TaxTMI 
TaxTMI 
2025 (12) TMI 1174
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....unds of appeal for A.Y. 2020-21 : - 4960/Del/2024 A.Y. 2020-21 (Assessee's appeal) 1) That the learned Commissioner of Income tax (Appeals) ["CIT (Appeals)"] erred on facts and in law in confirming the disallowance of variable license fee paid to Ministry of Information and Broadcasting (MIB) under section 35ABB of the Income Tax Act, 1961 ["Act"] which is applicable on companies providing telecommunication services while appellant is engage in providing Direct to Home (DTH) services. 2) The appellant craves leave to add to, alter, amend, or vary the above grounds of appeal at or before the time of hearing. 4966/Del/2024 A.Y. 2020-21 (Revenue's appeal) 1. Whether Ld. CIT(A) has erred in deleting the disallowance of provision for interest on outstanding license fee of Rs. 119,01,19,717/- for AY 2020-21 and mentioning it as ascertained liability. Rs. 404640704. 2. Without prejudice to the G.O.A. at S., No. 1 on provision for interest on outstanding license fee whether Ld. CIT(A) has grossly erred in considering interest on license fee (Provision) as 2 revenue expense even when the same has come into existence on the basis of license fee which....
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....ross revenue shall, therefore, be calculated, without deduction of taxes and agency commission, on the basis of billing rates, net of discounts to advertisers. Barter advertising contracts shall also be included in the gross revenues on the basis of relevant billing rates. In the case of licencee providing or receiving goods and service from other companies that are owned or controlled by the owners of the licencee, all such transactions shall be valued at normal commercial rates and included in the profit and toss accounts of the licencee to calculate its gross revenue. 3.1.2 Every licencee shall maintain separate financial accounts for the channel, which shall be audited by the Statutory Auditors. At the end of each financial year, the company shall provide the statement of gross revenue forming part of the final accounts of the licencee as per the format in Form D, duly certified by the Statutory Auditors. It may be noted that the income heads specified in Form D are only indicative and illustrative and the Auditor would include all the relevant heads qualifying for gross revenue whether or not specifically included in the said format In addition, the income from the Re....
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....o and including the date of payment." 4. In terms of the aforesaid Licence Agreement, the assessee was/ is required to pay: -One time non-refundable entry fee of Rs. 10 crores prior to issuance of letter of intent from licensor. - Annual licence fee @ 10% of the gross revenue earned during the period. It may be noted that such annual licence fee is to be paid on the basis of gross revenue as per the prescribed formula stated above (Adjusted Gross Revenue (AGR)]. Further, in terms of the contract, MIB is authorized to scrutinize the audited accounts of the assessee for a specified period to verify if the licence fee deposited by the assessee is in accordance with the formula as prescribed in the agreement and in case there is any difference in the amount so deposited by the assessee and the amount as computed by MIB, the same was payable by the assessee along with simple interest @ 1% per month on the difference for the period of delay. 5. In terms of the aforesaid contract, the assessee paid the initial non-refundable entry fee of Rs. 10 crore in financial year 2007-08; the said one-time non-refundable fees was debited to the profit and loss account by the a....
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....has provided an incremental liability of Rs. 119,01,19,717 for such interest, which has been claimed as deduction (refer page 266 of the paperbook). 9. Summarily, the assessee has, inter alia, claimed the following amounts as deduction in the return of income: (a) Rs. 294,80,00,000 towards payment of variable annual licence fees, and (b) Rs. 119,01,19,717 as provision of interest on delayed payment of licence fee as per agreement owning to dispute in computation of AGR with MIB. Case of the assessing officer: 10. The case of the assessee was picked up for scrutiny assessment which culminated into order dated 28.09.2022 passed under section 143(3) of the Income Tax Act, 1961 ('the Act'), In the assessment order, the income of the assessee was assessed at Rs. 834,08,54,720/- inter alia, after making disallowance on account of the following: (i) Amortization of licence fee under section 35ABB Despite the specific submissions of the assessee that provisions of section 35ABB of the Act are not applicable to the assessee, the assessing officer proceeded to hold that the variable annual licence fee of Rs. 294,80,00,000/- is required to ....
