TaxTMI 
TaxTMI 
2007 (8) TMI 371
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....f Rs. 600,88,54,056. The said return filed on 30th Nov., 1996 was revised on 16th Dec., 1997 restating the total income at Rs. 577.82 crores. The revised return was initially processed under s. 143(1)(a) resulting in an adjustment of Rs. 33,00,000. The intimation was passed on 19th March, 1998. The return was selected for scrutiny and thereafter an assessment under s. 143(3) has been completed. 4. The assessee had commissioned two telecommunication earth stations in the previous year relevant to the assessment year under appeal. One earth station was commissioned at Calcutta in May, 1995 and the second one was commissioned at Madras in June, 1995. The assessee company treated these earth stations as new undertakings and claimed deduction under s. 80-IA in respect thereof. The income attributable to the earth stations has been computed by the assessee, in a separate exercise. 5. The AO examined the claim of the deduction made by the assessee company under s. 80-IA in a detailed manner and held that an earth station by itself cannot be construed as an undertaking. He was of the opinion that earth station is a link in a long chain which started from the telephone instrument thro....
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....ed profits derived from any business of providing telecommunication services and that the undertaking started providing such services after 1st day of April, 1995. The assessee explained before the CIT(A) that the above two conditions have been satisfied in the present case. The assessee also placed reliance on the decision of the Supreme Court in the case of Textile Machinery Corpn. Ltd. vs. CIT 1977 CTR (SC) 151 : (1977) 107 ITR 195 (SC) and the decision of Madras High Court in the case of Rajeswari Mills Ltd. vs. CIT (1963) 50 ITR 29 (Mad). 6. After considering the detailed arguments of the assessee company in a comprehensive manner, the CIT(A) held that the earth stations set up by the assessee company could not be equated with an undertaking as expressed in the provisions of s. 80-IA. The CIT(A) felt that the description of an earth station falls greatly short of the meaning of undertaking in the sense construed in s. 80-IA. The CIT(A) examined the facts of the case and held that the decision of the Supreme Court in the case of Textile Machinery Corpn. Ltd. vs. CIT would not be applicable to the present case for the reason that in the case decided by the Supreme Court, the ....
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....titution of a Special Bench is extracted below: The issue requiring our adjudication in this appeal is whether or not the CIT(A) was justified in confirming the action of the AO in declining the deduction under s. 80-IA of the IT Act, amounting to Rs. 2,290 lakhs in respect of the telecommunication earth station commissioned by the assessee in the relevant previous year. This is a repetitive issue inasmuch as not only this issue will come up in the case of this very assessee but it will also come up in the cases of other companies commissioning telecommunication earth stations. It is also important to bear in mind the fact that a number of companies will be affected by Tribunal's decision on this issue, that this issue also has substantial revenue implications and is likely to come up at different stations. In view of the above, we are of the considered opinion that the Registry be directed to place the case records before the Hon'ble President. Hon'ble President may consider constituting a Special Bench to decide the following question or such other question, as he may deem fit or proper or to constitute a Special Bench for disposing of this appeal: 'Wheth....
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....ummarised below: 1. An earth station is a station located on earth that can transmit or receive satellite communication. It is a critical undertaking in the business of international telecommunication, which involves the transmission of an international telephone call between an Indian party and an overseas party. Each station provides the capability to access satellite communication with adequate bandwidth, quality and reliability. 2. An earth station consists of multiple sophisticated sub-systems such as modulator, up-converter, high power amplifier, satellite dish antenna, low noise amplifier, down-converter, demodulator, computerized servo controlled mechanisms for satellite tracking etc. All of the above required specialised technical knowledge and skills for their operation and maintenance. In an earth station, a satellite dish antenna is erected on the ground and a building is constructed adjacent to it, to house communication equipments, uninterrupted power system, diesel generation set, air conditioning equipments etc. 3. All the technical sub-systems of an earth station are very crucial in providing international telecommunication services. The ....
