TaxTMI 
TaxTMI 
2025 (12) TMI 1280
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....equently, the assessee filed its revised return of income on 29.03.2012, declaring a total income of Rs. 4,10,84,31,389/-. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142 (1) were issued and served upon the assessee. Vide draft assessment order dated 31.03.2014 passed under section 144C read with section 143(3) of the Act, the Assessing Officer (''AO'') proposed certain additions and disallowances to the total income declared by the assessee. Being aggrieved, the assessee filed detailed objections before the learned DRP, which were disposed off vide direction dated 10.12.2014 issued under section 144C(5) of the Act, agreeing partially with the assessee, allowing certain objections against the additions/disallowances proposed by the AO. In conformity, the AO passed the impugned final assessment order, assessing the total income of the assessee at Rs. 6,54,61,22,360/-. Being aggrieved, both the assessee and the Revenue are in appeal before us. ITA No. 671/Ahd./2015 Assessee's Appeal (A.Y. 2010-11) 3. In this appeal, the assessee has raised the following grounds: - "Ground no 1-Disallowance of dep....
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....9;; 1.6 On the facts and in the circumstances of the case and in law, the learned AO has erred in applying the GAAR provisions prescribed under section 95 of the Act which are clearly not applicable for the year under consideration. Ground no 2-Disallowance of network site rentals amounting to Rs 172.90 crores 2. On the facts and in circumstances of the case and in law, the learned AO, based on the directions of the learned DRP has erred in disallowing the expenses of Rs 172.90 crores paid to Indus Towers Limited ('Indus') as "Network Site Rentals" under section 37(1) of the Act. 2.1 On the facts and in circumstances of the case and in law, the learned AO, based on the directions of the learned DRP has erred in holding that there is excessive payment of Rs 172.90 crores by the Appellant to Indus which is not "wholly and exclusively for the purpose of business". 2.2 On the facts and in circumstances of the case and in law, the learned AO, based on the directions of the learned DRP has erred in not considering the fact that significant costs which were being incurred by Appellant in the prior years for running and maintenance of su....
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....irections of learned DRP, has erred in making an addition under section 40(a)(ia) of the Act on account of non-deduction of taxes on the trade discount given to prepaid distributors amounting to Rs 71,82,87,365. 5.1 On the facts and circumstances of the case and in law, the learned AO, based on the directions of learned DRP, erred in holding that the trade discount given is in the nature of commission and hence taxes are deductible under the provisions of section 194H of the Act. 5.2 On the facts and circumstances of the case and in law, the learned AO, based on the directions of learned DRP, erred in not appreciating the fact that in the given case trade discount given to prepaid distributors has neither been credited nor paid to prepaid distributors and has not been claimed as deduction and hence, provisions of section 40(a)(ia) of the Act are not applicable. 5.3 Without prejudice to the above, on the fact and in the circumstances of the case and in law, the learned AO, based on the directions of the learned DRP has erred in not giving effect to taxes paid by the recipient and hence, no disallowance should be made by virtue of second proviso to section ....
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....ce, the transfer is in the nature of a gift, and therefore, as per the expressed provisions of section 47(iii) of the Act, the same is not exigible to capital gains tax. The assessee further submitted that no loss, either capital or otherwise, has been claimed in relation to the above transfer of PI assets. Further, the loss on transfer of PI assets amounting to Rs. 293.23 crores debited to the profit and loss account has been added while computing the total income. The assessee further submitted that, in the absence of any consideration, the tax WDV of the books of assets where the PI assets were capitalised were also not required to be adjusted by any amount. Even then, in line with its motive of not claiming any tax advantage by this transaction, the assessee submitted that it voluntarily reduced the tax WDV as the PI assets transferred by it to M/s. Vodafone Infrastructure Ltd. from the said block of assets. 6. The AO, vide its draft assessment order, disagreed with the submissions of the assessee and held that every transfer without any consideration cannot be termed as a gift and every transaction should be viewed in isolation and seen as part of the above transactions. Th....