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.... wherein the case of the assessee for earlier year (AY 2010-11) was tagged [para 69 of CIT(A) order]. The CIT(A) however held that since post expiry of original licence granted for 10 years (expired on 10.09.2017) the licence was periodically extended for period of six months (tabulated above), the licence fee was for the short- extended period and not for 10 years (as alleged by the AO). The assessee placed on record working of amortization of licence fee under section 35ABB of the Act considering licence period of six months taking into account fee for financial years 2018-19 and 2019-20 and computed amount of Rs. 323,72,50,000 to be allowed. The CIT(A) however held that no amount in excess of amount charged in books would be allowed and hence restricted/ allowed the claim of Rs. 294,80,00,000/- [Page 70 of CIT(A) order). (ii) Re: Disallowance of provision of interest qua delayed licence fee (a) The obligation of interest payment @ 1% for delay in payment of licence fee was as per the agreement with MIB. (b) While computing licence fee liability, the assessee claims certain deduction in calculating AGR which MIB did not accept, resulting in dis....
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....-(ii) of subsection (4) includes the undertaking which started or starts providing telecommunications services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services etc. 16. The Ld. Counsel further referring to section 72A(7)(iiia), submitted that the section defines what is an industrial undertaking and business of providing telecommunication services which would fall within the industrial undertaking but the DTH services are not defined anywhere in the provisions of the Act. Therefore, the Ld. Counsel submits that in the absence of definition for DTH services, the same will not fall within the ambit of the provisions of section 35ABB of the Act since the DTH services are not akin to telecommunication services. 17. The Ld. Counsel for the assessee further referring to clause (k) of section-2 i.e. "Definitions" in The Telecom Regulatory Authority of India Act, 1997 (TRAI) submitted that while defining telecommunication services in clause (k) the broadcasting services are excluded from telecommunication services. The Ld. Counsel further submitted that though in the TRAI Regulations it was pr....
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....evenue the Ld. Counsel for the assessee submitted that ground No.1 and 2 are in respect of interest on outstanding license fee and the same was allowed consistently and, therefore, there is no reason to deviate for the assessment year under consideration and make disallowance of such provision of interest on outstanding license fee. The Ld. Counsel for the assessee further stated that the AO himself while completing the assessment years for the A.Y's 2013-14, 2014-15, 2017-18 and 2019-20 allowed interest on outstanding license fee as deduction and, therefore, there is no reason for not allowing the same during the assessment year under consideration. Ld. Counsel placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Bharti Hexacom Ltd. 245 ITR 428. 21. The Ld. Counsel for the assessee also made detailed submissions which are as under:- "SUBMISSIONS OF THE ASSESSEE: 14. Brief submissions of the assessee in respect to the aforesaid appeals are as under: Re: GoA No.1 (Assessee's Appeal) & GoA.3 (Revenue's Appeal): Licence fee u/s. 35ABB 15. In this regard, it is respectfully submitted that the fundamental case....
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....ring any right to operate telecommunication services under section 35ABB of the Act is not applicable. 18. The assessee, in the present case, is engaged in the business of providing direct-to-home (DTH) services which is BROADCASTING service; the said DTH/broadcasting services is clearly distinct from telecommunication service. The same is evident from the following illustrative facts, provisions and precedents: 18.1 Functional and technological distinction: The licensing regimes for the two industries are structured differently to reflect distinct communication models - telecom licenses are designed for interactive, bidirectional services, while broadcasting licenses focus on content delivery with no direct feedback from the audience. Telecom service providers invest heavily in building and maintaining their own infrastructure relying on a network of cellular towers, fiber-optic cables, and satellites to offer voice, data, and broadband services; telecom operators build and maintain extensive terrestrial networks, including 4G/5G towers and data centers. Essentially, they manage end-to-end communication services. In contrast, DTH is merely a dis....
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....he subscribers' premises. Since these signals are in encrypted form they are decrypted by the Set-Top Boxes and the viewing cards inside these boxes enable subscribers to view the various TV channels on their TV sets. Invariably, the set-top boxes are installed without any consideration and remain the property of the assessees. 13.1 If we closely examine the modus operandi of the activity undertaken by the assessees, it would be evident that their activity involves at least two aspects: the first, is the act of relaying the signals from the satellites of various broadcasters of TV channels, and the second, is the object of such relaying of the signals, which is the effect of the content delivered to the subscriber. This effect is nothing but the entertainment of the subscribers. In other words, the activity of the assessees involves at least two aspects which correspond to the subject-matter of the levy under the Central Finance Act, 1994, namely, broadcasting service and the respective State enactments as providing entertainment to the subscribers." 18.2 Regulatory Authority: Broadcasting and telecommunications are subject to distinct regulatory frameworks an....