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....llite transponders. -Providing digital leased circuits necessary for software exports. -Facility for multipoint communication. -Provision for TV broadcasting services. -Ensure high uptime and reliability and the circuits were free of cross talk. 13. At the second phase of his arguments, the learned senior counsel explained how according to him the functional properties of the earth stations are commercially recognised to be undertakings. The detailed arguments of the learned senior counsel on those propositions pertaining to the commercial identity and functional nature of the earth stations are briefed below: 1. That the earth stations are not just buildings in supporting the telecommunications offered by the assessee company, but they are centres of complicated technological manipulations competent to provide distinct services to the assessee company in its operational activities. 2. The earth stations are new, as they were commissioned in the previous year relevant to the assessment year under appeal and of absolutely distinct technological pace and by virtue of these factors of identity, the earth stations are undertaking....
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....entitled for deduction under s. 80J. The Madras High Court upholding the decision of the Tribunal held that the word undertaking is not to be equated with the legal entity, which may own the undertaking. A single legal entity may own and operate more than one industrial undertaking and the fact of common ownership does not render undertakings, which are otherwise capable of being separated into a common undertaking. 3. Ashok Motors Ltd. vs. CIT (1961) 41 ITR 397 (Mad) While considering the exemption available to an assessee under s. 15C of the IT Act, 1922, the Court held that exemption is confined to profit derived from the industrial undertaking and cannot operate in respect of any profit derived by the assessee from any trade or business other than the industrial undertaking. In this context, the Court held that s. 15C of the IT Act, 1922 does not make an industrial undertaking per se the unit of assessment. There is a clear distinction between the assessee and the industrial undertaking. 4. CIT vs. Chanda Diesels (1995) 216 ITR 639 (Bom) In this case the Court was considering a case of special deduction provided under s. 80HH of the IT Act, 1961. In that conte....
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....s are undertakings for the purpose of s. 80-IA and such a functional identity has to be assigned to the earth stations. He explained that only for the reason that the earth stations are boosting the activities of an existing network it does not take away the physical, functional and commercial identity of earth stations as undertakings. 18. After explaining on the distinction between the undertaking and the company or the assessee, which owns the undertakings, the learned senior counsel continued to present his arguments on the legal concept of undertaking. The learned senior counsel argued that the contour of an undertaking has to be viewed in a broad commercial sense and from a commonsense point of view. The physical integration of the earth station with the overall system of the assessee does not undo the independent character of undertakings. In this regard, the learned counsel has relied on the decision of the Bombay High Court-Nagpur Bench in the case of CIT vs. Chanda Diesels and that of Calcutta High Court in the case of CIT vs. Orient Paper Mills Ltd. (1974) 94 ITR 73 (Cal). In the first decision, the Bombay High Court has pointed out the necessity of a liberal interpre....
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....g the true implication of s. 54D held that the expression industrial undertaking must be construed liberally and must be given its popular meaning thereby in a wide sense any project or business, a person may undertake. 6. P. Alikunju, M.A. Nazeer Cashew Industries vs. CIT (1987) 65 CTR (Ker) 214 : (1987) 166 ITR 804 (Ker) The Court was examining the expression industrial undertaking. The Court held that a provision for exemption or relief in a fiscal statute should be construed liberally and in favour of the assessee and if that rule is followed, an undertaking mentioned in s. 54D must be one maintained by a person for the purpose of carrying on his business. The expression undertaking must be construed in the light of the word business which is a word of wide import which is to be construed in a broad manner rather than in a restricted sense. 20. Apart from relying on the above judicial pronouncements, the learned senior counsel also relied on the dictionary meaning of term undertaking. As per Black's Law Dictionary, Seventh Edition 1999 at page No. 1528 the meaning of the term undertaking has been given among other things as engagement. The Law Lexicon Second Edi....
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....ication services on or after 1st day of April, 1995 but before 31st day of March, 2000. He explained that both the earth stations one at Calcutta and the other at Madras were commissioned after 1st day of April, 1995 within the previous year period 1st April, 1995 to 31st March, 1996. He explained therefore that this condition also has been satisfied by the assessee company. 23. Thereafter, the learned counsel came to the third limb of sub-s. (4C) where it has been provided that telecommunication services provided by the assessee need to be basic or cellular. He explained that one of the objections raised by the lower authorities is that the assessee company being engaged in telecommunication services relating to international telephone is not providing any basic services and therefore not entitled for the deduction. The learned counsel vehemently objected to the finding of the lower authorities and brought out the arguments in the following manner: 1. That VSNL was a company fully owned by the Government of India which later on went for disinvestment. The disinvestment document released by the Central Government on 20th Sept., 1999 has clearly stated in p. 18 of the do....
