The ACIT, Circle-8,, Ahmedabad v. Vodafone Essar Gujarat Ltd.,, Ahmedabad

ITA 2469/AHD/2011 | 2008-2009
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 246920514 RSA 2011
Assessee PAN AAACF1190P
Bench Ahmedabad
Appeal Number ITA 2469/AHD/2011
Duration Of Justice 5 year(s)
Appellant The ACIT, Circle-8,, Ahmedabad
Respondent Vodafone Essar Gujarat Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-09-2016
Date Of Final Hearing 21-07-2016
Next Hearing Date 21-07-2016
Assessment Year 2008-2009
Appeal Filed On 30-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SHRI S. S. GODARA JUDICIAL MEMBER. ITA. NOS. 948 & 2469/AHD/2011 (ASSESSMENT YEARS: 2005-06 & 2008-09) ACIT CIRCLE-8 AHMEDABAD APPELLANT VS. VODAFONE ESSAR GUJARAT LIMITED VODAFONE HOUSE 4 TH FLOOR CORPORATE ROAD PRAHLADNAGAR OFF. S.G. ROAD AHMEDABAD RESPONDENT & ITA. NOS. 775 & 2126/AHD/2011 (ASSESSMENT YEARS: 2007-08 & 2008-09) VODAFONE ESSAR GUJARAT LIMITED VODAFONE HOUSE 4 TH FLOOR CORPORATE ROAD PRAHLADNAGAR OFF. S.G. ROAD AHMEDABAD APPELLANT VS. ACIT CIRCLE-8 AHMEDABAD RESPONDEN T PAN NO. AAACF1190P ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 2 - / BY REVENUE : SHRI D. P. GUPTA CIT D.R. WITH SATISH SOLANKI SR. D.R. / BY ASSESSEE : SHRI S. N. SOPARKAR A.R. /DATE OF HEARING : 21.07.2016 /DATE OF PRONOUNCEMENT : 30.09.2016 ORDER PER S. S. GODARA JUDICIAL MEMBER THIS IS A BATCH OF FOUR CASES. FIRST ASSESSMENT YE AR 2005-06 INVOLVES REVENUES APPEAL ITA NO.948/AHD/20 11 PREFERRED AGAINST ORDER DATED 19.01.2011 PASSED BY THE CIT(A)-XIV AHMEDABAD IN CASE NO. CIT(A) XIV/ACIT CIR.8/283/2009-10. 2. NEXT ASSESSMENT YEAR 2007-08 CONTAINS ASSESSEES APPEAL ITA NO.775/AHD/2011 ARISING FROM ORDER OF TH E VERY CIT(A) DATED 18.01.2011 IN CASE NO. CIT(A) XIV/ACIT CIR.8/284/2009-10. 3. LAST ASSESSMENT YEAR 2008-09 INVOLVES ASSESSEES AND REVENUES CROSS APPEALS ITA NOS. 2126 & 2469/AHD/20 11 FILED AGAINST ORDER OF THE SAME CIT(A) DATED 13.07. 2011 IN CASE NO. CIT(A) XIV/ACIT CIR.8/241/2010-11. RELEVANT PROCEEDINGS IN ALL CASE ARE U/S.143(3) OF THE INCOME TAX ACT 1961; IN SHORT THE ACT. ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 3 - 4. LD. COUNSEL REPRESENTING ASSESSEE FILES A COMPIL ATION CHART SUMMARIZING GIST OF ALL THE ISSUES INVOLVED I N THESE FOUR APPEALS. THE REVENUE IS FAIR ENOUGH IN NOT DISPUTI NG CORRECTNESS THEREOF. THE SAME IS TAKEN ON RECORD. WE PROCEED ASSESSMENT YEAR-WISE FOR THE SAKE OF CONVEN IENCE AND BREVITY. ASSESSMENT YEAR 2005-06 REVENUES APPEAL ITA NO. 94 8/ AHD/2011 5. THE