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....rusal of the order passed by the DRP, we find that the DRP has made following observations while deciding the issue in favour of the Assessee: "18.3 The panel has carefully considered the submission of the assessee in this regard. The assessee has tried to justify the aforesaid transaction to be a purely business decision based on commercial consideration. On the other hand, the AO is of the view that VDL is camouflaging the demerger scheme and getting it legalized by obtaining sanction from the Hon'ble High Court, which too by misrepresenting facts. In fact the assessee has transferred its Pl assets just to evade taxes in a manner to benefit Its ultimate holding company, for which it has claimed a loss. However, section 47(iii) of the Act provides that any transfer of a capital asset under a will or an irrevocable trust or as gift will not be regarded as a transfer. In the instant case. the transaction under reference is by way of gift duly approved by the High Court & hence a legitimate transaction and the Act itself recognizes such Gift by corporate. Further, clause 40 of the Memorandum of Association specifically permits the assessee to grant gift to any person. Th....
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....approved by the Hon'ble High Court of Delhi. Even otherwise a company is an artificial juridical person with a separate legal entity of its own, unless the Corporate Veil is lifted by court orders. The case of the assessee is that of a real gift and not deemed gift as in the case of CIT V. Tibruz Mustafa Bilgen (1986) 157 ITR 723 (Mad), the Hon'ble Medras High Court has held that section 47(iii) applies only to real gift and not deemed gift. Therefore, the action of the AO in disallowing depreciation on passive Infrastructure Assets (PI) is held by the panel to be not tenable and the AO is therefore directed to delete the said addition." (Emphasis Supplied) 8.6 We are in agreement with the view taken by the DRP. The Scheme of Demerger which clearly provided that the Assessee shall gift PI Assets to Vodafone Infrastructure Ltd.. Before the Hon'ble Delhi High Court the Revenue had filed objection to the Scheme of Demerger contending, inter alla, that a transfer by way of gift was not permissible under Section 391 of the Companies Act, 1956. However, the aforesaid objection was rejected by the Hon'ble Delhi High Court observing that the Revenue had failed to p....
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....Act. After considering the submissions of the assessee, the AO, vide draft assessment order, held that the entire scheme of transfer of PI assets to M/s. Vodafone Infrastructure Ltd. and then to M/s Indus Towers Ltd. on the same date was to evade taxes and reduce tax liability. The AO further held that before the transfer of PI assets, the assessee was earning Indefeasible Right to Use ("IRU") amounting to Rs. 37.9 crore from M/s. Indus Towers Ltd., and after the transfer of PI assets for "Nil" consideration, the assessee is paying Rs. 210.8 crore to M/s. Indus Towers Ltd. for the use. Thus, the AO held that the expenses of Rs. 210.8 crore for the use of assets previously owned by the assessee is only to reduce the tax liability and the same is excessive and unreasonable within the meaning of provisions of section 40A(2)(b) of the Act. Accordingly, the entire payment of network site rentals amounting to Rs. 210.8 crore was proposed to be disallowed and added to the total income of the assessee. In further proceedings, the learned DRP accepted the contention of the assessee that the provisions of section 40A(2)(b) of the Act are not applicable to the instant case. However, the learn....
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....d that these submissions need examination on the basis of relevant factual details. 12. Having considered the submissions and perused the material available on record, we find that these submissions were not examined by any of the lower authorities, and the payment made by the assessee as network site rentals to M/s. Indus Towers Ltd. was treated as excessive in the absence of any value addition by M/s. Indus Towers Ltd. We further note that the assessee, on one hand, claims that high costs were incurred by it in the earlier years for running and maintenance of towers, which, after being transferred, have now been incurred by M/s. Indus Towers Ltd, and therefore, the assessee is being charged the high rental. However, we find that there is no examination of the aspect that the assessee charged the costs incurred by it from M/s. Indus Towers Ltd., when running and maintaining such towers was under its control. Therefore, we are of the considered view that the various arguments now raised before us require detailed examination, which has not been done by any of the lower authorities. Therefore, in the interest of justice, we deem it appropriate to restore this issue to the file of....