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....tion dt. 14th Dec., 2001 has made regulations for telecom charges and sharing of the revenue by The Telecommunication Interconnection (Charges and Revenue Sharing) Regulation, 2001. In the said regulation, the international calls have been included in basic services and the domain of the assessee company is providing telecommunication services in international calls. 5. That the document released by World Trade Organisation (WTO) on coverage of basic telecommunications and value added services has divided telecommunication services into two categories of basic telecommunications and value added services. As per the said document, basic telecommunications include the relaying of voice or data from sender to receiver and include all telecommunication services both public and private that involve end-to-end transmission of customer supplier information. It has also been stated in the said document that basic telecommunication services are provided through cross border supply and through the establishment of foreign firms or commercial presence, including the ability to own and operate independent telecom network infrastructure. 6. The Telecommunication Interconnectio....
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....s of the IT Act, 1961 have to be construed in a liberal and meaningful manner so that and then only the true import of the services rendered by the assessee company could be understood in a rightful context. 25. Regarding the commissioning of the two earth stations, the assessee has placed a copy of an internal memo of the assessee company wherein it has been stated that the earth station at Halisahar in Calcutta was commissioned in May, 1995 and the earth station at Korattur in Madras was commissioned in June, 1995. He therefore submitted that the establishment of the new undertaking has been made within the qualifying period provided by sub-s. (4C). 26. The learned senior counsel produced before us a copy of the writing issued by PanAmSat where it is stated that earth station is the internationally accepted term that includes satellite communication stations located on the ground. They can be configured and utilised in a number of ways but in order for an earth station to transmit or receive a signal it will require up-link/or down-link equipment. On the basis of the said publication, the learned counsel contended that the earth station is a compendium of several technologi....
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....ay of April, 1995 but before the 31st day of March, 2000. He explained therefore, that the first condition to be satisfied by the assessee company to claim the deduction is that the two earth stations commissioned by it amounted to undertakings, construed in s. 80-IA. He explained that the assessee is a telecommunication company engaged in international long distance calls. The assessee is having the entire system of carrying on the telecommunication business of international calls even before 1st day of April, 1995. The assessee company has improved its facilities and quality of service by commissioning the two earth stations in the previous year relevant to the assessment year under appeal. The relevance of these two earth stations does not go beyond this. These two earth stations cannot be treated as undertakings for the purpose of s. 80-IA. The arguments of the learned CIT regarding whether the earth stations commissioned by the assessee company are undertakings or not, are summarised below: 1. The heading of s. 80-IA reads in respect of deduction from industrial undertakings etc. Though the word industrial is not there prefixing word undertaking in sub-s. (4C) of s. 8....
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.... if an existing company could establish any number of new undertakings under the same umbrella, those undertakings newly set up by the existing company must establish that those new units are functionally independent and the existing business could be carried on even without the help of new units and the new units are independently working as centres of profit. The learned CIT explained that none of the above attributes are satisfied in the present case of earth stations explained by the assessing authority. 31. The learned CIT further invited our attention to the various decisions relied on by the learned senior counsel appearing for the assessee. He explained that the facts considered by the respective Courts while arriving at those decisions are different from the facts of the present case. He referred to the decision of the Madras High Court in the case of Madras Machine Tools Manufacturers Ltd. vs. CIT. In the said decision, even though the Court has held that an undertaking is different from the company, the Court has contemplated therein that the independent activities to be carried on by the undertaking. Even if it is not possible to equate the undertaking with the compa....
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.... the assessee company is not providing basic telecommunication services are summarised below: 1. As per the history of VSNL available in the website the only service provided by VSNL in India is the introduction of internet services. That in all other aspects, the assessee company is providing international telephone services, not directly to the end consumers but only to the domestic telecom service providers. He explained that as per the profile published by the assessee company itself, the areas of business carried on by the assessee company are the following: -International long distance calls -National long distance calls -Data communication -Internet -Managed data network services -Data centre services -TV uplinking -INMARSAT services -Video conferencing 2. That the abovementioned areas do not cover basic telecommunication services. 3. That the VSNL has mainly consolidated its business in its core operation of global satellite and optical fibre connectivity. Their gateways and earth stations are interconnected. The above services do not come under the concept of basic s....
