TaxTMI 
TaxTMI 
2026 (5) TMI 308
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....e same are heard together and being disposed off by this common order. First We take up assessee's appeal being ITA No.962/Del/2016 for AY 2011-12. 3. Ground No.1 is general in nature, hence not adjudicated. 4. Grounds No.2 to 4.1 is regarding disallowance under section 40(a)(ia) of the Act on account of discount given to distributors/franchises. In this regard, ld. AR of the assessee submitted that this issue is covered by the decisions of ITAT in case of assessee for AYs 2007-08 to 2009-10 in favour of the assessee. Further the appeals filed by the Revenue in AYs 2007-08 and 2009-10 before the Hon'ble Delhi High Court are decided against the Revenue and the Hon'ble High Court upheld the orders of the ITAT and also against the orders of Hon'ble Delhi High Court, no appeals are filed by the Revenue before the Hon'ble Apex Court. Accordingly, he pleaded that these grounds be allowed. 5. On the other hand, ld. DR of the Revenue did not dispute aforesaid submissions. 6. Considered the rival submissions and material placed on record. Since the issue is already decided in favour of the assessee in earlier assessment years, respectfully following the precedents, we allow abov....
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.... commencement of the business to operate telecommunication services or thereafter at any time during any previous year and for which payment has actually been made to obtain a licence, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure." (Emphasis supplied) 16. As evident from above, following conditions are required to be satisfied to claim deduction under section 35ABB of the Act: a. Expenditure incurred should be capital in nature; and b. Expenditure should have been incurred to acquire a right to operate telecommunication services. 17. It is also submitted that a telecom license (National Long Distance/ International Long Distance/ Unified Access License, etc) is required to be obtained as pre-requisite to render services as a telecom operator. The telecom license enables the telecom operator to provide telecom services in India. Once the telecom license has been obtained, the telecom operator is required to bid for relevant spectrum used for rendering telecom services. The spectrum bidding is ....
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....al relying upon the Hon'ble ITAT Mumbai judgement in the case of Idea Cellular Limited Versus Principal Commissioner of Income Tax-14, Mumbai, ITA No. 360/Mum/2016 (CLC Pg. no. 312-324),held that depreciation should be allowed on the spectrum charges. Relevant findings of the Hon'ble ITAT Delhi are reproduced below- "43. Heard both the parties and perused the material available on record. From the perusal of order of Ld. CIT(A), it is seen that the Ld. CIT(A) allowed the depreciation on 3G Spectrum license fee by relying upon the judgment of Hon'ble Co-ordinate Bench of Mumbai Tribunal in the case of Idea Cellular Ltd. vs. PCIT (supra) which order is followed by the Co-ordinate Bench of Mumbai ITAT in assessee's group company case of TTML (supra). Admittedly there is no change in the facts and circumstances and the allegation of the AO while making disallowance of deprecation claimed by the assessee. The Ld. CIT while allowing the deprecation has made the following observations in para 8.2 of its order: 44. Before us, Revenue has miserably failed to bring any material to convert the findings of Ld. CIT(A) who followed the order of Co- ordinate Mumbai Bench....
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.... Ltd. and Mafatlal Industries P. Ltd., 2013 (10) TMI 324 - Supreme Court (LB), dated October 8, 2013, wherein Hon'ble Apex Court held that if there is no loss of tax to Revenue then there is no need for the Revenue to continue with litigation when it was quite clear that not only it will be fruitless but also that it may not have added anything much to the public coffers. 28. Further, reliance is placed upon Hon'ble Delhi High Court judgement in the case of Eicher Motors Ltd. Versus Commissioner of Income-Tax-III, 2017 (9) TMI 1043 - DELHI HIGH COURT, Dated:- September 15, 2017, wherein Hon'ble High Court while considering the question that whether a particular expense is allowable as revenue or capital expenditure, set aside the order of ITAT wherein the issue was remanded back to AO for determining the nature of expenditure and held that if expense is allowable either Revenue or Capital, then in remanding the matter to AO is a fruitless exercise. 29. The case of assessee company is on much better footing, as there is no dispute about the nature of expenditure and the only point of contention is whether to allow amortization u/s35ABB of the Act or depreciation u/s. 32 of the....