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....vs. Cortech Energy Pvt. Ltd., reported in 45 taxman.com 116 (Guj.) upheld the deletion of disallowance made under section 14A read with Rule 8D of the Rules, as no exempt income was earned by the assessee. The Revenue could not bring any material to deviate from the decision so rendered by the Tribunal on this issue in the assessee's own case. Accordingly, respectfully following the decision cited supra, the disallowance made under section 14A of the Act read with Rule 8D of the Rules is deleted. Accordingly, Ground No.3 raised in assessee's appeal is allowed. 16. The issue arising in Ground No.4, raised in assessee's appeal, pertains to the disallowance of roaming charges under section 40(a)(ia) and section 40(a)(i) of the Act on account of non-deduction of tax on the national and international roaming charges paid by the assessee to other telecom operators. 17. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee paid an amount of Rs. 64,81,13,995/- as roaming charges to domestic and overseas service providers. Out of the above roaming expenses Rs. 10,03,23,295/- pertained to international....
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....11.2016, for the assessment year 2009-10, wherein a similar issue was decided in favour of the assessee, following another decision of the Co-ordinate Bench of the Tribunal in assessee's sister concern in Vodafone East Ltd. in ITA No.1864/Kol/2012. We further find that recently, in the case of another sister concern of the assessee, the Co-ordinate Bench of the Tribunal in Vodafone Digilink Ltd. (supra), vide order dated 14.10.2025, deleted the similar disallowance of roaming charges for non-deduction of tax under the provisions of section 194J of the Act. The Revenue could not bring any material to deviate from the decision so rendered by the Tribunal on this issue. Accordingly, respectfully following the decision cited supra, the disallowance made in respect of roaming charges under section 40(a)(ia) and section 40(a)(i) are deleted. Accordingly, Ground No.4 raised in assessee's appeal is allowed. 19. The issue arising in Ground No.5, raised in assessee's appeal, pertains to the addition under section 40(a)(i) of the Act on account of non-deduction of taxes on the trade discount given to prepaid distributors. 20. The brief facts of the case pertaining to this issue, as eman....
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....ile deciding a similar issue in case of Bharti Cellular Ltd. vs. ACIT, reported in (2024) 462 ITR 247 (SC), held that the cellular mobile service provider is not under a legal obligation to deduct tax at source on the income/profit component in the payment received by the distributors/franchisees from the 3rd party customers, or while selling or transferring the prepaid coupons or starter kits to the distributors and thus section 194H is not applicable on trade discounts given to prepaid distributors. We find that similar findings have also been rendered recently by the Co-ordinate Bench of the Tribunal in Vodafone Digilink Ltd. (supra), vide order dated 14.10.2024. Therefore, respectfully following the decisions cited supra, the disallowance on account of the trade discount given to the prepaid distributors under section 40(a)(ia) is deleted. Accordingly, Ground No.5 raised in assessee's appeal is allowed. 22. The issue arising in Ground No.6, raised in assessee's appeal, pertains to the non-allowance of deduction under section 80IA of the Act in respect of Service From India Scheme ("SFIS") income received by the assessee. 23. The brief facts of the case pertaining to this ....
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....tion under section 80IA of the Act, is not applicable in the case of a telecommunication service provider. 25. In order to examine the submissions of the learned AR, it is pertinent to note the relevant provisions of the Act. Section 80IA(4) deals with the nature of undertakings to which the provisions of section 80IA of the Act are applicable. As per section 80IA(4)(ii) of the Act, an undertaking which provides telecommunication services, whether basic or cellular, is one such undertaking to which the provisions of section 80IA of the Act are applicable. In the present case, it is undisputed that the assessee is a cellular mobile telephony service provider in the State of Gujarat. Further, section 80IA(2A) of the Act reads as follows: - "(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub-section (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, thirty per ce....
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....tion 80IA(2A) is concerned. "13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, it wanted to curtail the time line during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/enterprise who fall under sub-section (2A) to claim 100% deduction of profits and gains of eligible business for the first five years and upto 30% for the remaining five years in the ten consecutive assessment years out of the fifteen years starting from the time the enterprise started its operation. The legislature having ousted applicability of subsection (1) and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be "derived from". The requirements of the first degree nexus of the pr....
