the approach of PCIT to examine the question with regard to taxability of interest/penalty as payable by the assessee under the license agreemen....
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....bility and justification shall attract additional License fee as revenue share (typically 1% additional revenue share if Bendwidth allocated is upto 6.2 MHz + 6.2 MHz in place of 4.4 MHz + 4.4 MHz). 18.3.2 Further, royalty for the use of spectrum for point to point links and access links (other than Cellular Service Spectrum) shall be separately payable as per the details and prescription of Wireless Planning & Coordination Wing. The fee/royalty for the use of spectrum /possession of wireless telegraphy equipment depends upon various factors such as frequency, hop and link length, area of operation etc. Authorization of frequencies for setting up Microwave links by Cellular Operators and issue of Licenses shall be separately dealt with WPC Wing as per existing rules. 18.3.3 The above spectrum charge is subject to unilateral review by WPC Wing from time to time which shall be binding on the licensee. 19. Definition of 'Adjusted Gross Revenue': 19.1 Gross Revenue: The Gross Revenue shall be inclusive of installation charges, late fees, sale proceeds of handsets (or any other terminal equipment etc.), revenue on account of interest,....
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....n the payment made and actual amount duly payable (on accrual basis) for the last quarter of financial year within 15 days of the end of the quarter. 20.4 The quarterly payment shall be made together with a STATEMENT in the prescribed form as Annexure-II, showing the computation of revenue and License fee payable. The aforesaid quarterly STATEMENTS of each year shall be required to be audited by the Auditors (hereinafter called LICENSEE'S Auditors) of the LICENSEE appointed under Section 224 of the Companies Act, 1956. The report of the Auditor should be in prescribed form as Annexure-II. 20.5 Any delay in payment of License Fee payable, or any other dues payable under the LICENSE beyond the stipulated period will attract interest at a rate which will be 5% above the Prime Lending Rate (PLR) of State Bank of India prevalent on the day the payment became due. The interest shall be compounded monthly and a part of the month shall be reckoned as a full month for the purposes of calculation of interest. A month shall be reckoned as an English calendar month 20.6 Final adjustment of the License fee for the year shall be made based on the gross revenue figu....
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....d view that the interest and penalty clauses are enshrined in the license agreement as compensatory mechanism for delayed payment of three components i.e entry fee, license fee and charges. Charges is not specifically defined but when we take into consideration the aforesaid clauses we find that apart from entry fee and license fee the Licensee was supposed to pay Radio Spectrum Charges and royalty for the use of spectrum for point to point links and access links. These charges admittedly were considered as revenue expenditure. Thus sub clause 10.2 mentions that for delayed payment of fee and other charges due to this provision of clause of termination of license can be invoked. It is very much apparent from the clauses of license agreement that the interest is payable on the quantum of delayed payment of license fee determined as per the license agreement. Penalty is payable in case the total amount paid as quarterly License Fee for the 4 (four) quarters of the financial year, falls short by more than 10% of the payable License Fee. Delayed payment of penalty shall also be liable to interest. 10.9 Therefore, in case of default in payment of three components referred above, whic....
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.... could have been no situation like loan borrowing. 10.11 Then we are of the considered view that the nature of agreement giving rise to the payment of interest or penalty should have been examined by the PCIT. The reasoning given by the ld. PCIT as followed by the ld. AO in the effect giving order is that the interest and penalty will take the colour of license fee to hold that the same is capital expenditure. However, we consider the same to be not a justified manner of determining the taxability of an expenditure. Every expenditure or income giving rise to a tax incidence should be categorically defined either in the statute or be otherwise impliedly decipherable from the transaction. It is not justified to draw any inferences about the nature of an expenditure being revenue or capital on the basis of another expenditure without analyzing the surrounding circumstances and the context in which the liability of expenditure arises. 10.12 The fact that initially PCIT intended to question the payment of interest and penalty being hit by the provisions of section 37 of the Act, but, which was not ultimately done shows that as with regard to relationship of this expenditure with t....
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....AO to rectify the assessment order to the effect of allowing deduction in respect of license fees only to the extent of amount pertaining to the period of expired licenses and in respect of renewed license fees which was currently in operation, the same was requested to be amortized over the remaining life of the respective license in terms of section 35ABB of the Act. However, the PCIT has proceeded to completely ignore the aforesaid rectification application filed by the appellant before the AO, wherein the appellant had suo-moto requested for recalculation of variable license fee in terms of section 35ABB of the Act in light of the decision of the Hon'ble Apex Court. The PCIT failed to appreciate that rectification application dated 25.10.2023 filed by the appellant formed part of the "record" and it was thus incumbent upon the PCIT to have considered the same while passing the impugned revisionary order. That apart, it comes up that the order of the Hon'ble Apex Court dated 16.10.2023 was rendered after the completion of the assessment vide order on dated 10.10.2023, thus as such there was no error in the assessment order as on the date of passing of the assessment order. 10....