REVENUES FIRST SUBSTANTIVE GROUND PLEADS TH AT THE CIT(A) HAS ERRED IN DIRECTING THE ASSESSING AUTHORI TY TO REDUCE NET INTEREST INCOME OF RS.2% ONLY COMING TO RS.47 36 986/- FOR THE PURPOSE OF COMPUTING SECTION 80IA DEDUCTION. WE COME TO ASSESSMENT ORDER DATED 29.12 .2009. THE ASSESSEE COMPANY IS A CELLULAR SERVICE PROVIDER IN GUJARAT STATE. THIS IS SECOND ROUND OF LITIGATION BETWEEN THE PARTIES BEFORE THE TRIBUNAL. THE ASSESSING OFFICER HAD FRAMED A REGULAR ASSESSMENT ON 31.12.2007. THE ASSESSEE H AD RECEIVED INTEREST INCOME OF RS.89 85 504/- FROM FIX ED DEPOSITS KEPT WITH A BANK ALONGWITH RS.2 13 16 438/ - OF ANOTHER INTEREST REALIZED FROM LOANS GIVEN TO M/S. HUTCHINSON ESSAR SOUTH LTD. THE ASSESSING OFFICER FRAMED A RE GULAR ASSESSMENT ON 31.12.2007. HE EXCLUDED THIS ENTIRE INTEREST INCOME FOR THE PURPOSE OF COMPUTING SECTION 80IA DE DUCTION. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) UPHELD AS SESSING OFFICERS ACTION. THE ASSESSEE CAME IN APPEAL BEFO RE THIS TRIBUNAL. A COORDINATE BENCH IN ITS ORDER DATED 09 .01.2009 UPHELD THE LOWER AUTHORITIES ACTION IN PRINCIPLE AS PER HONBLE ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 4 - APEX COURTS DECISION IN PANDIAN CHEMICALS VS. CIT (2003) 262 ITR 278 (SC). THE ASSESSEE THEN RAISED AN ALTE RNATIVE CONTENTION SEEKING TO EXCLUDE ONLY THE NET AMOUNT O F THE ABOVE INTEREST INCOME INSTEAD OF GROSS SUM I.E. THE DIFFERENCE BETWEEN INTEREST EXPENSES INCURRED AND THE INTEREST INCOME EARNED FROM ITS INDUSTRIAL UNDERTAKING. LD. COORDI NATE BENCH QUOTED HONBLE DELHI HIGH COURTS DECISION IN CIT V S. SHRI RAM HONDA POWER EQUIPMENTS (2007) 289 ITR 475 AS WE LL AS THIS TRIBUNALS SPECIAL BENCH ORDER IN LALSON ENTER PRISES VS. DCIT (2004) 82 TTJ 1048 (DELHI) TO DIRECT THE ASSES SING OFFICER TO ASCERTAIN NEXUS BETWEEN THE TWO INTEREST INCOME AS WELL AS THE INTEREST EXPENDITURE TO EXCLUDE ONLY TH E NET COMPONENT THEREOF. 6. THE ASSESSING OFFICER TOOK UP CONSEQUENTIAL PROCEEDINGS. THE ASSESSEE FILED A LETTER DATED 24. 09.2009 INTER ALIA INDICATING QUA ITS LATTER INTEREST INCOM E THAT IT HAD AVAILED A LOAN OF RS.140CRORES FROM STANDARD CHARTE RED BANK @7% AS ADVANCED TO M/S. HUTCHINSON ESSAR SOUTH (SUP RA) @ 9% YIELDING THE IMPUGNED INTEREST INCOME. IT SUBMI TTED BANK STATEMENT AS WELL TO BUTTRESS THE SAME. THE ASSESS ING OFFICER FOLLOWED HIS EARLIER REASONING TO DISALLOW THE IMPU GNED DEDUCTION WITHOUT EVEN DISPUTING THIS NEXUS BETWEEN INTEREST INCOME EARNED AND ITS CORRESPONDING EXPENDITURE. T HE CIT(A) ACCEPTS ASSESSEES CONTENTION THAT THERE EXISTS A L IVE NEXUS BETWEEN THE ABOVE LOAN AVAILED @7% AS ADVANCED TO ASSESSEES SUBSIDIARY @9% RESULTING IN THE SURPLUS INTEREST ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 5 - INCOME. HE QUOTES THIS TRIBUNALS ORDER TO ALLOW A SSESSEES NETTING PLEA LEAVING BEHIND THE REVENUE AGGRIEVED. 