TaxTMI 
TaxTMI 
2023 (7) TMI 1603
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....the case and in law, the Hon'ble CIT(A) erred in upholding the action of the AO of disallowing a sum of Rs. 4, 21,70,0/- u/s40(a)(ia) pertaining to the discount to the distributors of prepaid SIM cards on the alleged ground that the discount allowed by the Appellant is in the nature of commission' and holding that the Appellant is liable to deduct tax at source u/s 194H irrespective of whether the relationship between the Appellant and their distributors is that of principal and agent or not. Without Prejudice Ground No. 1: Ground No. III: On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the action of the AO of disallowing a sum of Rs. 54,47,48,738/-u/s. 40(a)(ia) pertaining to the domestic roaming charges paid/payable to the other telecom operators on the alleged ground that the domestic roaming charges is in the nature of 'fee for technical services' and holding that the Appellant is liable to deduct tax at source u/s 194J. Ground No. IV: On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the action of the AO in disallowing the....
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....Act r.w.r. 8D of the Rules to the 'book profit' computed w/s 115JB of the Act. Ground No. XII: The Appellant craves leave to add, to alter and/or amend all or any of the foregoing grounds of. 3. The brief facts of the case are that assessee is in the business of providing cellular services in the telecom circles of Maharashtra, Gujarat, Andhra Pradesh, Delhi, UP(W), UP(E). Haryana, Kerala, Rajasthan, Himachal Pradesh and Madhya Pradesh. The company also trades in handsets and accessories which are integral part of the nature of business in which the assessee is operating. During the year, the assessee has claimed deduction u/s 801A of the IT Act on profits of circles. 4. E-Return of income was filed on 26.09.2009 declaring total income of Rs Nil after loss of set off of brought forward unabsorbed depreciation of Rs. 330,629,157/- Tax of Rs.124, 22, 95,483/- was paid on book profits. The assessee filed a revised return of income on 01.04.2010 declaring a total income of Rs Nil after set off of brought forward unabsorbed depreciation of Rs.2,297,410,373/- Tax payable on book profits was revised to Rs 125,51,17,160/- The return was revised on account of....
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....count allowed to the distributors. Accordingly, the assessee was asked to make its submissions as to why tax was not deducted on the discount allowed to the distributors. The assessee furnished a copy of agreement entered into with the distributors and filed a detailed reply before the ld. AO. It was submitted by the assessee that it appoints distributors who purchase prepaid Starter Packs and recharge vouchers in bulk and then sell them to sub-dealers or retailers. It was submitted that there is a principal to principal relationship between the assessee company and the distributors and the prepaid Starter Packs and Recharge Vouchers are given to them at a discounted price. It was submitted that the assessee company receives the sale proceeds from the distributors in advance and thereafter, deliver the products to the distributors irrespective of whether they in turn are sold or unsold by the distributors. The distributors are free to sell the prepaid cards / recharge vouchers to any retailers who shall be appointed by them on their own account (i.e. the distributors) and no control is being exercised by the assessee company thereon, at any price which the distributor decides subje....
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....tailers and retailers sell the same to the ultimate customer /user. The distributors make payment of the discounted price in advance to the assessee and there is no payment of any kind made by the assessee to its distributors. The distributors would sell to the retailers after adding its margin and the retailers would sell to the customer after adding his margin. The ultimate price to the customer/user is subjected to the Maximum Retail Price (MRP) fixed by the assessee. It is pertinent to note that the distributor does not earn any income just by obtaining the prepaid sim cards and recharge vouchers from the assessee. The distributor earns income only if the said sim cards and recharge vouchers were sold further. Hence, there is no fixed amount of commission that could be determined from the agreement entered into by the assessee with the distributors. Once the amount of commission income that could be determined in the hands of the distributor is not permissible, there cannot be any obligation of deduction of tax at source that could be casted on the assessee. 2.8.2. We find that in the case before the Co-ordinate Bench of Pune Tribunal in the case of Idea Cellular Limit....
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....Accordingly, the Ground No. II raised by the assessee is allowed. The Ground No. I raised by the assessee is only supporting the Ground No. II for furnishing of additional evidences, the adjudication of which becomes academic in nature. Hence Ground No. I is also allowed. 7. As we seen with reference to relevant extract of the order of Coordinate Bench on identical issue for AY 2008-09 has been discussed and deliberated with all relevant facts, agreements and findings of various Hon'ble High Courts and Apex Court and revenue in their arguments in not in a position to differentiate neither in terms of facts nor law, without any hesitation, we accept the preposition laid down by the Coordinate Bench. In view of above, ground no. 2 raised by the assessee is allowed. As ground no. 1 is also to support ground no. 2 in terms of substantiating the same by filing additional evidences, although became academic now, but the same is also allowed based on outcome of ground no. 2. 8. Ground no. 3 pertains to disallowance of Rs.54,47,48,738/- on account of domestic roaming charges paid to other telecom operators u/s. 40(a)(ia) of the Act. This issue is identical to what discussed and d....