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....t that an undertaking in effect is an activity and need not be equated or compared with the mother undertaking itself. He contended that the deduction under s. 80-IA is available to an undertaking and not to the company. He explained that for availing deduction under s. 80-IA, the new undertaking may undertake a part of the activity earlier carried out by the company and the activity need not be altogether a new one. 38. He further argued that s. 80-IA(4C) does not require that the entire telecommunication services from the origination of the call to the termination of the call should be rendered by the assessee. In fact, it is not possible for any company in India or even in the world to render end-to-end international telecommunication services. Therefore, even if an assessee renders telecommunication service covering a part of the entire chain, it is entitled to deduction under s. 80-IA. He explained that the main question requires to be considered is whether the undertaking provides telecommunication services or not. The words telecommunication services are in their import not limited by the words which follow, viz., whether basic or cellular. The rule of ejusdem generis has....
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....ri-Horticultural Society (2005) 273 ITR 198 (Mad). 41. We heard both sides in detail. On going through the rival submissions, we find that the issue raised before this Special Bench can be adjudicated in the light of the answers available to the following 4 questions: (i) Whether the earth stations commissioned by the assessee company in the previous year relevant to the assessment year under appeal are new undertakings for the purposes of s. 80-IA(4C)? (ii) Whether the undertakings have commenced the activity after 1st April, 1995? (iii) Whether the undertakings are providing basic or cellular telecom services? (iv) Whether the profit computed by the assessee company, which is attributable to the earth stations is acceptable for quantifying the deduction under s. 80-IA? 42. First we will consider the question whether the earth stations commissioned by the assessee company during the previous year relevant to the assessment year under appeal are undertakings or not, for the purposes of s. 80-IA. 1. The learned senior counsel appearing for the assessee company has argued that the expression undertaking has to be construed liberally ....
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....to manufacture articles to be used in the existing business. The assessee which was carrying on the business of manufacturing boilers, machinery parts, wagons etc. set up two new units, a steel foundry division and jute mill division. The steel foundry division started manufacturing some castings, which the appellant was previously buying from the market but the castings were mostly used by the other existing divisions of the company. In this scenario, the Supreme Court held that the new activity launched by the assessee by establishing new plant and machinery by substantial investments may produce the same commodities of the old business or it may produce some other distinct marketable products, even commodities, which may feed the old business. These products may be consumed by the assessee in its old business or may be sold in the open market. In this case also the new units established by the assessee were separate and independent and producing new articles even though the same could be consumed by the old unit, and overall the new units could survive by themselves by selling the products in the open market. The same principles have been upheld by the Bombay High Court in the c....
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.... an industrial company. The company used to produce (purchase) power from outside source like State Electricity Board. In order to augment the power supply. the company has commissioned a power plant run by diesel generators. In this case the captive consumption of power by the industrial company does not cease to make the power plant a new undertaking because the new undertaking is an independent operational unit which could survive by itself by selling the power to outsiders. Therefore, it is very clear that in the commercial sense an undertaking is a separate business personality capable of surviving independent of the group companies and providing identifiable services and making itself a revenue generating centre. 48. In the present case, the earth station commissioned by the assessee company is not a functionally independent unit. The earth station cannot commercially function without the other systems embedded in the chain of activity carried on by the assessee company in providing telecommunication services. The earth station commissioned by the assessee company is not an independent service provider in the true commercial sense. It is not an independent profit centre. T....
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....nication services for the fact that it has commissioned two earth stations in the previous year relevant to the assessment year under appeal. We hold that earth stations are not undertakings for the purpose of s. 80-IA. 51. The second question to be answered is whether the undertaking has commenced providing services after the 1st day of April, 1995. Once we find that the earth stations are not undertakings, this question becomes infructuous. The assessee company as a telecommunication services provider has commenced its business way back in 1986 and it is not possible to hold that the earth stations by themselves have started providing telecommunication services after the 1st day of April, 1995. Therefore, the answer is negative to the second question also. 52. The third question to be considered is whether the assessee company is providing basic or cellular services or if at all the telecommunication services are to be limited to basic or cellular as per sub-s. (4C) of s. 80-IA. 53. Sub-s. (4C) of s. 80-IA reads as under: (4C) This section applies to any undertaking which starts providing telecommunication services whether basic or cellular at any time on or aft....