7. HEARD BOTH PARTIES REITERATING THEIR RESPECTIVE STAND. THERE IS NO DISPUTE THAT INSTANT PROCEEDINGS ARE CONSEQUENTIAL ONES CONFINED TO NEXUS ASPECT ONLY QU A IMPUGNED INTEREST EXPENSES AND INTEREST INCOME IN Q UESTION. IT HAS ALREADY COME ON RECORD THAT ASSESSEE AVAILED LOAN @7% FOLLOWED BY THE SAME BEING ADVANCED TO ITS SUBSIDIA RY @9%. THIS CRUCIAL FACT GOES UNREBUTTED IN THE COURSE OF HEARING. HONBLE JURISDICTIONAL HIGH COURT IN CASE OF NIRMA LTD. (2014) 367 ITR 12 REITERATES THE VERY NETTING PRINCIPLE. WE ACCORDINGLY SEE NO REASON TO INTERFERE IN THE LOWER APPELLATE FINDINGS UNDER CHALLENGE. THIS FIRST SUBSTANTIVE G ROUND IS THUS DECLINED. 8. THE REVENUES SECOND SUBSTANTIVE GROUND PLEADS T HAT THE CIT(A) HAS ERRED IN DIRECTING ASSESSING OFFICER TO GRANT THE ASSESSEE SECTION 80IA DEDUCTION ON INTEREST REF UND FROM TELECOMMUNICATION DEPARTMENT AMOUNTING TO RS.1 45 13 974/- AS ARISING FROM EXCESS PAYMENTS MA DE IN EARLIER YEARS AND OFFERED IN THE NATURE OF BUSINESS INCOME U/S.41(1) OF THE ACT. THERE IS NO QUARREL BETWEEN THE PARTIES ABOUT THE NATURE OF SUM IN QUESTION. THE ASSESSING OFFICER FOLLOWED DERIVED FROM PRINCIPLE TO CONCLUDE THAT THIS AMOUNT WAS NOT ELIGIBLE FOR THE IMPUGNED DEDUCTION SINCE NOT DERIVED FROM ASSESSEES INDUSTRIAL UNDERTAKING. ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 6 - 9. THE CIT(A) FOLLOWED THIS TRIBUNALS DECISION IN RADHA MADHAV INDUSTRIES CASE 8 TAXMAN.COM 63 (AHD) TO HOL D THAT EVEN PROFITS TAXABLE U/S.41(1) OF THE ACT ARE TO BE DEEMED TO HAVE BEEN DERIVED FROM THE ELIGIBLE UNDERTAKING FOR THE PURPOSE OF CLAIMING SECTION 80IA DEDUCTION. 10. WE HAVE HEARD RIVAL SUBMISSIONS. SHRI SOPARKAR BRINGS TO OUR NOTICE A COORDINATE BENCH DECISION OF THE TR IBUNAL IN ITA NOS.3304 & 3386/DEL/2010 BSNL LTD. VS. DCIT HOL DING THAT SECTION 80IA SUBSECTION 2A IS IN THE NATURE OF A NON OBSTANTE CLAUSE TO THE MAIN PROVISION WHEREIN IT IS NOWHERE NECESSARY THAT THE PROFITS IN QUESTION HAVE TO BE D ERIVED FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING. BOTH PARTIES POINTED OUT VERY FAIRLY THAT HONBLE DELHI HIGH COURT HAS UPHEL D THE SAME. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON F ACTS OR LAW. WE THUS FIND NO REASON TO DISAGREE WITH THE CIT(A) S FINDINGS UNDER CHALLENGE. THIS SECOND SUBSTANTIVE GROUND IS REJECTED. 11. THE REVENUES LAST SUBSTANTIVE GROUND ASSAILS CORRECTNESS OF THE LOWER APPELLATE ORDER DIRECTING THE ASSESSING OFFICER TO ALLOW SECTION 80IA DEDUCTION O N ASSESSEES MISCELLANEOUS INCOME OF RS.17 50 636/- COMPRISING OF CHEQUE BOUNCE CHARGES OF RS.2 97 571/ - RECOVERY FOR COMPUTER USAGE TO CALL CENTRE AGENCIES OF RS.9 04 222/- SCRAP SALES OF RS.5 47 083/- AND MISCELLANEOUS STAFF RECOVERY OF RS.1760/-; RESPECTI VELY. THE ASSESSING OFFICER AGAIN OBSERVED THAT NEITHER THESE AMOUNTS HAD BEEN DERIVED FROM ASSESSEES INDUSTRIAL UNDERTA KING NOR ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 7 - DID THEY HAVE ANY DIRECT NEXUS WITH ITS TELECOMMUNI CATION SERVICES IN QUESTION. 12. THE CIT(A) REVERSES ASSESSING OFFICERS FINDING AS FOLLOWS: 2.18I HAVE CONSIDERED THE FACTS OF THE CASE THE S UBMISSION AND DETAILS FILED BY THE AR WITH RESPECT TO THE NATURE OF MISCELLANEOUS EXPENSES CAREFULLY AND I HAVE ALSO PE RUSED THE CASE LAWS AS RELIED UPON BY THE AR. HON'BLE IT AT IN ITS ORDER FOR AY 2005-06 HAD DIRECTED THE AO TO EXAMINE NATURE OF MISCELLANEOUS INCOME EARNED BY THE APPELLANT TO DETERMINE IF THE SAME IS DERIVED FROM INDUSTRIAL UN DERTAKING. 2.19 THE BREAK UP OF MISCELLANEOUS EXPENSES EARNED BY THE APPELLANT DURING AY 2005-06 IS GIVEN BELOW. PARTICULARS RS. CHEQUE BOUNCE CHARGES 297 571 RECOVERY FOR COMPUTER USAGE TO CALL CENTRE AGENCIES 904 222 SCRAP SALE 547 083 MISC STAFF RECOVERY 1 760 TOTAL 17 50 636 2.20 DURING THE COURSE OF ASSESSMENT AS WELL AS APP ELLATE PROCEEDINGS THE APPELLANT HAD SUBMITTED THAT CHEQU E BOUNCE CHARGES ARE LEVIED ON CUSTOMERS WHOSE PAYMEN T CHEQUES ARE BOUNCED. FURTHER THE APPELLANT HAD A LSO RELIED ON THE JUDGEMENT OF THE GUJARAT HIGH COURT IN CASE OF NIRMA INDUSTRIES (SUPRA) WHEREIN IT IS HELD THAT INTERE ST ON LATE- PAYMENT RECEIVED FROM THE CUSTOMERS WAS ELIGIBLE FO R DEDUCTION UNDER SECTION 80IA OF THE ACT. THE RELEVA NT OBSERVATIONS OF GUJARAT HIGH COURT ARE GIVEN BELOW: 30. THE TRIBUNAL WAS THEREFORE NOT JUSTIFIED IN HOLDING THAT WHILE COMPUTING DEDUCTION UNDER S. 80-I OF THE ACT INTEREST RECEIVED FROM TRADE DEBTORS TOWARDS LATE P AYMENT OF SALES CONSIDERATION IS REQUIRED TO BE EXCLUDED FROM THE PROFITS OF THE INDUSTRIAL UNDERTAKING AS THE SAME C ANNOT BE STATED TO HAVE BEEN DERIVED FROM THE BUSINESS OF TH E INDUSTRIAL UNDERTAKING.' 