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....iber 4. Thus, each telecom operator would enter into a national roaming agreement with OTO (Refer a specimen national roaming agreement entered with BPL Cellular Limited on page no. 79 to 111 of the FPB-II). 5. Roaming Agreement Process: In order that a subscriber is able to "latch" on to a visited network, a roaming agreement needs to be in place between the visited network and the home network. Agreement is established after completing of following processes. Business Agreement - Network and Billing configuration - IREG & TADIG Testing - Launch of commercial service. Aforesaid process is enumerated in be as under: ● Business Agreement - A business agreement is signed between two networks as per GSMA guidelines to setup roaming service. ● Network& Billing configuration - Post business agreement, necessary configures required to be done in visited and home network and billing system. ● IREG & TADIG Testing - Once configuration is done, series of testing is done as per GSMA specified guidelines defined in IREG & TADIO testing document. ● (i) IREG (International Roaming Expert Gro....
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.... the decision of the Chandigarh Tribunal referred to supra vide order dated 28/06/2018, we do not find any case in the argument advanced by the ld. DR before us in support of the orders of the lower authorities. Hence, respectfully following the aforesaid decision of the Chandigarh Tribunal which has dealt the decision on the impugned issue, the ground No. III raised by the assessee is hereby allowed. 9. As we seen with reference to relevant extract of the order of Coordinate Bench on identical issue for AY 2009-10 has been discussed and deliberated with all relevant facts, agreements and findings of various Hon'ble High Courts and Apex Court and revenue in their arguments in not in a position to differentiate neither in terms of facts nor law, without any hesitation, we accept the preposition laid down by the Coordinate Bench. In view of above, ground no. 3 raised by the assessee is allowed. 10. Ground no. 4 pertains to disallowance of amortisation of the intrinsic value of ESOP charged to P & L account of Rs.14,47,37,034/- This issue is identical to what discussed and decided in AY 2008-09 also by the Coordinate Bench vide ITA No. 2285/Mum/2014. Relevant findings of Coo....
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....6,78,07,777/- for acquisition of the shares for erstwhile Spice Communication Ltd. This issue is identical to the facts and circumstances of the case decided by the Hon'ble Supreme Court in the case of CIT vs. S. A. Builders (288 ITR 1) (SC) and by the Hon'ble Bombay High Court in the case of PCIT vs. Concentrix Services (I) Pvt. Ltd. (2019) 111 taxmann.com 269 (Bom). Therefore, after following these decisions which are applicable mutatis mutandis, we allow ground no. 5 raised by the assessee. 13. Ground no. 6 pertains to disallowance of Rs.4,14,65,950/- u/s 14A. This issue is identical to what discussed and decided in AY 2008-09 also by the Coordinate Bench vide ITA No. 2285/Mum/2014. Relevant findings of Coordinate Bench are as under :- 5. The ground No. V raised by the assessee is challenging the disallowance made u/s.14A of the Act. 5.1 We have heard rival submissions and perused the materials available on record. At the outset, we find that assessee had not earned any exempt income during the year. The ld. AO however, disregarded the same and observed that since assessee had made huge investments in various companies, disallowance u/s.14A of the Ac....
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....r under Rule 8D of Income-tax Rules, 1962 read with section 14A of the Income- tax Act, 1961 ('the Act'). 3. He submits that the ITAT erred in relying on the decision of this court n Pr. CIT v. IL&FS Energy Development Company Ltd. [2017] 84 taxmann.com 186/250 Taxman 174/399 ITR 483 (wherein it has been held that no disallowance under section 14A of the Act can be made if the assessee had not earned any exempt income), as the revenue has not been accepted the said decision and has preferred an SLP against the said decision. 4. Learned counsel for the petitioner also submits that in view of the amendment made by the Finance Act, 2022 to section 14A of the Act by inserting a non obstante clause and an explanation after the proviso, a change in law has been brought about and consequently, the judgments relied upon by the authorities below including IL&FS Energy Development Co. Ltd. (supra) are no longer good law. The amendment to Section 14A of the Act is reproduced hereinbelow :- 'Amendment of section 14A. In section 14A of the Income-tax Act, - (a) in sub-section (1), for the words "For the purposes of, the words "Notwithstanding anyt....
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.... ITR 310 has held that a retrospective provision in a tax act which is "for the removal of doubts" cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. The relevant extract of the said judgment is reproduced hereinbelow: '9. The High Court did not refer to the 1999 Explanation in upholding the inclusion of salary for the field break periods in the assessable income of the employees of the appellant. However, the respondents have urged the point before us. 10. In our view the 1999 Explanation could not apply to assessment years for the simple reason that it had not come into effect then. Prior to introducing the 1999 Explanation, the decision in CIT v. S.G. Pgnatale [(1980) 124 ITR 391 (Guj.)] was followed in 1989 by a Division Bench of the Gauhati High Court in CIT v. Goslino t found Mario [(2000) 241 ITR 314 (Gau.]. that the 1983 Explanation had been given effect from 1-4-1979 whereas the year in question in that case was 1976-77 and said: (ITR p. 318) "[I]t is settled law that assessment has to be made with reference to the law which is in existence at the relevant time. The m....