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....mmunication services are a consumer-oriented industry. The expression basic is used in a consumer-friendly manner and it is used as such in telecommunication sector. 57. The assessee company has placed reliance on the disinvestment documents issued by the assessee company in 1999 when it was a fully Government of India owned undertaking, wherein it was stated that the basic telecommunication services are the principal line of activity of the assessee company. It is to be seen that in that document, the expression 'basic' telecommunication services has been used in a lucid and generic style which does not answer to the precision necessary in interpreting a provision of law. The assessee has also relied on the notification dt. 14th Dec., 2001 issued by TRAI. The notification related to Telecommunication, Interconnection (Charges and Revenue Share) Regulation, 2000. Even though international calls have been characterised as part of basic telecom services in the said regulation that also is a general statement without specifically pointing out the necessary features attributable to providing of basic telecom services. 58. The assessee has also relied on the 34th Report of....
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....r, it has been discussed in the technical literature that voice telephony including international voice transmission amounted to providing of basic telecommunication services. But wherever specific references are to be made on official documents, the assessee company has not been treated as a provider of basic telecommunication services. This is a crucial point to be considered. 61. The meaning of basic telecommunication services has to be understood in its normal commercial sense as understood by an ordinary user of telecommunication services. The meaning of the expression basic telecom services is also to be understood in its contextual meaning; it is relative. In the context of an ordinary user, basic telecommunication services means the services provided directly to an end customer. Traditionally speaking such services could be provided through the connectivity of a landline. Now with the advent of new technology, the connectivity could be even wireless. But anyhow, it should connect to an ultimate customer. It should satisfy the basic needs of an ultimate customer in telecommunications. 62. The meaning of the term basic given in the Concise Oxford Dictionary, Ninth Editi....
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....to the field. Such deduction meant for basic service providers may not be found necessary by the Government to persons like the assessee who are providing direct services to other basic service providers in the area of international telecommunication; may be for the reason that the tariff rate enjoyed by such secondary service providers itself would take care of the need of incentives. 66. Therefore, we find that the assessee company is not providing basic telecommunication services as stated in s. 80-IA(4C). The assessee is providing international connectivity to other providers of basic services in India. The services rendered by the assessee company is one step above the basic telecommunication services. Therefore, it is to be seen that the assessee company does not satisfy the condition provided in sub-s. (4C) regarding the nature of telecommunication services so as to become eligible for the deduction provided under s. 80-IA. 67. We must also refer to the argument of the learned senior counsel that the extension of the meaning of the expression basic or cellular brought in by the Finance (No. 2) Act, 1998 w.e.f. 1st April, 1995 (1999) supports the case of the assessee co....
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....h stations set up by it. Since long, the assessee has been in the business of providing connectivity of phone calls at the international level i.e., between India and other countries through the sea cables laid by the assessee. However, due to advancement in technology, the assessee set up two earth stations at Madras and Calcutta in the year under consideration. It is in respect of the profits from these stations, the assessee has claimed deduction under s. 80-IA of the Act which was rejected by lower authorities. Facts as well as arguments of the parties have already been set out in detail by my learned Brother in his order and, therefore, need not be repeated here. If necessary, reference would be made at the appropriate place. 73. The claim under s. 80-IA can be allowed in the case of assessee if it is shown that the earth stations set up by the assessee, from where the activity of connecting overseas phone calls was carried on, can be said to be the undertakings providing telecommunication services whether basic or cellular as per the provisions of s. 80-IA applicable to the year under consideration. So, the first question to be considered is whether such earth stations can....
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....tic or organized course of activity or conduct with a set purpose. Such legal provision has to be kept in mind while defining the scope of undertaking. 75. The word 'undertaking' has been defined by various dictionaries as under: Law Lexicon-Second Edition The word 'undertaking' must be defined as any business or any work or project which one engages in or attempts as an enterprise analogous to business or trade. Black's Law Dictionary A promise, pledge, or engagement. Illustrated Oxford Dictionary Work, etc., undertaken, as enterprise. Webster's Encyclopedic Unabridged Dictionary The act of one who undertakes any task or responsibility, the task or enterprise, etc. undertaken, a promise, pledge, guarantee. The combined reading of the above shows that the word 'undertaking' would mean an activity carried on by the assessee. Since s. 80-IA refers to the profits derived from the business of undertaking, in our opinion, it would mean any activity carried on systematically or in the organized manner with a view to earn profit. 76. The view taken by us is fortified by the decisi....