2.21 CHEQUE BOUNCING CHARGES ARE ALSO IN THE NATURE OF TRADING RECEIPT AND HENCE RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF HON'BLE GUJARAT HIGH COURT I DIRECT THE LEARNED AO TO ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 8 - ALLOW DEDUCTION UNDER SECTION 80IA ON CHEQUE BOUNCE CHARGES RECEIVED BY THE APPELLANT FROM ITS CUSTOMER S. 2.22 WITH REGARD TO SCRAP SALE I FIND THAT AS APPE LLANT IS IN THE NATURE OF TELECOM BUSINESS IT LAUNCHES VARIOUS SCH EMES FROM TIME TO TIME TO CREATE AS WELL AS RETAIN EXISTING C USTOMERS. FURTHER APPELLANT OCCASIONALLY OR SEASONALLY ALSO LAUNCHES VARIOUS SCHEMES AND CREATES PROPAGANDA BY VARIOUS M ODES OF COMMUNICATIONS. ONCE THE PERIOD OF SCHEME GETS O VER THE PROMOTIONAL MATERIAL IS NOT OF ANY USE TO THE APPEL LANT AND HENCE THE SAME IS SOLD AS SCRAP BY THE APPELLANT. THUS SCRAP IS DIRECTLY RELATED TO THE TELECOM BUSINESS O F THE APPELLANT AND HENCE INCOME FROM SCRAP SALES BEING DERIVED FROM THE BUSINESS OF AN UNDERTAKING IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 2.23 THE APPELLANT HAS ALSO PLACED RELIANCE ON VARI OUS JUDGMENTS OF HON'BLE AHMEDABAD ITAT AND HON'BLE GUJARAT HIGH COURT WHICH HAVE SPECIFICALLY HELD THAT INCOME EARNED FRO M SALE OF SCRAP WHICH IS GENERATED OUT OF BUSINESS ACTIVITY O F THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA OF THE ACT. 2.24 AS THE INCOME FROM SALE OF SCRAP IS DIRECTLY D ERIVED FROM THE BUSINESS ACTIVITY OF THE APPELLANT RESPECTFULLY FO LLOWING THE ABOVE JUDGMENTS OF HON'BLE GUJARAT HIGH COURT IN TH E CASE OF DCIT VS. HARJIVANDAS JUTHABHAI ZAVERI AND ANOTHER ( SUPRA) AND HON'BLE ABAD ITAT IN THE CASE OF ARVIND FASHIO NS LTD. (SUPRA) AND MIRA INDUSTRIES (SUPRA) I HOLD THAT IN COME FROM SALE OF SCRAP BEING DERIVED FROM THE BUSINESS ACTIV ITY OF THE APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 8 0IA. 2.25 WITH REGARD TO RECOVERY FOR COMPUTER USAGE BY CALL CENTRE AGENCIES AND OTHER MISCELLANEOUS STAFF RECOVERY I FIND THAT THESE CHARGES RECOVERED BY THE APPELLANT ARE IN THE NATURE OF RECOVERY OF COST INCURRED IN PROVIDING HELP DESK SE RVICES AND EXPENSES RECOVERED FROM STAFF MEMBERS RESPECTIVELY AND HENCE THE SAME ARE DIRECTLY RELATED TO THE TELECOM MUNICATION BUSINESS. 2.26 THE APPELLANT IN THE COURSE OF PROVIDING TELEC OMMUNICATION SERVICES PROVIDES HELP DESK SERVICES TO ITS SUBSCRI BERS AND POTENTIAL CUSTOMERS THROUGH AN IN-HOUSE CALL CENTRE . THE APPELLANT HAD PROVIDED ITS OWN COMPUTERS AND OTHER EQUIPMENTS ON LEASE TO OUTSIDE AGENCIES FOR MANAGIN G ITS IN- HOUSE CALL CENTRE AND RECEIVED -RENT FROM THESE OUT SIDE AGENCIES IN RETURN. THUS RECOVERY OF