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....on 14A of the Act, this issue raised by the assessee as part of Ground No.6 has become academic and therefore, is left open. 29. The issue arising in Ground No.7 raised in assessee's appeal pertains to addition of disallowance made under section 14A of the Act read with Rule 8D of the Rules while computing the book profit under section 115-JB of the Act. 30. Having considered the submissions of both sides and perused the material available on record, we find that the Special Bench of the Tribunal in ACIT vs. Vireet Investments Pvt. Ltd., reported in (2017) 58 ITR (T) 313 (Delhi Trib.) (SB) held that the computation under clause (f) of Explanation - 1 to section 115-JB(2) of the Act is to be made without resorting to the computation as contemplated under section 14A of the Act read with Rule 8D of the Rules. Thus, respectfully following the aforesaid decision of the Special Bench of the Tribunal, we direct the AO to compute the book profit under section 115-JB of the Act, without resorting, the disallowance made under section 14A of the Act read with Rule 8D of the Rules. As a result, Ground No.7 raised in assessee's appeal is allowed. 31. Ground No.8 raised in assessee's a....
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.... erred in law and on facts in deleting the disallowance of Rs. 85,37,97,840/-made on account of Royalty to WPC (Wireless planning commission)." 12). "The DRP, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 8,84,47,780/- made u/s.36(1)(iii) of the Act on account of capitalization of interest expenses relating to Capital WIP." 13). "The DRP, Ahmedabad has erred in law and on facts in deleting the addition made on account of Arm's Length Price of international transaction as under:" 13a). "The DRP, Ahmedabad has erred in law and on facts in deleting the adjustment made in respect of the determination of ALP for royalty payments for use of brands "Essar" & "Vodafone". 13b). "The DRP, Ahmedabad has erred in law and on facts in accepting TNMM as the most appropriate method with the comparison being carried out at entity level, in alternative analysis". 13c). "The DRP, Ahmedabad has erred in law by incorrect application of TNMM for benchmarking royalty payments". 13d). "The DRP, Ahmedabad has grossly erred in law in violating the principles of natural justice by accepting the comparability analysis of t....
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....IT Vs. DS Promoters & Developers Pvt. Ltd., 25 DTR (Del) 8, Arihant Builders Developers & Investors (P.) Ltd v. ITAT [2005] 277 ITR 239 (MP), Asstt. CIT v. Gendalal Hazarilal & Co. [2003] 263 ITR 679 (MP), CIT v. Neo Poly Pack (P.) Ltd [2000] 245 ITR 492 (Delhi),. Dhansiram Agarwalla v. CIT [1996] 217 ITR 4 (Gauhati), CIT v. Shiv Sagar Estate [2002] 257 ITR 59 (SC) and Union of India v. Satish Pannalal Shah [2001] 249 ITR 221 (SC). In our opinion, there was no good and justifiable cause to take a different view and conclude in the assessment proceedings for the year under consideration that the AY 1996-97 was the first year when the assessee started providing telecommunication services, without there being any change in the factual position and when the earlier decision was not challenged by the Department. As pointed out in the Director's report for the AY 1997-98 and the relevant accounts for that year, the assessee started providing telecommunication services only in the period relevant to the AY 1997-98. The evidence brought to our notice by the Id. AR on behalf of the assessee and uncontroverted by the Revenue unmistakeably points out that the assessee started providing te....
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.... We are of the opinion that such an restrictive interpretation does not emerge from the amended provisions. The Id. CIT(A) was also not justified in concluding that the assessee having exercised option in the period relevant to the AY 1997-98[even though there was no such provision of exercising option and the assessee could not claim any such deduction in view of loss], provisions of sec. 80IA of the Act substituted from the AY 2002-03 would not apply" 39. We find that similar findings were rendered by the Co-ordinate Bench of the Tribunal for the assessment year 2009-10, and a similar ground raised by the Revenue was dismissed. Since the learned DRP following the decision of the Co-ordinate Bench of the Tribunal in assessee's own case in preceding years has directed the AO to apply the amended provisions of section 80IA of the Act, applicable from the assessment year 2000-01, and accordingly, allowed deduction @ 100% of the profits of the current year to the assessee, respectfully following the decisions cited supra, we do not find any infirmity in the same. Accordingly, Ground no.2 raised in Revenue's appeal is dismissed. 40. The issue arising in Ground no.3, raised in Rev....