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..... CIT(A). From the record, we observed that in the annual report for the FY 2010-11 published by the assessee and specifically in the Director's Report, assessee has submitted a physical performance of various services as under:- S. No. Parameter 2010-11 Status as on 31.03.2010 Target Achievement Status as on 31.3.2011 1 Fixed connections Land Line 278.31 -27 -26.06 252.25 WLL 61.45 15 -5.79 55.65 Total - Fixed Connections 339.75 -12 -31.85 307.90 2 Broadband Wireline DSL 53.76 30 21.15 74.91 FTTH 0.00 5 0.01 0.01 Total - Wireline 53.76 35.00 21.16 74.92 Wireless 3G 11.20 35 13.40 24.60 WiMAX 0.01 3.5 0.09 0.10 EvDO 0.96 1.5 0.20 1.16 Total - Wireless 12.16 40.00 13.70 25.87 &nbs....
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....ounds no.9 & 10 raised by the assessee. 35. Ground No.11 is with regard to Enhancement of Rs. 157 crores made by CIT(A).In this regard, it is submitted that by virtue of the payment of one- time 3G and BWA Spectrum Charges, assessee company has obtained a Spectrum license for 20 years and assessee company has amortized Rs. 925.01 crores, being 1/20th of total spectrum charges of INR 18,500.38 crores paid during AY 2011-12, u/s. 35ABB of the Act. This sum of INR 18,500.38 crores has been capitalized in the books of accounts as Entry License Fee. 36. Apart from the above, assessee company also paid fees to DoT on year-to- year basis which is debited to P&L. The same is amounted to INR 1971.72 Crores in the subject FY. 37. The AO has limited the disallowance to spectrum fee of INR 925 crores which is the sum that has been claimed by the assessee company on amortization basis. 38. However, when the issue of disallowance u/s. 35ABB travelled to Ld. CIT(A), he wrongly assumed that INR 925.01 crores disallowance was made by Ld. AO out of the expenditure of INR 1971.72 crores and this fact is evident from para 7.3.5 of Page 45, of the CIT(A) order. 39. Thereafter, Ld. CIT(A)....
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....scientific method adopted by the assessee and therefore in view of these facts and in the absence of such details, the claim of the assessee that the entire amount should be allowed as deduction cannot be accepted. He further held that the assessee company does not have specific details by which deviation of estimated license fee in respect of NLD could be determined with reference to the actual amount of license fee available and that it is not possible to determine the NLD revenues earned during the year, which forms part of the AGR. He restricted the disallowance to 15% of the total amount claimed under this head on adhoc basis. On the alternative ground of disallowance made by the AO u/s. 43B of the Act, he followed the decision of Hon'ble Calcutta High Court in the case of CIT vs. Vares International Pvt. Ltd. 225 ITR 831 and held that, the license fee in question cannot be treated as tax, duty, cess or fees as has been envisaged u/s. 43B of the Act and hence a disallowance cannot be made under this Section. Aggrieved with this order both the assessee as well as the Revenue have filed appeals. 4.4. After hearing rival contentions, we find that the issue in question is....
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....stained by the First Appellate Authority. In the result, consistent with the view taken on the issue of allowability of license fee and spectrum charges, we allow the ground of the assessee and dismiss the ground of revenue" (Emphasis supplied) 41. In view of the above-mentioned submissions and judicial pronouncement in assessee's own case, ld. AR pleaded that the enhancement by way of disallowance of 15% amounting to Rs. 157 crores, ought to be deleted. 42. On the other hand, ld. DR of the Revenue relied heavily on the detailed findings of Ld CIT(A) and submitted that the Ld CIT(A) had rightly enhanced the same. 43. Considered the rival submissions and material placed on record. With regard to ground no.11, we observed that ld. CIT (A) has enhanced the addition of Rs. 157 crores for the reason that assessee has claimed Rs. 925.01 crores u/s. 35ABB on account of amortization of payments made for obtaining BWA Spectrum and 3G spectrum. He observed that assessee has made the payment as one time charge towards the 3G and BWA spectrum. The abovementioned payment made to Government of India during the current FY under consideration for a period of 20 years from the date of w....