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....nd 470 redeemable preference shares of Rs. 100/- each. The excess of net assets over purchase consideration amounting to Rs. 12,301 million was recognized as capital reserve in the books of the appellant. Due disclosures in this regard were made under Note (iv) of the audited financial statements for the year ended March,2020. (@ pages 51 to 52 of paper book Vol.I) 11.3 Attention in this regard was invited to the Scheme of arrangement filed before NCLT, copy of which was duly filed before the AO vide submission dated 09.05.2023 during the course of original assessment(@ pages 432 to 433 of paper book Vol.I). It was pointed out that consideration was determined in terms of Share Entitlement Report dated 19.12.2017, issued by Ernst & Young Merchant Banking Services Private Limited and Walker Chandiok & Co LLP. Further, Fairness Opinion of even date was issued by RBSA Capital Advisors LLP, a merchant banker registered with the Securities and Exchange Board of India. It is specifically cited that the Revenue's counsel, Ms. Easha Kadian was present during the hearing and her presence was duly recorded in the final order of the NCLT sanctioning the Scheme under Company Application No.....
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....otal brought forwarded loss and depreciation allowance from assessment year 2002-03 to 2019-20. Copy of tax audit report of TTSL was duly filed before the AO during the course of original assessment vide submission dated 21.09.2023.(@ pages 492 to 494 of paper book Vol.II). It was however clarified that only losses eligible, i.e., not related to period exceeding eight years, is carried forward by the appellant pursuant to demerger 11.4 Further, it is submitted, that the issue of allowability of accumulated loss and unabsorbed depreciation of TTSL in the hands of the appellant pursuant to the demerger was specifically examined by the AO and in depth enquiries were made by the assessing officer during the course of assessment, in response to which the appellant filed detailed reply(ies) justifying the allowability of loss/depreciation as cited before us was tabulated in the submissions and same is reproduced hereunder: S. No Issue Information sought by AO/TPO in original proceedings Summary of information/documents filed before AO/TPO Finding of AO/TPO 2. Claim of brought forward loss and unabsorbed depreciation relatable to consumer wireless undertaking of TT....
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....usiness and not a demerger 2. The aforesaid proposition is made on the legal basis that "demerger' is well defined in section 2(19AA) as extracted above. To qualify as demerger certain conditions, need to be satisfied 3. On of the conditions stipulated in clause(iv) thereof is that in consideration of demerger at least 75% of the shareholders of the demerged company shall become shareholders of the resultant company. This is primary condition for demerger as also for amalgamation. The idea is to allow freedom of restructuring of businesses by the persons or entities, which are carrying on such businesses. While in amalgamation there is pooling of interest by both companies, in demerger, a company springs up to carry on the business with 3/4th of old shareholders continuing to participate in the business of the Resulting company. In either case, the participation of existing shareholders to the given extent is a must. 4. In the present case, the scheme as approved by NCLT provides for issue of not the equity shares but preference shares and that too much are redeemable non participative, non-voting. The shares are mandatorily redeemable after a given p....
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.... reasons given above the transaction does not qualify to be a demerger and therefore the assessee was not entitled to benefits given by the AO under section 72(4) of the Act. The AO is directed to withdraw the allowance of the claim so made by him." 11.6 Now admittedly section 72A of the Act, allows in the case of amalgamation/ demerger, for the amalgamated/ resulting company to claim carry forward and set off of unabsorbed business loss and unabsorbed depreciation only of the amalgamating / demerged company, subject to the restrictions contained in that section. The said section enacts a deeming fiction to deem the unabsorbed business loss and unabsorbed depreciation of the demerged company to become the unabsorbed business loss and unabsorbed depreciation of the resulting company. As a result of the said deeming fiction, the resulting company is enabled to carry forward and set off unabsorbed business loss and unabsorbed business depreciation of the demerged company. The case of assessee is that since the entire business loss of TTSL related to the consumer wireless mobile business undertaking alone, the entire loss stood transferred to the appellant. In so far as unabsorbed d....