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....ation. For the purposes of this clause, "domestic satellite" means a satellite owned and operated by an Indian company for providing telecommunication service; ............" From the perusal of the aforesaid provisions which inclusively define telecommunication services to include pager, internet, broadband, internet, network, and domestic satellite services (like ISRO) etc., it is evident that the Legislature does not intend to include DTH services within the scope of telecommunication services. The same is supported by the fact that (i) DTH services providers, including the assessee have not claimed nor has the Revenue allowed deduction under section 801A under the Act; and (ii) benefit of carry forward of losses is also not allowed on amalgamation of companies providing DTH business. The Memorandum Explaining provisions of Finance Act, 2002 which sought to provide benefit of section 72A of the Act qua accumulated losses on amalgamation to telecommunication service sector read as under : "Incentive for amalgamation in telecom sector Under the existing provisions contained in section 724 of the Income-tax Act, the benefit of curry fo....
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....tence Section 35ABB of the Act was inserted vide Finance Act, 1997 stating that capital expenditure incurred for acquiring any right to operate telecommunication services, shall be amortized over the unexpired period of licence, starting from the year of actual payment. The relevant extracts of Memorandum explaining provisions of Finance Bill 1997 are reproduced below: "Amortisation of telecom licence fees In order to give fillip to this sector in addition to tax holiday, the Bill proposes to insert a new section 35ABB in the Income-tax Act. The section seeks to provide that any capital expenditure incurred and actually paid by an assessee on the acquisition of any right to operate telecom services by obtaining licence will be allowed as a deduction in equal instalments over the period for which the licence remains in force. It further seeks to provide that where the licence is transferred and proceeds of the transfer are less than the expenditure remaining unallowed, a deduction equal to the expenditure remaining unallowed as reduced by the proceeds of transfer, shall be allowed in the previous year in which the licence has been transferred. It also seek....
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....ness of telecommunication services and had procured licences in different telecom circles. In the present case, as clearly explained above, the assessee is not engaged in telecommunication business but broadcasting/ DTH business, which is completely separate from the former (telecommunication) industry and to which provisions of section 35ABB of the Act do not apply. Being so, the aforesaid judgment of the apex Court has no application in the facts of the present case. 22. In view of the aforesaid, since provisions of section 35ABB of the Act are not applicable to the assessee, not engaged in telecommunication services, the question of any amortization of the variable licence fee does not arise; thus, the disallowance made by the assessing officer is erroneous. The variable licence fee is thus allowable revenue deduction under section 37 of the Act. Assessee's case for assessment year 2010-11 tagged with Bharti Hexacom batch 23. Furthermore, as regards averment that the case of the assessee was also tagged in the aforesaid judgement of the Supreme Court, it is submitted that the case appearing vide Civil Appeal No. 6897/2018 [SLP (C) No. 019426/2018] ....
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.... being achieved through the payment of license fees on a yearly basis, the same is allowable under section 37 of the Act. 26. It is settled law that recurring consideration paid for use cannot be equated to price paid for acquisition of any asset and thus, the fees paid will be treated as revenue expenditure [refer Mewar Sugar Mills Ltd. vs. CIT, [1973] 3 SCC 143, Empire Jute Co. Ltd vs. CIT [1980] 3 Taxman 69 (SC), Gotan Lime Syndicate v. CIT 59 ITR 718 (SC)]. 27. In view of the aforesaid, the annual variable licence fee paid by the assessee with reference to adjusted gross revenue for the year is clearly allowable revenue expenditure. Without prejudice- full amortization under section 35ABB in same year 28. Strictly without prejudice to the aforesaid and in the alternative, if one is to assume that section 35ABB of the Act is applicable to the present case and the licence fee/ expenditure is to be amortized thereunder, even then, for the year under consideration, the entire licence fee deserves to be amortized over the period of licence (6 months): 29. In terms of section 35ABB of the Act read with the Explanation thereto, expenditure ....