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....-statement of transactions on revenue account as per the method of accounting laid down by the mandatory Accounting Standard 11 ('AS-11) issued under the Companies Act, 1956, As the said foreign exchange gain is directly related to the telecommunication business undertaken by the assessee, the same would qualify as income from telecommunication business. Further, Hon'ble Bombay High Court in case of CIT v Syntel Limited(2010-TIOL-76-HC-Mum- IT) has also heldat the foreign exchange income is eligible for deduction under section 80IA of the Act. Relevant observations of Hon'ble Bombay High Court are as under. "5. Having heard both sides, factual matrix reveal that the respondent has received sale consideration in Dollars, which it were to receive on the date of sale. In terms of Dollars, the receipt is same. But on account of fluctuation in conversion rate it has received mote in terms of rupee. In the submission of the assessee the exchange fluctuation giving benefits cannot be within the teeth of the law laid down by the Apex Court in the case of M/s Liberty India Ltd. (cited supra). 6. Apart from the above, the appeal preferred by the Revenue for the ....
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....appeal before us. 43. We find that the Co-ordinate Bench of the Tribunal in the assessee's own case for the assessment year 2009-10 cited supra, decided a similar issue in favour of the assessee, following the decision of the Hon'ble Gujarat High Court in CIT Vs. Deversons Industries Ltd. reported in (2015) 55 taxmann.com 189 (Guj.), and held that foreign exchange gain is eligible for deduction under section 80IA of the Act. Therefore, having considered the submissions of both sides and perused the material available on record, as the findings of the learned DRP are based on the decisions of the Hon'ble Jurisdictional High Court, respectfully following the said decisions, we do not find any infirmity in the same. Accordingly, the Ground no. 3 raised in Revenue's appeal is dismissed. 44. The issue arising in Ground No.4, raised in Revenue's appeal, pertains to the deletion of the disallowance of deduction under section 80IA of the Act on cell site sharing revenue and IRU revenue received by the assessee. 45. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee received Rs. 6.1 million for ....
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.... Assessing Officer's main reason for disallowing the corresponding claim was that neither the assessee is engaged in the business of leasing of assets nor sharing of cell sites. He held that the above incomes could not be treated to have been derived from an eligible undertaking u/s.80IA in other words. Shri Soparkar places on record Hon'ble Delhi high court's decision in a batch of cases ITA Nos.476-490/2016 PCIT vs. BSNL decided on 01.08.2016 upholding this tribunal's Delhi bench's order concluding that the above 'derived from' criteria does not apply in case of an undertaking providing telecommunication services in view of the fact that Section 80IA(2A) starts with a non obstante clause treating the same as a separate species. His further case is that this tribunal's order in assessee's case for A.Y. 2006-07 (supra) also adjudicates the very issue in its favour. The Revenue fails to controvert both these legal developments. We thus find no merit in this substantive ground. It is accordingly rejected." 48. We find that similar findings were rendered by the Co-ordinate Bench of the Tribunal in the case of assessee's sister concern in Vodafone....
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....ring of property retaining the character of 'Income from house property'. It is, therefore, directed to be considered as eligible for deduction u/s. 80IA of the Act." In view of the above decision of the Co-ordinate Bench of the Tribunal, exclusion of cell site sharing revenue of INR.0.81 Crores from the business income while computing deduction under Section 80IA of the Act cannot be sustained. Therefore, the Assessing Officer is directed to grant benefit of Section 80IA of the Act in respect of Cell site Sharing Revenue of INR.0.81 Crores." 49. During the hearing, the Revenue could not bring any material on record to deviate from the findings rendered by the Tribunal in the aforesaid decisions. Accordingly, respectfully following the decisions cited supra, we do not find any infirmity in the impugned final assessment order on this issue. As a result, the same is upheld, and Ground No.4 raised in Revenue's appeal is dismissed. 50. The issue arising in Ground No.5, raised in Revenue's appeal, pertains to the allowance of deduction under section 80IA of the Act on bad debts written back. 51. The brief facts of the case pertaining to this issue, as emanating....