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....urpose of determining if it is a case of demerger and the basic requirement to fulfill the eligibility of section 72A(4) of the Act is that the transfer of undertaking should be in pursuance of a scheme of arrangement under the Companies Act by demerged company. Thus, without examining the various aspects of the arrangement on a gross basis PCIT has drawn inferences holding that assessee is not entitled for benefit of any brought forward loss or unabsorbed depreciation. 11.10 It is sufficiently established before us on the basis of various evidences discussed above and forming part of the paper book that TTSL was engaged in consumer wireless mobile business and was continuously incurring loss since inception and the entire business loss related to the said undertaking alone. The assets relating to consumer wireless mobile business undertaking was only considered for unabsorbed depreciation. In fact, all the assets/ liabilities relating to the demerged business have been transferred by the demerged company which has vested in the appellant. Attention in this regard was rightly invited to the special purpose balance sheet of demerged undertaking which provides for all assets and l....
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....providing for shareholders becoming equity shareholders, such condition presumed by the Commissioner in the impugned is beyond the letter of the law, which is impermissible. 11.13 Thus the liberty was there with the assessee to issue shares of the class that were more beneficial to the shareholders or the resultant company itself. The Revenue cannot dispute that shareholders of preferential shares of the company are as good a shareholder like equity holder. We are of the considered view that as for the purpose of section 2(19AA) r.w.s. 72A of the Act, there is no requirement under law that the allotee shareholders should continue to be shareholders of the resultant company for a minimum period. Therefore, the observations of PCIT that preferential shares after redemption will lead to violation of clause (iv) and (v) of section 2(19AA) of the Act is not a correct perspective. The objective fulfillment of the condition is necessary and not the subjective effect on compliances of the conditions. The manner in which PCIT has examined the issue subjectively as to what would be the effect after redemption of the preferential shares on the shareholding of the resultant company cannot b....
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.... is that one of the submissions of the ld. Sr. Counsel is that no show cause notice was issued by PCIT u/s 263 of the Act on this issue. The PCIT had directed in the impugned order to enhance income of the assessee by Rs. 1230.01 crores being addition u/s 56 of the Act on account of alleged gain on acquisition of consumer wireless business of TTSL. In the effect giving order the net assets over consideration received on demerger to the extent of Rs. 1230.01 crores has been added u/s 156(2)(10) of the Act. 12.1 At outset it is pertinent to mention that the PCIT, in continuation to the preceding issue pertaining to disallowance of carry forward of accumulated business losses and unabsorbed depreciation of consumer wireless business undertaking of TTSL acquired by the appellant, in paragraph 4 at page 155 of the impugned order has further held that since the conditions of demerger under section 2(19AA) of the Act were not satisfied (as mentioned supra), the appellant is not entitled to benefit under proviso to section 56(2)(x) of the Act and accordingly, amount of Rs. 1230.01 crores representing excess of net assets acquired over purchase consideration paid by the appellant is liab....
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....psum consideration through the process of demerger was paid. It has been established before us that the valuation of this demerger was done by professional valuers and the valuation was accepted in the scheme of arrangement by NCLT and High Court. That being the case, on the one hand, it was erroneous on the part of the PCIT to have gone beyond the scope of notice u/s 263 of the Act, on the other hand, to allege that there was a deemed capital gain on acquisition of consumer wireless business of the TTSL. Therefore, we are inclined to allow this issue in favour of the assessee and corresponding ground nos. 10 to 10.4 are allowed. 13. Issue No.4: As with regard to this issue arising out of transfer pricing adjustment, PCIT had directed an adjustment to the extent of Rs. 2663.71 crores on account of alleged incorrect reduction of proportionate adjustment allowed by the ld. TPO and ld. AO has enhanced the income to that extent in the effect giving order. In the impugned order, the PCIT has enhanced the TP adjustment on the alleged ground that in the case of CIT vs. Firestone International Ltd. 378 ITR 558 (Bom), SLP preferred by Revenue stood admitted by the Hon'ble Apex Court and ....
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.... contesting the settled provision before the Hon'ble Supreme Court cannot be the basis for invoking exceptional jurisdiction of Section 263 of the Act. Here the AO had sufficiently examined the issue and benefitted assessee on basis of decision of Hon'ble Jurisdictional High Curt, so a contrary direction is rather not appreciable. 13.4 Rather it is established before us on the basis of a decision of Mumbai benches in the case of M/s Damco India Pvt. Ltd versus DCIT, Circle-6(2)(1) Mumbai ITA1155/Mum/2017 order dated 20.03.2019, that Hon'ble Supreme Court is merely dealing with the issue of disallowance u/s 14A of the Act, in M/s Firestone case SLP. Thus that all the more requires setting aside the directions of PCIT on this issue. Therefore, this issue is decided in favour of the assessee and corresponding grounds nos. 11 to 11.3 are allowed. 14. Issue No.5: This issue concerns the observations of PCIT that the AO has not examined the issue of disallowance u/s 40(a)(i) of the Act while huge payments were made without deduction of tax. The AO was directed to examine each contract between the assessee and non-residents and to make necessary disallowances u/s 40(a)(i) of the Act....