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....t cannot be allowed in view of S.43B of the Act, for the reason that, the amount of INR1,332.05 crores was paid after the due date of filing of the return and as a difference of INR85.05 crores remained unpaid. 4.3. On appeal the First Appellate Authority held that as far as spectrum charges and national long distance license fee are concerned, there is a categorical qualification made by the auditors of the assessee company in their audited report, that the amount in question was not in line with the agreement and that the effect there of could not be determined and that such claim was made merely based on estimates without any specific scientific method adopted by the assessee and therefore in view of these facts and in the absence of such details, the claim of the assessee that the entire amount should be allowed as deduction cannot be accepted. He further held that the assessee company does not have specific details by which deviation of estimated license fee in respect of NLD could be determined with reference to the actual amount of license fee available and that it is not possible to determine the NLD revenues earned during the year, which forms part of the AGR. He ....
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....TR 831. The 'license fees' being a charge received by the government for parting with rights, is neither a tax, nor a duty, nor a fee, nor a cess within the meaning of S.43B of the Act. Hence this Sec.43B cannot be applied. 4.8. In view of the above discussion, we allow the appeal of the assessee and dismiss the appeal of the Revenue on this issue. As we have held so, the alternative contentions raised by the assessee need not be adjudicated as it would be an academic exercise. ................ 5.2. In view of our finding that the license fee and spectrum charges have to be allowed in full, we delete this adjustment made to the book profit u/s. 115 JB of the Act to the extent sustained by the First Appellate Authority. In the result, consistent with the view taken on the issue of allowability of license fee and spectrum charges, we allow the ground of the assessee and dismiss the ground of revenue" 44. Respectfully following the above, we are inclined to delete the additions made by the ld. CIT (A) and accordingly allow ground no.11 raised by the assessee. 45. Grounds No.12 to 15 are against the addition of Rs. 983.47 crores u/s. 43B as well as u/s.....
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....ed only status report vide email dated 28.01.2026 and submitted that ld. CIT(A) confirmed the addition made by the AO and relied on the orders of the authorities below. 55. Considered the rival submissions and material placed on record. We observed that the assessee had declared in its balance sheet that it has outstanding loan of Rs. 983.18 crores to GOI as on 31.03.2011. The same was treated as due payable under the category of statutory payment u/s. 43B of the Act. On the contrary, we observed that the same is outstanding principal amount to GOI. Therefore, the above said outstanding is not related to any category mentioned say clause 'd' or 'e' u/s. 43B of the Act. Moreover, it is relating to interest portion and there is no requirement in the above section to settle the outstanding principal amount due to GOI. Therefore, the addition proposed by the lower authorities are deserved to be deleted. In the result, grounds raised by the assessee are allowed. 56. Ground No.16 is against the addition of Rs. 40.27 crores on account of difference between general ledger and store ledger for inventory. 57. At the outset, ld. AR of the assessee submitted that it is relevant to men....