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....ument is that the same amounts to double deduction. We find from the case file that assessee's stand before the Assessing Officer was that these bad debts written back are in respect of cellular services only as allowed in earlier years thereby reducing the corresponding Section 80IA deduction claim. It emphasize that these sums are now taxable in the impugned assessment year u/s.41(1) of the Act are to be characterized as business income only. It quoted this tribunal's order in Radha Madhav Industries case ITA No.1935/Ahd/2007 holding identical profits u/s.41(1) as to has been derived from the eligible undertaking. The Assessing Officer opined that such a course of action would amount to double deduction as the very sum stood accepted as bad debts in earlier years and now these figures are sought to be included in Section 80IA deduction claim. 13. We come to DRP's findings now. Ld. Panel negates this double deduction reason after holding that assessee's bad debts claim in earlier assessment years would have reduced its eligible deduction therein. It further places reliance on the above Radha Madhav's case law (supra) to accept assessee's contention....
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....he provisions of section 80IA(2A) and section 80IA(1) directed the AO to grant the benefit under section 80IA of the Act in respect of other income. The Revenue could not bring any material to deviate from the decision so rendered by the Tribunal on this issue. Accordingly, respectfully following the decision cited supra, we do not find any infirmity in the impugned order on this issue. As a result, the same is upheld, and Ground No.6 raised in Revenue's appeal is dismissed. 58. Grounds Nos. 7 and 8, raised in Revenue's appeal, pertain to the allowability of deduction under section 80IA of the Act on roaming charges and discount offered to prepaid distributors, which was disallowed under section 40(a)(ia) of the Act. Since the disallowance on this issue has already been deleted in assessee's appeal, being ITA No.671/Ahd/2015, these grounds raised by the Revenue have become academic, and therefore, are dismissed. 59. The issue arising in Ground No.9, raised in Revenue's appeal, pertains to the deletion of the addition on account of receipts from prepaid services. 60. The brief facts of the case, pertaining to this issue, as emanating from the record are: During the year und....
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.... directed to be deleted. In conformity, the AO, inter alia, passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 63. Having considered the submissions of both sides and perused the material available on record, we find that similar issue came up for consideration before the Co-ordinate Bench of the Tribunal in ACIT vs. Shyam Telelinks Ltd., reported in (2013) 31 taxmann.com 239 (Del-Trib.), wherein the Co-ordinate Bench agreed with the similar mode of revenue recognition by the taxpayer. The Co-ordinate Bench of the Tribunal further directed the AO to verify whether, in the subsequent year, the taxpayer has declared the revenue in respect of expired prepaid cards, and in case no discrepancy is found in this regard, the Co-ordinate Bench directed that no adjustment is called for with the assessee's mode of revenue recognition. The relevant findings of the Co-ordinate Bench, in the aforesaid decision, are reproduced as follows: - "16. In the present case, the main dispute is regarding revenue recognition relating to unused talk time remaining available as at the end of the year. As noted earlier, there is no "dispute that compa....
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....enue recognition by the assessee. However, in order to avoid the likelihood of revenue leakage, we restore this issue to the file of the AO for limited verification whether the unutilized talk time has been accounted for and included in the receipt of the year in which the validity of the recharge has expired. We further direct that in case no discrepancy is found in this regard, no adjustment is called for with the assessee's mode of revenue recognition. Accordingly, the impugned order on this issue is set aside, and Ground No.9 raised in Revenue's Appeal is allowed for statistical purposes. 66. The issue arising in Ground No.10, raised in Revenue's appeal, pertains to the deletion of the disallowance made on account of license fees paid by the assessee to the Department of Telecommunication ("DoT"). 67. The brief facts of the case pertaining to this issue, as emanating from the record are: During the year under consideration, the assessee claimed license fees amounting to Rs. 197,12,50,422/- paid to DoT as deduction under section 37(1) of the Act. Further, an amount of Rs. 25,26,41,322/- in respect of earlier years payment was claimed under section 35ABB of the Act. As per ....