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....ant queries raised by the AO vide notices/questionnaire and information/ replies filed by the appellant in response thereto from time to time were submitted during hearing. The AO had directed the appellant to provide the following details: "3. Foreign Remittance made to person(s) located in low tax jurisdiction countries (Business ITR) Assessee has made large Foreign Remittance to person(s) located in low tax jurisdiction countries. i). In your case Assessee has made large Foreign Remittance to person(s) located in low tax jurisdiction countries. In view of this kindly submit details of all the payments made under various heads to non residents in the format name, amount, country of residence, head /type of payment. ii) Kindly explain for each such payment, whether income tax was not deducted or was deducted at lower rate. If you have any certificate to that extent from Dept, please Submit copy of the same. iii) For all such payments where income tax is not deducted or deducted at Lowe rate, kindly submit copies bills and TRC issued by those parties along with copies of agreements and entered into with them for those transactions. iv) A....
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....include origination, termination and carriage charges on per minute basis are known as Interconnection Usage Charges 'IUC'. Thus, if a subscriber of Airtel in Delhi makes a call to her friend in the USA, who is a subscriber of the AT&T network there, then if the call matures, a call termination charge is payable to AT&T, which is called the IUC charge, in this case. The aforesaid charges are prescribed and regulated by the Telecom Regulatory Authority of India ('TRAI/regulator') as far as the domestic arena is concerned whereas in the case of international interconnect, these are commercially negotiated and mutually agreed upon between the domestic operators and Foreign Telecom Operators (FTOs). Pursuant to these revenue sharing arrangements with overseas network operators, the appellant made various remittances of IUC or Communication Charges to FTOs. No tax was deducted on the said payments in terms of section 195 of the Act since their payments are not liable to tax in India. Attention in this regard is invited to the following: (a) The Hon'ble High Court in appellant's own case in 319 ITR 139, while examining the scope of the definition of "fees for t....
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....o be deducted under section 194J of the Act. (d) Specific attention in this regard is invited to the case of CIT (TDS)-2 vs. M/s. Tata Teleservices Ltd ITA 1417/2018[page 2881 to 2885 of PB(Vol III)]before the jurisdictional Delhi High Court, wherein the Departmental Representative filed directions issued by the CBDT which state that the Board has accepted the position that Roaming and IUC charges are not to be subjected to TDS and thereby no appeal was preferred against the decision of the Karnataka High Court in the case of Vodafone South (supra). (e) Later, the Hon'ble Karnataka High Court in the case of Vodafone Idea Ltd vs. DCIT: [2023] 152 taxmann.com 575, has held that payments made to non-resident telecom operators by assessee, telecommunication service provider, for providing interconnect services and transfer of capacity in foreign countries was not chargeable to tax as royalty and hence tax is not deductible when payments are made to non-resident telecom operator. 14.4 Now what we find is that relying the jurisdictional Hon'ble Delhi High Court decision in the case of CIT v. Telstra Singapore Pte. Ltd.: [2024] 467 ITR 302 a co-ordinate bench at Delhi....
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....e was considered duly by AO vide notice dated 11.09.2023 and response of assessee dated 16.09.2023 copies of which are part of PB page 2593 to 2621 of PB Vol. III, we are of considered view that issue did not deserved to be interfered u/s 263 of the Act. We thus allow the ground no. 13. 16. Issue No.7: This issues concerns the directions of ld. PCIT that the AO did not investigate the issue concerning non-availability of depreciation. It is established that no depreciation on good will was claimed by appellant during the year and as with regard to tangible assets detailed enquiry was conducted by the AO vide notice dated 06.09.2023 and 11.09.2023 as replied by assessee by reply dated 16.09.2023, copy available at pages 2593 to 2621 of PB Vol. III. Though, in the consequential proceedings, no adverse inference has been drawn by the AO. Thus, the grievance of the assessee on the directions issued by the ld. PCIT as challenged do not survive, but certainly as the issue was duly examined by the AO, we are of considered view that issue did not deserved to be interfered u/s 263 of the Act. We thus allow the ground no. 14(a). 17. Issue No.8: This issue arises out of the directions o....