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....e as an ascertained liability deserves to be upheld and Revenue's appeal is liable to be dismissed for the reasons explained in detail infra: 35. The relevant facts in relation to the issue under consideration, which clearly demonstrate that incremental provision of Rs. 119,01,19,717, towards interest obligation for delayed payment of licence fee, is an ascertained liability, are as under: 35.1 It is emphatically reiterated that in terms of the Licence Agreement, the assessee was/is required to pay annual licence fee @10% of the gross revenue earned during the period. Such annual licence fee is to be paid on the basis of gross revenue as per the prescribed formulae. Further, in terms of the contract, MIB is authorized to scrutinize the audited accounts of the assessee for a specified period to verify if the licence fee deposited by the assessee is in accordance with the formula as prescribed in the agreement and in case there is any difference in the amount so deposited by the assessee and the amount as computed by MIB, the same was payable by the assessee along with simple interest @ 1% per month on the difference for the period of delay [refer Article 3 of t....
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....ote that similar issue relating to computation of AGR with respect to deduction/ exclusion of certain items was raised in the case of telecom companies. During the year under consideration, the apex Court has, vide order dated 24.10.2019, decided the issue against the telecom companies qua exclusion of various items while computing AGR and consequential licence fee (copy of the order is placed at pages 267 to 419 of the paperbook). As the matter pertaining to AGR dispute in respect of both telecom and DTH companies is similar in nature, the said findings of the Hon'ble Supreme Court shall have a strong bearing on the similar matter pending regarding the DTH companies Most importantly, the Hon'ble Supreme Court in the aforesaid judgement specifically ruled on the issue pertaining to liability of interest in case of delayed payment of licence fee, holding that the interest can be levied and compounded in case there is a contractual obligation (refer pages 267 to 419 @398-418 (para 197) of the paperbook). Considering the said unfavorable judgment for telecom industry, the ongoing litigation for DTH industry, including the assessee, is likely to result in outf....
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.... (P) Ltd. vs CIT: 314 ITR 62 wherein, in context of allowability of provision for warranty expenses, it has been held that "17. At this stage, we once again reiterate that a liability is a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources and in respect of which a reliable estimate is possible of the amount of obligation. 39. The assessee duly satisfies all the conditions laid down by the Hon'ble Supreme Court in the case of Rotork Controls India P. Ltd (supra), as demonstrated hereunder:- i. an enterprise has a present obligation as a result of past event; The assessee entered into agreement with MIB on 10.09.2007 as per which it has a contractual obligation to pay interest on license fee to MIB (refer Para No.3.1.A.4). Thus, there is a past event and as a result of which the assessee has created a provision for interest on license fee, which is a present obligation. ii. it is probable that an outflow of resources will be required to settle the obligation; As per terms of agreement with the MIB, the interest is due and payable, hence the same is provided in the Prof....
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....llowed, notwithstanding that final quantification is disputed before the apex Court. 44. The case of the assessee is squarely covered by the decision of the Delhi High Court in the case of Aggarwal and Modi Enterprises (Cinema Project) Co. (P.) Ltd. v. CIT [2016] 381 ITR 469 (Del.). In that case, the assessee company had entered into an agreement with New Delhi Municipal Council (NDMC") to operate licence for running a cinema hall for a period of 10 years. Litigation ensued between the assessee and NDMC regarding increase in the annual licence fee payable by the licensee. Further, as per terms of agreement, the assessee was also required to pay interest on delayed payment of annual licence fee. The dispute/ litigation qua additional licence fee reached the Hon'ble Supreme Court. As the matter was pending, the assessee had created provision for interest on non-payment of increased annual licence fee. The AO had disallowed the provision of interest holding that since the dispute was pending adjudication before the Courts, the interest as demanded by NDMC was a contingent liability and hence could not be allowed. The disallowance was upheld by the Tribunal. On ap....
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....due influence and coercion is illegal and not enforceable in law." What also weighed with the ITAT is that the Assessee could not on the one hand challenge the validity of the said agreement and on the other urge the Department to act upon it because it is beneficial to the Assessee. 50. There appears to be a misconception on the question regarding an accrued liability in the hands of the Assessee in the above circumstances. In terms of the interim orders passed by the Court which were conditional upon the Assessee making a certain payment. what was being made clear was that the Assessee's contention regarding legality of the renewed licence agreement was still to be determined. In other words, the Assessee could not, during the pendency of the suit, claim that it had no liability under the renewed licence agreement. It was granted interim protection on the express understanding that it would abide by the interim order of the Court which was in itself an acknowledgement that the liability under the renewed licence deeds continue as long as the suit is pending. However, the only concession was that the Assessee would pay the reduced licence fee for the renewed period wh....