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.... 69. The learned DRP, vide its direction, following the decision of the Co- ordinate Bench of the Tribunal in assessee's own case for the assessment year 2006-07, held that the license fees paid by the assessee on a revenue sharing basis are allowable as revenue expenditure deductible under section 37(1) of the Act. Accordingly, the learned DRP directed the AO to delete the proposed addition of license fees paid on a revenue-sharing basis. In conformity, the AO, inter alia, passed the final assessment order on this issue. Being aggrieved, Revenue is in appeal before us. 70. Having considered the submissions of both sides and perused the material available on record, we find that the Co-ordinate Bench of the Tribunal in case of the assessee's sister concern in Vodafone Digilink Limited (supra) vide order dated 14.10.2025, after considering the decision of the Hon'ble Supreme Court in CIT vs. Bharati Hexacom Ltd., reported in (2023) 155 taxmann.com 322 (SC) observed as follows: - "12.1 Ground No.2 raised by the Assessee pertains to disallowance of license fees amounting to INR.1,40,20,51,723/- claimed as deduction under Section 37(1) of the Act. Both sides agreed that ....
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.... Hon'ble Supreme Court. Accordingly, we direct the Assessing Officer to verifying the working furnished by the Assessee and compute the quantum of disallowance as per the judgment of the Hon'ble Supreme Court in the case of Bharti Hexacom Ltd. (Supra). Accordingly, in terms of aforesaid, Ground No.2 raised by the Assessee is partly allowed." 71. During the hearing, the learned AR has filed the working of disallowance to an extent of Rs. 107,80,87,620/- in line with the decision of the Hon'ble Supreme Court in Bharati Hexacom Ltd. (supra). Therefore, respectfully following the decision of the Co-ordinate Bench of the Tribunal cited supra, we direct the AO to verify the working of the disallowance furnished by the assessee and compute the quantum of disallowance as per the decision of the Hon'ble Supreme Court in Bharati Hexacom Ltd. (supra). Accordingly, the impugned order on this issue is set aside, and Ground No.10 raised in Revenue's appeal is partly allowed. 72. The issue arising in Ground No.11, raised in Revenue's appeal, pertains to the deletion of the disallowance made on account of royalty paid to Wireless Planning Commissioner ("WPC"). 73. The brief facts ....
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....s also relied on the order of DRP for A.Y. 2009-10. However, the said order of DRP has also been not accepted by the Department and further appeal has been recommended. 13.6 In view of the above discussion the claim of the assessee of treating the royalty/license fees paid to WPC during the year as a revenue expenditure is disallowed and after appropriate deduction u/s.35ABB the remaining portion is added back to the total income according to the following calculation; Current previous year 2009-10 Previous year up to which license granted 2016-17 Therefore denominator as per section 35ABB 8 years Therefore deduction allowable at appropriate Fraction [Rs. 97,57,68,959/08] = Rs. 12,19,71,120/- 13.7 Accordingly the total disallowance works out to Rs 85,37,97,840/- (97,57,68,959 - 12,19,71,120). In view of the above, an amount of Rs. 85,37,97,840/- is disallowed and added to the income of the assessee." 74. The DRP, vide its direction, following the decision of the Hon'ble Delhi High Court in assessee's own case in CIT vs. Fascel Ltd., reported in (2009) 221 CTR 305 (Del), held that the payment of fees of WPC is deductible as revenue expend....
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.... 2009-10 cited supra upheld the similar findings of the learned DRP on this issue, and observed as follows: - "28. Heard both sides. The Revenue strongly contends that the Assessing Officer had rightly invoked the impugned disallowance in the above draft assessment by quoting Section 43(1) explanation 8 of the Act. It however fails to dispute that hon'ble apex court decision in Core Healthcare case (supra) categorically holds that the said explanation does not apply in case of 36(1)(iii) deduction. The assessee at this stage states to have incurred the impugned interest expenditure in respect of various external corporate borrowings obtained for acquisition of capital assets for continuing its existing telecom business only and not for extension thereof. Its further case is that the interest in question paid on borrowed funds for acquisition of a capital asset is allowable even for a period to dated of its being put to use. As per hon'ble apex court's decision hereinabove holding that there is no distinction u/s.36(1)(iii) between interest incurred on capital borrowed for revenue or capital purposes provided the same is used for business purposes irrespective o....