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....ing eligible for deduction under s. 80-IA. An undertaking in its normal meaning is an undertaking as has been defined in S.Y.C.W. & S. Mills AIR 1969 Mysore 280 at 291 as follows: 'It is not in its real meaning anything which may be described as a tangible place of property like land, machinery or equipment; it is in actual effect an activity of man which is commercial or in business parlance means an activity engaged in with a view to earn profit. Property, movable or immovable, used in the course of or for the purpose of such business can more accurately be described as the tools of business or undertaking, i.e., things or articles which are necessary to be used to keep. the undertaking going or to assist the carrying on of the activities leading to the earning of profits.' In terms of the above definition the sub-station most certainly does not qualify as an undertaking. The undertaking in this case is the whole company namely VSNL itself. Since VSNL did not begin operations in the prescribed period, it is not eligible for the deduction claimed. The functioning of earth station has been described by the AO in para 17.2 which is also reproduced as under:....
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....own or run many undertakings some of which may be entitled to the benefit of s. 84 and others may not be so entitled and hence it is not possible to equate the undertaking with the company. This view was reiterated by the Court in the case of CIT vs. Premier Cotton Mills Ltd. (1999) 154 CTR (Mad) 538 : (1999) 240 ITR 434 (Mad) by observing as under: The word 'undertaking' is not to be equated with the legal entity which may own the undertaking. A single legal entity may own and operate more than one industrial undertaking and the fact of common ownership does not render undertakings which are otherwise capable of being separated into a common undertaking. Similar view is also taken by the Hon'ble Bombay High Court in the case of CIT vs. Chanda Diesels (1995) 216 ITR 639 (Bom), wherein, it was observed sub-s. (2) of s. 80HH refers to the 'industrial undertaking' and not to the assessee or his other business. The Hon'ble Calcutta High Court in the case of Industrial Gases Ltd. vs. CIT (1965) 58 ITR 317 (Cal), held as under: Sec. 15C makes a distinction between the assessee and the industrial undertaking. The unit of assessment is the assessee....
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....ion of the Hon'ble Mysore High Court in the case of S.Y.G.W. & S. Mills AIR 1969 Mysore 280 relied on by the AO does not help the case of the Revenue. The AO relied on the following observations of the Court: 'Undertaking' is not in its real meaning anything which may be described as a tangible piece of property like land, machinery or the equipment; it is in actual effect an activity of man which is commercial or business parlance means an activity engaged in with a view to earn profit. Perusal of the above reveals that mere property like land, plant and machinery would not constitute an undertaking but it is the activity of the man carried on with a view to earn profit which is relevant. There cannot be any dispute to such legal position. The case of the assessee is that exemption is being claimed in respect of the profits derived from the services rendered by the assessee. The income of assessee is not from mere use of machinery but from the activity of connecting phone calls from the customers of Indian territory to the overseas customers and vice versa. The activity of assessee has been narrated in brief by the AO in para 17.2 of his order which has been r....
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....rpn., it has to be noted, that the Court was concerned with a case where the claim of assessee was denied on the ground that the new unit was formed by reconstruction of old business. It is in this context, the Court held that it would be sufficient if substantial amount is invested in the new plant and machinery. Meaning thereby that the claim could not be rejected if negligible capital of old business is also employed in the new business. The Court never said that substantial investment was to be compared with the entire capital of assessee company. An assessee may have capital of Rs. 100 crores but the new unit may be established with the capital of Rs. 1 crore. In such cases, exemption cannot be denied on the ground that investment in the new unit is only one per cent to the total capital of assessee. Substantial investment was referred to with Rs. 1 crore in above example. According to the Hon'ble Supreme Court, if, for example, Rs. 90 lakhs is invested in the new plant and machinery, then the claim of the assessee could not be denied merely because Rs. 10 lakhs worth old machinery was also deployed. Therefore, the contention of the learned Departmental Representative rega....