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....nd that the salary of the assessee was paid by a foreign company. This Court dismissed the appeal holding that it was a question of fact. (CIT v. SR Patton [(1998)8 SCC 608]) 15. Given this legislative history of Section 9(1)(ii), we can only assume that it was deliberately introduced with effect from 1-4-2000 and therefore intended to apply prospectively [See CIT v. Patel Bros. & Co. Ltd., (1995) 4 SCC 485, 494 (para 18) : (1995) 215 ITR 165]. It was also understood as such by CBDT which issued Circular No. 779 dated 14-9-1999 containing Explanatory Notes on the provisions of the Finance Act, 1999 insofar as it related to direct taxes. It said in paras 5.2 and 5.3. "5.2 The Act has expanded the existing Explanation which states that salary paid for services rendered in India shall be regarded as income earned in India, so as to specifically provide that any salary payable for the rest period or leave period which is both preceded and succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India. 5.3 This amendment will take effect from 1-4-2000, and will accordingly, apply in relation t....
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.... 139].) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of UP., (1981) 2 SCC 585]. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24; Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC352; CIT v. Podar Cement (P.) Ltd., (1997) 5 SCC 482]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are "it is declared" or "for the removal of doubts". 18. There was and is no ambiguity in the main provision of section 9(1)(ii). It includes salaries in the total income of an assessee if the assessee has earned it in India. The word "earned" had been judicially defined in SG. Pgnatale [(1980) 124 ITR 391 (Guj.)] by the High Court of Gujarat, in our view, correctly, to mean as income "arising or accruing in India". The amendment to the section by way of an Explanation in 1983 effected a change in the scope of that ju....
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....ees of Rs.7,24,57,14,772/- This issue is identical to what discussed and decided in AY 2008-09 also by the Coordinate Bench vide ITA No. 2285/Mum/2014. Relevant findings of Coordinate Bench are as under :- 6. The ground No.VI raised by the assessee is challenging the disallowance of Revenue sharing license fees amounting to Rs.415,08,45,362/- 6.1 We have heard rival submissions and perused the materials available on record. The ld. AO observed that assessee had debited license fee amounting to Rs.4150.84 million in its profit and loss account. The ld. AO observed that assessee was claiming depreciation on license fee and deduction u/s.35ABB of the Act. This payment is made by the assessee to Government authorities to carry on the business of telecom service provider. The ld. AO observed that assessee had claimed license fees as deduction u/s.35ABB of the Act by amortising the expenditure over the period of license. He also observed that the assessee had to pay license fees on revenue sharing basis from A.Y.2000-01 onwards. This amount of Revenue sharing license fee was initially capitalised and depreciation was claimed on the same. However, subsequently the assess....
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.... by the assessee, the assessee had been consistently claiming deduction as revenue expenditure u/s.37(1) of the Act. Accordingly, he submitted that there is absolutely no double deduction claimed by the assessee at all. This fact was submitted before the ld. CIT(A) by the assessee but no finding has been given by the ld. CIT(A) in this regard. Hence, in the interest of justice and fair play, we remand this issue to the file of the ld. AO for limited purpose on verification of the fact as to whether the assessee has claimed double deduction in respect of this expenditure for the same circle where the assessee is operating its telecom services. If it is found that there is no double deduction claimed by the assessee, the assessee would be eligible for deduction as revenue expenditure u/s.37(1) of the Act which would be in tune with the decisions rendered by the Hon'ble Jurisdictional High Court in assessee's own case for A. Yrs. 2003- 04, 2006-07 and 2007-08 referred to supra. With these observations, the ground No.VI raised by the assessee is allowed for statistical purposes. 16. As we seen with reference to relevant extract of the order of Coordinate Bench on identical issue....
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....assessee is challenging the disallowance u/s.14A of the Act while computing book profits u/s.115JB of the Act. 10.1 We have heard rival submissions and perused the materials available on record. We have already held vide ground No. V above that no disallowance u/s.14A of the Act could be made in the instant case as there was no exempt income claimed by the assessee. The said decision would hold good for this ground also as admittedly Clause "f" of Explanation 1 to Section 115JB(2) of the Act would come into operation only if there is exempt income credited in the profit and loss account. Accordingly, the ground No. X raised by the assessee is allowed. 21. As we seen with reference to relevant extract of the order of Coordinate Bench on identical issue for AY 2008-09 has been discussed and deliberated with all relevant facts, agreements and findings of various Hon'ble High Courts and Apex Court and revenue in their arguments in not in a position to differentiate neither in terms of facts nor law, without any hesitation, we accept the preposition laid down by the Coordinate Bench. In view of above, ground no. 11 raised by the assessee is allowed. 22. In the result,....