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....tractual liability for purchases is allowable deduction in the year in which the assessee had incurred such liability and the payee files suit for recovery, dehors the fact that liability was disputed by the assessee. 47. In the case of National Agricultural Cooperative Marketing Federation of India Ltd. v. CІТ: [2017] 393 ITR 666 (Delhi), the assessee claimed deduction of interest determined to be payable under an arbitration award dated 28.01.2000. On appeal filed by the assessee. Division Bench (DB) of the High Court, by an order dated 28.02.2001, granted stay of the execution of the said decree. For tax purposes, claim of such interest payable by assessee on amount awarded was disallowed by assessing officer by holding that liability was contingent and not even acknowledged in the books of account. The Special Bench of Tribunal held that since the decree was stayed by the Division Bench, there was no liability on assessee to pay interest. On appeal, the High Court held that since award had been made rule of Court by a Single Judge of High Court, the mere fact that the said judgment and decree was stayed by the Division Bench would not relieve assessee of it....
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....in the present case, the assessee had an obligation to pay interest, arising as a result of contract entered into with MIB; the liability to pay interest has crystallized in light of the attendant circumstances; the same is an ascertained liability quantified with reasonable certainty. Thus, the provision for interest created by the assessee is an allowable deduction under section 37(1) of the Act. 51. It may be reiterated that the assessee has also created provision for the enhanced licence fee (principal amount), which is disputed before the apex Court. The said licence fee is allowed by the Revenue albeit under section 35ABB of the Act there is no dispute as to the same delayed payment of such licence fee is unascertained is self-contradictory and not sustainable. 52. Be that as it may, it may kindly be appreciated that if the aforesaid liability of interest is ultimately, for any reason, not paid/charged by the assessee, the same shall be offered to tax in the year of cessation of such liability in terms of provisions of section 41(1) of the Act. 53. In view of the aforesaid, the disallowance of provision for interest made by the assessing officer tre....
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.... 57.1 It is, at the outset, submitted that the averment made by the Revenue in the ground of appeal qua provision for interest to be considered as capital expenditure is neither the basis of disallowance nor was the case of the Revenue before the lower authority. It is trite law that it is not open for the Revenue to change the complexion of the case for the first time before the Tribunal, the Tribunal is not vested with power of enhancement or to withdraw relief granted by the assessing authority [refer MCorp Global (P.) Ltd. vs. CIT: [2009] 309 ITR 434 (SC), Indian Steel & Wire Products Lid, vs. CIT: 208 ITR 740 (Cal.), Daimler India Commercial Vehicles (P.) Ltd. vs. DCIT: 416 ITR 343 (Mad)- Revenue's SLP dismissed). 57.2 Be that as it may, interest is for delay in payment of annual licence fee as per the terms of the agreement entered into with MIB. The compensatory interest does not result in any capital asset or right coming into existence; the said interest is thus required to be expensed off in any case. The same is thus clearly a revenue expense; there cannot be any dispute whatsoever qua allowability of the same. Reliance, in this regard, is place....
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....39;ble Supreme Court in Bharti Hexacom's case (supra), we are of the considered view that allowability of interest/penalty in the context of AGR issue was not in issue at all. The issue only revolved around the determination of validity of Hon'ble Delhi High Court holding a part of the license fee to be capital expenditure and part to be revenue expenditure. ............... 10.8 After taking into consideration the aforesaid relevant clauses, we are of the considered 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 oyalty 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 ap....
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....rt of the principal liability, but this expenditure of interest and penalty as arisen out of a contingency due to attempt of the assessee to contest the issue of quantum of license fee itself. Therefore, the incidence of interest and penalty is outcome of a business decision to defend the license fee quantum and, thus, it cannot be considered to have submerged with the license fee and to be coloured in its nature similar to license fee as a capital expenditure." (emphasis supplied). 59. For the aforesaid cumulative reasons, the provision for interest on delayed payment of license fee is allowable as deduction; the disallowance made by the assessing officer is not sustainable. Conclusion / prayer 60. For the reason elaborated above, the appeal filed by the assessee deserves to be allowed and the Revenue's appeal is liable to be dismissed." 22. On the other hand Ld. DR strongly supported the orders of the authorities below. The Ld. DR further stated that in so far as variable license fee is concerned the issue is squarely covered by the decision of the CIT Vs. Bharti Hexacom Ltd (supra). 23. Heard rival submissions and perused the orders of the author....