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....ivity. Consequently, it has to be held that both the earth stations were functionally independent and, therefore, the activity carried on was integrated one. 87. There is also no merit in the contention of the learned CIT-Departmental Representative that the new unit should also be self-supporting one in the commercial sense. Reference can be made to the judgment of the Hon'ble Calcutta High Court in the case of CIT vs. Orient Paper Mills Ltd. (1974) 94 ITR 73 (Cal), which has been affirmed by the apex Court CIT vs. Orient Paper Mills Ltd. (1989) 176 ITR 110 (SC). In that case, the assessee set up a unit for manufacture of caustic soda which was an essential chemical for use in the process of manufacture of paper, an existing activity carried on by the assessee. The entire production of caustic soda was consumed by the assessee in the existing process of manufacturing of paper and no part of it was sold. The assessee claimed the deduction under s. 15C of the 1922 Act which was disallowed on the ground that new plant was ancillary to the existing units. The Tribunal allowed the claim of assessee and the High Court as well as the apex Court upheld the view of the Tribunal. Thi....
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....dvanced technology of cellular phones. New enactment also came into existence i.e., Telecommunication Regulatory Authority of India Act, 1997 (TRAI). This Act defines the expression telecommunication services as under: Telecommunication services means service of any description (including, electronic mail, voice mail, data services, audio tex service, video tex services, radio paging and cellular mobile telephone service) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means but shall not include broadcasting services. The above statutory definitions reveal that the legislature has considered the expression telecommunication services of wide amplitude inasmuch as it includes transmission of voice, images and data through various modes. 90. At this stage, we may usefully refer to the settled legal position that where an expression is defined in an enactment qua the related subject, then the same meaning should be attributed to such expression in other enactment unless defined otherwise. This legal position was laid down by the Con....
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...., the word 'basic' used in s. 80-IA would only mean voice communication through conventional system i.e. through cable technology which is popularly known as communication through landline phones. Thus, the words basic or cellular would mean voice communication either through landline system or through cellular system. The other systems, even for voice communication were, therefore, not intended by the legislature while amending the provisions of s. 80-IA by Finance Act, 1995. 92. In view of the above discussion, it has to be held that voice communication through satellite, based on latest technology, was outside the scope of the expression telecommunication services whether basic or cellular used in s. 80-IA. The earth station is part of the system of voice communication through satellite. Earth station and satellite are supplementary to each other. This system is entirely distinct and different from the cable or cellular system. This view is also fortified by the subsequent amendment in s. 80-IA of the Act by Finance (No. 2) Act, 1996 [sic-(1998)] effective from asst. yr. 1997-98 [sic-asst. yr. 1999-2000], whereby, after the words whether basic or cellular, the followi....
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....Bench in understanding the meaning of the expression basic or cellular. In this connection, the assessee has furnished copies of letters dt. 23rd Feb., 1994, 5th March, 1997 and 14th Jan., 1999, issued by the Government of India, Department of Telecommunications, New Delhi. In the letter dt. 23rd Feb., 1994, it has been stated the Government have decided that VSNL will have monopoly for 10 years in basic services (voice telephoning) starting from 1st April, 1994. In the letter dt. 5th March, 1997, it has been stated Videsh Sanchar Nigam Ltd. is the only entity authorized by the Government of India to provide basic international telephone services to and from India. To the same effect is the letter dt. 14th Jan., 1999. In view of these letters it is prayed by the assessee that the activity of the assessee regarding transmission of voice through earth station be considered as basic telecommunication services. In my opinion, these letters do not help the case of the assessee, for the reasons-(1) prior to asst. yr. 1996-97, the assessee was engaged in the business of voice communication at the international level through the sea cables which was conventional method of telecommunication....
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.... the telecommunication services through earth station set up by the assessee cannot be characterized either basic or cellular and therefore, the assessee would not be entitled to deduction under s. 80-IA for the year under consideration. This objection is relevant only for the year 1996-97, because in the later years the scope of the section is expanded. Similarly, once it is held that the services rendered by the assessee were not eligible for deduction under s. 80-IA, it is irrelevant as to whether or not, in order to be eligible for deduction under s. 80-IA, satellite telecommunication services are required to be provided on end-to-end basis. This aspect of the matter cannot have anything to do with the issue in appeal for the asst. yr. 1996-97, but only for 1997-98 onwards. The proposed separate order thus holds that while the appeal for the asst. yr. 1996-97 is to be dismissed, the issue has to be resolved in favour of the assessee for the asst. yr. 1997-98 onwards. In the paper book filed by the learned Departmental Representative, the details of assessment year wise claim are given. These are reproduced below for ready reference: Assessment year Amount (Rs. In crores) ....