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....the case of Lalchand Bhagat Ambica Ram Versus Commissioner of Income- Tax, Bihar and Orissa, 1959 (5) TMI 12 - Supreme Court, Dated: - May 14, 1959. 63. Furthermore, Ld. CIT(A) has failed to bring on record any evidence that would support his allegation that certain purchases made by assessee company has not been recorded in the financial statement and therefore, addition made by Ld. AO and confirmed by Ld. CIT(A), should be deleted. 64. On the other hand, ld. DR of the Revenue relied on the orders of the authorities below. 65. Considered the rival submissions and material placed on record. We observed that there was difference observed between General Ledger and Stores Ledger for inventory. It is brought to our notice that assessee has 47 circles and 700 stores and it maintains record of its inventory at store level as well as general level. We noticed that there is a time gap in reporting the inventory movements on real time basis. It is fact on record that there may be difference of stock between Stocks Ledger and General Ledger maintained by the assessee. The difference observed is of Rs. 40.27 crores for the simple reason that the amount reported in the general store ....
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....le) raises a corresponding Advice of Credit ('ATC') upon the former Circle (i.e., West Bengal Circle). 69. The above-mentioned exercise of raising ATC may not be completed with respect to many items in transit on or before 31 March of the year. However, for control purposes, ATD shall continue to reflect as pending between the Circles, representing an item 'In Transit' between the two Circles. The said exercise is an ongoing process and balance, if any, lies in the balance sheet, reflecting as Inter/Intra Circle Remittance Balance, on which the liability is yet to be recorded. 70. It is also submitted that amount of Rs. 1527.40 crores for AY 2011-12, primarily reflects the abovementioned value of assets which are in transit between the Circles and have not been accepted, verified and recorded by the receiving Circles. 71. The accounting entry recorded at the time of recording the asset acquired by the transferring Circle (i.e., West Bengal Circle) and subsequent transfer of the said asset to the receiving circle (i.e., Odisha Circle) is as follows: At the time of purchase/ acquisition of asset by West Bengal Circle (say on 1 April 2010): Fixed Assets (West ....
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.... and if there is any pilferage in movement of stock, they have to report the same as part of statutory reporting. We observed that assessee has never claimed the same as an expenditure and in this regard, we observed that assessee also filed a certificate which is placed at pages 146E and 146F of the paper book. A certificate from the management which is placed at pages 146E & F of the paper book clearly indicates that it is only movement of assets between the circles. It cannot be treated as neither loss or profit. We noticed that tax authorities have added the same as addition to the income of the assessee which is uncalled for. Accordingly, ground no.17 raised by the assessee is allowed. 78. Ground No.18 is with regarding to penalty proceedings u/s. 271(1)(c) of the Act, which is premature. 79. In the result, the assessee's appeal being ITA No.962/Del/2016 for AY 2011-12 is allowed as per above terms. 80. Now we take up assessee's appeal being ITA No.1772/Del/2018 for the AY 2013-14. 81. Grounds No.1 & 1.1 is against the addition of Rs. 926,27,00,000 on account of amortisation of amount paid for 3G and BWA spectrum. 82. We observed that these grounds are similar t....
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.... referred as Ld. CIT(A)]. 5. The Ld. CIT(A) accepted the assessee's contention that the Ld. AO should not have made the addition on the basis of mere extrapolation. Ld. CIT(A) set aside the assessment qua this issue and. remanded the matter to the Ld. AO with direction to furnish the necessary details to the assessee, provide adequate opportunity of being heard, verify the assessee's claim, and grant requisite relief. This is evident from Page 25, para 8.1 of the Ld. CIT(A)'s order dated 11 January 2018, under section ('u/s') 250 of the Income Tax Act ('the Act') On merits, it is submitted that delayed withholding of tax by a customer out of income accounted for on accrual basis, resulting in credit reflecting in Form 26AS subsequently, cannot lead to addition of income already accrued and offered to tax. 7. That apart, thereafter, it is respectfully submitted that, as on date, the Ld. AO has not yet passed an order to give effect to the directions contained in the order of Ld. CIT(A) passed u/s'250 of the Act and thereby resulting in order being barred by period of limitation. 8. In this regard, it is submitted that section 153(6) of the Act spe....