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....The Assessee is not into Telecommunication services as defined in clause (k) of section 2 of the TRAI Regulations. 26. We further observe that whether the DTH services are covered within the scope of broadcasting services or not has been considered by the Hon'ble Apex Court in the case of State of Kerala Vs. Asianet Satellite Communications Ltd. [2025] 174 taxmann.com 1107 (SC) dated 22.05.2025, though in the context of excise / service tax/ Vat laws, wherein Hon'ble Supreme Court held as under :- "12.4 In the year 2005, the Finance Act, 1994 was again amended to define "broadcasting" to include abroad casting agency or an organization collecting the broadcasting charges for transmission of electromagnetic waves through space or through cables, direct to home signals or by any other means to cable operator including multisystem operator or any other person on behalf of the said agency or an organization through any representative or agent appointed in India. Thus, service tax was levied on direct to home (DTH) broadcasting services. Modus Operandi of the Assessees and their aspects: 13. As regards the business of the assessees herein, they are DTH broa....
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....xpenditure is not revenue expenditure and the provision of section 35ABB of the Act shall apply, without noticing the provision of section 35ABB of the Act shall not apply to the broadcasting services and they apply only to telecommunication services which are not akin to broadcasting services, and therefore, the provision of section 35ABB of the Act shall not apply to the facts of the assessee's case. 29. In view of the above observations we direct the AO to allow variable license fee paid by the assessee to Ministry of Information and Broadcasting as revenue expenditure u/s. 37(1) of the Act. The ground No.1 of grounds of appeal of the assessee is allowed and ground No.3 of grounds of appeal of the revenue is dismissed. 30. Coming to ground No. 1 and 2 of grounds of appeal of the revenue we observed that the issue in appeal with regard to deletion of disallowance of provision for interest on outstanding license fee was disallowed by treating it an unascertained liability. We observed that the Ld. CIT(A) elaborately considered the submissions of the assessee, the terms of the agreement, the findings of the AO and held that the interest on license fee paid by the assessee as ....
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....nclude different types of revenues of the DTH company without any deductions. Further, the definition of gross revenue as well as computation of license fee payments is subject matter of dispute between the DTH companies and MIB since its inception. Due to the dispute with MIB, the appellant while making payments of license fee to MIB has claimed certain deductions from gross revenue but the MIB didn't consider these deductions in computing GR because clause 3.1.1 of the agreement doesn't allow any deduction from the gross revenue. The appellant referred this dispute matter to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), an appellate authority applicable to both Telecom and DTH Industries, who had passed an order dated 28.05.2010 in Petition No. 92(C) of 2009 deciding that specified deductions as sought by the Appellant from the GR to determine the license fees payable to the MIB, shall be allowed. This was confirmed/decided on the basis of the license agreement between the Appellant and the MIB to provide DTH services in India and in the light of its earlier order dated 07.07.2006 in the case of Association of Unified Telecom Service Providers of India (....
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....ity. During the appellate proceedings, the appellant contested this issue on several counts stating that the interest on licence fee is not an unascertained liability in nature as supported by decision of Hon'ble Supreme Court in Bharat Earth Movers v. Commission of Income Tax (supra). Further, the Appellant has satisfied all the condition laid down by the Hon'ble Supreme Court in case of Rotork Controls India Ltd (supra) viz there is a present obligation to pay interest on the basis of the contract and unfavourable judgement of Hon'ble Supreme Court on similar issue in telecom operators, the ongoing litigation is likely to results into outflow and the interest on licence fee is computed as per the Guidelines to DTH services issued by MIB. Also, the Appellant follows the mercantile system of accounting wherein it is not necessary that the liability must have actually been paid during the concerned financial year. The appellant also submitted that the crux of the matter is the reasonable certainty with which the liability can be ascertained on the date of the provision for the stated expense and corresponding adjustments would be made in the year in which the suit is fin....