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....As the international transaction with regard to payment of royalty by the assessee to VIML and RGL was inextricably linked to the assessee's business, alternatively, the assessee benchmarked the aforesaid international transaction with other international transactions relating to roaming service and software development service undertaken by the assessee by adopting Transactional Net Margin Method ("TNMM") as the secondary method for the purpose of benchmarking. 82. Pursuant to the reference by the AO under section 92CA(1) of the Act, the Transfer Pricing Officer ("TPO"), vide order dated 28.01.2014, passed under section 92CA(3) of the Act, rejected the comparable instances chosen by the assessee by adopting CUP as the most appropriate method. As regards the royalty paid to RGL for the use of the brand name "Essar", the TPO held that not even a single document was produced by the assessee to show the benefit received by it on account of payment of the trademark royalty. The TPO further held that in the geographical region of Gujarat, the brand "Essar" is not associated with telecommunication services from the perspective of a common layman. The TPO held that the brand "Essar" is....
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.... Gujarat region, its brand name did not have any value in the telecommunication business. We are of the view: that value of brand cannot be determined merely on the basis that brand has a presence in a particular business or territory or not. "Essar" brand is globally renowned and the group has a significant presence in the state of Gujarat. Essar Group is a global player in communication sector with presence across multiple countries, namely India, Kenya, Uganda, Congo, etc. Additionally Essar Group is a leading Indian multinational group with business interests in various sectors including telecom, steel, oil and gas, power, business process outsourcing, shipping, ports and logistics, projects, minerals, etc., and significant presence in the state of Gujarat. In times of consumerism, one of the key success factors in the telecommunication business is the use of recognized brand which helps customers identify themselves with the brand. Further, it also communicates assurance of quality and value of services provided to the customers. Also, in telecom industry, several telecom service providers like Bharti Airtel, Idea, Reliance Communication, Tata Teleservices, etc., are marketing....
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....how that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the Assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred "wholly and exclusively" for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OBCD guidelines, in the paragraphs which we have quoted above. 16.2.3 Based on above case laws of Hon'ble Delhi High Court and Hon'ble" Mumbai ITAT, we are of the view that action of TPO in treating value of "Essar" brand as NIL was not correct. 16.2.4 The Hon'ble DRP in its order for AY 2009-10 has given relief to the assessee on this issue. The finding of DRP is contained in para 16.10 of the order which is as below : "Hence, based on the above observations and judicial precedents, we are of the view that the royalty payment made by the assessee for the use of "Vodafone" brand name and "Essar' brand name at the rate of 0.30%....
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.... say, since the transfer pricing officer in the instant case has proceeded to propose the impugned upward adjustment on the basis of related party transactions after adopting CUP method instead of TNMM hereinabove, we find that a co-ordinate bench of this tribunal in ACIT vs. Bilag Industries Pvt. Ltd. ITA No. 1441 & 1670/Ahd/2006 and 343/Ahd/2012 quotes a catena of case law to disagree with such an approach as follows: "28. We have heard both the sides. Learned representatives reiterate their respective pleadings in support of and against the impugned transfer pricing There is hardly and dispute that the assessee agreed to supply Deltametrin and its intermediate chemical solutions to the above stated associate enterprise or its designee. This lis however is confined to arms' length price determination of 18 tones supplied to the foreign entity. The assessee charges @ US $ 126.2 per kg by following cost + 55% markup. Its agreement quoted Deltametrin price to be @ 161.20 US $ per kg. The assessee also admitted the latter rate to be at arms length price as already indicated in page 292 of the paper book. This made the TPO to inter alia to reject assessee's other contenti....
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....e instant adjudication. We find it a fit case to repeat that assessee had employed TNMM method for charging @ cost + 55% markup i.e. an indirect method for declaring its ALP. The TPO adopted its direct sale price @ 161.2 US $ per kg for making the impugned upward adjustment. We do not find a single observation even in his order rejecting assessee's TNMM method before adopting the agreement price in question under the CUP method. 31. We stay back on Rule 10B(1)(a) at this stage. It is evident that this clause prescribes CUP methods application to determine controlled price of an international transaction by the price charged or paid for property transfer or services provided in a comparable uncontrolled transaction; or a number of transaction, as identified. The same forms a price charged or paid in relation to property or services as the basis of ALP transaction. We referred to the above stated rule 10A(a) to observe here that the expression 'comparable un-controlled transaction' signifies a transaction between enterprises other than associate ones; whether resident or non-resident. It has already come on record that the TPO in the instant case relied upon asse....