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....Ld CIT(A) had remitted the matter to the AO to allow the claim of the assessee after due verification, there is no prejudice caused to the assessee, therefore, we are inclined to direct the AO also to verify the claim of the assessee and allow the claim as per law. In the result, the ground raised by the assessee is allowed for statistical purpose. 91. Ground No.3 is with regarding to penalty proceedings u/s. 271(1)(c) of the Act, which is premature. 92. In the result, the assessee's appeal being ITA No.1772/Del/2018 for AY 2013-14 is allowed as per above terms. 93. We now proceed with Revenue's appeal being ITA No.961/Del/2018 for AY 2011-12 and cross objections filed by the assessee in AY 2011-12. 94. Ground No.1 is against the disallowance of depreciation of Rs. 216 crores by treating borrowing of Rs. 720 Crores received from Government of India as Capital Subsidy. The assessee also filed cross objection vide Ground No.1 against Ground No.1 of Revenue's appeal. 95. At the time of hearing, ld. DR of the Revenue submitted/brought to our notice findings of AO and pleaded to uphold the same. 96. On the other hand, ld. AR of the assessee submitted that the AO while ....
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....O while passing the assessment order for the subject AY has alleged that the loan of Rs. 720 crores received by assessee company from GOI for Village Public Telephones Program ('VPT') program, is a capital subsidy and the same should be reduced from the cost of assets and hence disallowed 30% of such loan amount by claiming it to be excess depreciation claimed by assessee company. We further observed that the above-mentioned loan from Government of India was received during FY 2002-03 as a budgetary support for VPT program of assessee company, which was intended to provide telephone connectivity services to all panchayats of India. And the said amount was alleged as a revenue receipt by the Ld. AO's predecessors in the assessment proceedings concluded for AY 2003-04 on the reasoning that the same is a loan in perpetuity i.e., grant in aid for the purposes of providing telephone service in village areas and that the said subsidy received in revenue in nature. We further observed that the said addition was also affirmed by Ld. CIT(A) in the order passed for AY 2003-04 and in appeal before ITAT, the same is also dismissed and the assessee filed an appeal before Hon'ble Delhi High Cour....
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....arks Source 1 Amount recoverable from DOT on Current Account (Dr) 2,957.91 2,482.37 475.54 Increase in amount Recoverable from DOT representing BSNL has not received anything from DOT Schedule K- Loans & Advances 2. Claims Payable to DOT (Cr) 473.94 18,755.99 18,282.05 Decrease in claims payable to DOT representing BSNL has made payments to DOT Schedule L - Current Liabilities 3 Net Balance of DOT (Sr 1-2) 2,483.97 (16,273.62) Net Payable to DOT 18,757.59 Amount paid by BSNL to DOT during FY 10-11 BSNL has a recoverable balance as on 31.03.2011 as compared to payable balance as on 31.03.2010, on account of the payment made by BSNL. Out of the same, amount of Rs. 18,500.38 crores are on account of entry license fee Addition of Rs. 18500.38 Crores in Fixed Assets schedule shown in Sch D of F.Y 09- 10 111. Hence, it is evident that AO erroneously made the addition of Rs. 13,789.65 crores, being the difference between net amount recoverable from DOT of Rs. 2,483.97 crores as on 31 March 2011 and the net payable of Rs. 16,273.62 crores as on 31 March 2010. The same shows that assessee company has made payment of Rs. 18....
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....Liabilities Net Balance of DOT (Sr.1 - Sr.2) 2,48,397 Net recoverable from DOT (16,27362) Net Payable to DOT 18,75,759 Net amount paid by BSNL to DOT during F.Y. 10-11 BNSL has a Recoverable balance as on 31.3.11 as compared to a Payable balance as on 31.3.10, which is due to the payment made by BSNL Addition of Rs. 18,500.38 Crores as Entry License Fees to FA Sch shown in Sch D of F.Y. 09-10 10.4.3 From the submission of the appellant as well as the final accounts (alongwith schedules thereto), which were also before the Assessing Officer, it is evident that whether the amounts recoverable from the DOT/payable to DOT are considered separately in isolation of each other or their net effect is considered, the appellant has during the year under appeal not recovered Rs. 13789.65 crores from the DOT, as averred by the A.O. in the assessment order. Rather it is the appellant which has made overall payment of Rs. 18,757.59 crores to the DOT during the financial year relevant to the assessment year under appeal. 10.4.4 In exercise of the powers vested in the undersigned u/s. 250(4), the Assessing Officer was required to examine the submission....