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.... TDSAT had decided the issue vide order dated 28.05.2010 in favour of the appellant on the basis of its earlier order dated 07.07.2006 in the case of AUSPI Vs UOI but the same was reversed by the Hon'ble Supreme Court on 11.10.2011 in Civil Appeal No. 5059 of 2007 in UOL VS AUSPI. Accordingly, the appellant had received demand notice/letter dated 19.03.2014 for enhanced license fees as well as interest on outstanding licence fees with the outstanding license fees of Rs. 2437A crores and interest of Rs. 54.72 crores upto 19.03.2014 and on miscellaneous application by the appellant, the TDSAT had issued order dated 04.04.2014 granting interim protection from coercive measure for recovery. Also, the appellant's appeal against the order of the TDSAT dated 28.05.2010 is presently pending with the TDSAT in the case of UOI Vs AUSPI has already been struck down on 11.10.2011.in Hon'ble Supreme Court, which is likely to be dismissed as the base order of the Civil Appeal No. 5059 of 2007 and the Supreme Court has categorically held that the licensee can't challenge the definition of adjusted gross revenue in the agreement once the licensee had accepted the term & conditions o....
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....t the MIB had determined the license fees at Rs. 513.69 crores and interest at Rs. 116.20 crores but the appellant had claimed the license fees at Rs. 294.80 crores only due to change in terms services under direction of the GOI w.r.t Broadcaster's share and interest at Rs. 119.01 crores for FY 2019-20 based on its own calculation. 5.2.4 The appellant also contended that it follows mercantile system of accounting and it is not necessary that the liability must have actually been paid during the financial year. There is no dispute about the adoption of accounting system by the appellant and allow ability of expenses/liability on accrual basis in the concerned financial year. The AO's point is that the claim of provision for arrear interest on license fees is not an ascertained liability for the present year because there was no internal or external event, which suggest that the liability of arrear interest is now become certain, However, it is seen that the appellant had made the claim for enhanced license fees after considering the definition of gross revenue and the AO did not object on the claim of license fees but made only amortization in 10 years by applying s....
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....7 dated 24.10.2019 has held that the interest on shortfall payment of license fees is a contractual liability as per the agreement and the same can be levied and compounded. Under these circumstances, I am of the view that the liability towards interest on outstanding enhanced license fees is an ascertained liability in the light of the Guidelines issued by the MIB, agreement with MIB, demand letter of the MIB and unfavorable orders of the Supreme Court on definition of adjusted gross revenue & levy of interest and accordingly, the appellant had correctly made a provision for interest on license fees under the mercantile system of accounting. So far as the slight difference of interest claim by appellant and the calculation of interest by MIB is concerned, the appellant had made only provision for interest and the same shall be adjusted on the outcome of the litigation as held by Jurisdictional Delhi High Court in M/s Aggarwal and Modi Enterprises (Cinema Project) Co. Pvt Ltd. [2016] 67 taxmann.com 63 (Delhi). Hence, AO is directed to delete the disallowance of provision for interest on arrear/outstanding license fees at Rs. 119,01,19,717/- for FY 2019-20. Thus, this ground of appe....
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....l of the assessee they are similar and identical to ground No.1 and 2 of grounds of appeal of the revenue for the A.Y. 2020-21 and the decision taken therein shall apply mutatis mutandis to ground No.3 and 4 for the A.Y. 2021-22. We order accordingly. 35. Coming to appeal of the revenue for the A.Y. 2016-17 in ITA No. 4868/Del/2024, the revenue has raised following grounds of appeal:- "1. Ld. CIT(A) grossly erred in considering provision for license fee as an ascertained liability and thus deleting the disallowance of provision for interest on outstanding license fee at Rs. 53.70.00.000/- for A.Y. 2016-17. 2. Ld. CIT(A) has grossly erred in considering interest on license fee (Provision) as revenue expense even when the same has come into existence on the basis of license fee which has been considered to be a capital receipt by Hon'ble Supreme Court in the case of VIT vs Bharti Hexacom Ltd. (2023) 155 taxmann.com 322 (sc). 36. We observed that these grounds are similar and identical to ground NO.2 and 3 of grounds of appeal of the revenue for A.Y. 2020-21 and the decision taken therein shall apply mutatis mutandis to ground No.1 and 2 for the A.Y. 2016-1....