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....lier letters dated 08.08.2008 of the Department of Telecommunications (DOTs), as per which BSNL was required to make payment of Rs. 10,186.58 crores for 3G spectrum allotted to it and Rs. 8,313 crores for BWA spectrum allotted to it. 10.4.6 In exercise of the powers vested in the first appellate authority u/s. 250(4) and also in view of the fact that the Assessing Officer had not properly examined the issue at hand either at the assessment or the remand stage, the appellant was further asked to produce evidence in support of the payment of Rs. 18.500.38 crores during the year. In response to this query raised vide this office letter dated 28.04.2015, the appellant has provided copy of letter no.11- 1/2015/TPF dated 06.05.2015 from the DOT confirming the payment of Rs. 18,500.38 crores during financial year 2010-11 (Rs.8313.80 crores on account of BWA spectrum option and Rs. 10,186.58 crores on account of 3G spectrum option). 10.4.7 With the above, the balances payable to/from DOT are explained. The Assessing Officer appears to have arrived at the addition on this account by taking the difference between payable of the previous year (Rs.1,627,362 lakh) and net reco....
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....estments during the subject AY. Admitting this fact, the AO still proceeded to make an addition u/s. 14A relying upon the CBDT circular no.5/2014 and the same is evident from para 10.4 Pg.11 of the Assessment order. In this regard, it is submitted that similar addition was made by AO in the assessment order in the case of assessee for AY 2008-09.Thereafter, addition made by AO was deleted by Ld. CIT(A) and appeal filed by the Revenue against the order of Ld. CIT(A) was dismissed by Hon'ble Tribunal vide its order in bearing ITA No. 3718/Del/2006 & others (CLC Pg.no. 330-348), relevant finding of the Hon'ble Tribunal is reproduced below: "20. The next issue is on disallowance u/s. 14A of the Act r.w.Rule 8D. This ground is raised by the Revenue as ground no.4 in the appeal for the A.Y. 2008-09. Admittedly the assessee has no exempt income during the year. Hence no disallowance can be made u/s. 14A of the act as held by the Hon'ble Delhi High Court in CIT vs. Holecim India reported in 272 CTR 282 and Cheminvest Ltd. in ITA 747/2014 judgement dated 2nd December,2015. In the result this ground of Revenue is dismissed." 121. During the year under consideration, Ld. CIT(A) ha....
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....ainst the deletion of addition of Rs. 106,54,00,000/- on account of Unconfirmed and un-reconciled amount recovered from DOT. 125. This ground is similar to Ground No.2 of Revenue's appeal for AY 2011-12 and we dismissed the ground no.2 of Revenue's appeal in AY 2011-12 vide paras 88 to 96 above. Accordingly, ground no.3 raised by the Revenue in AY 2013-14 is also dismissed. 126. Ground No.4 is against the Disallowance of depreciation of Rs. 105,84,00,000/- by treating borrowing of INR 720 Crores received from Government of India ('GOI') as Capital Subsidy. 127. Ld. DR of the Revenue relied on the order of the Assessing Officer. 128. On the other hand, ld. AR of the assessee submitted that the above- mentioned loan from GOI was received during FY 2002-03 as a budgetary support for VPT program of assessee company, which was intended to provide telephone connectivity services to all panchayats of India. 129. The said amount was alleged as a revenue receipt by the Ld. AO's predecessors in the assessment proceedings concluded for AY 2003-04 on the reasoning that the same is a loan in perpetuity i.e., grant in aid for the purposes of providing telephone service in village ....