COMPUTER USAG E CHARGES IS ONLY RECOVERY OF COST INCURRED IN PROVIDING HELP DESK SERVICES BY THE APPELLANT TO ITS SUBSCRIBERS AND PO TENTIAL ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 9 - CUSTOMERS. HENCE AS RECOVERY OF COMPUTER USAGE CHA RGES ARE DIRECTLY INCURRED IN PROVIDING TELECOMMUNICATIO N SERVICES BY THE APPELLANT THE SAME IS ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80I A. SIMILARLY OTHER MISCELLANEOUS RECOV ERY FROM STAFF MEMBERS IS ALSO RECOVERY OF EXPENSES AND IS D IRECTLY RELATED TO PROVIDING TELECOMMUNICATION SERVICES. HE NCE APPLYING PRINCIPLES OF RECOUPMENT EXPLAINED IN THE ABOVE JUDICIAL PRECEDENTS OF P INDUSTRIES AND METRO TYRES (SUPRA) INCOME FROM MISCELLANEOUS STAFF RECOVERY IS ALSO EL IGIBLE DEDUCTION UNDER SECTION 80IA. 2.27 IN VIEW OF THE FINDINGS GIVEN IN PARA 2.18 TO 2.26 ABOVE I FIND THAT MISCELLANEOUS INCOME IS DIRECTLY RELATED TO THE TELECOMMUNICATION ACTIVITIES OF THE APPELLANT AND A CCORDINGLY ARE DERIVED FROM THE TELECOMMUNICATION UNDERTAKING AND HENCE RESPECTFULLY FOLLOWING JUDGMENTS OF HON'BLE G UJARAT HIGH COURT AND HON'BLE ITAT ENTIRE MISCELLANEOUS I NCOME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. ACCORDIN GLY I DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECT ION 80IA OF THE ACT IN RESPECT OF MISCELLANEOUS INCOME OF RS.17 50 636. 2.28 IN THE RESULT THE APPEAL IS PARTLY ALLOWED. 13. WE HAVE HEARD BOTH SIDES. THIS IS UNDISPUTEDLY SECOND ROUND OF CONSEQUENTIAL PROCEEDINGS. LD. COORDINATE BENCH IN EARLIER ROUND (SUPRA) DIRECTED THE ASSESSING OFFICE R TO EXAMINE ALL MISCELLANEOUS INCOME AS TO WHETHER THE SAME HAS BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING OR NOT. THE ASSESSEES CONTENTIONS FAILED TO IMPRESS UPON THE A SSESSING AUTHORITY IN CONSEQUENTIAL PROCEEDINGS. THE CIT(A) HEREINABOVE DEALS WITH EACH AND EVERY HEAD OF INCOM E TO CONCLUDE THAT THERE EXISTS A NEXUS BETWEEN THESE MISCELLANEOUS INCOME AND THE INDUSTRIAL UNDERTAKING IN QUESTION IN THE MANNER EXTRACTED HEREINABOVE. THER E IS NO MATERIAL ON RECORD TO REBUT THE SAME. IT HAS ALREA DY BEEN OBSERVED IN PRECEDING PARAGRAPHS THAT THIS DERIVED FROM CONCEPT NO MORE APPLIES IN CASE OF A TELECOMMUNICAT ION ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 10 - BUSINESS ENTITY. LD. COUNSEL AT THE SAME TIME POIN TS OUT VERY FAIRLY THAT THE HONBLE JURISDICTIONAL HIGH COURT I N NIRMA LTD. CASE (SUPRA) HAS ADOPTED NETTING FORMULA QUA SUCH K IND OF INCOMES. WE APPRECIATE THIS FAIR STAND AND DIRECT THE ASSESSING OFFICER TO CONFINE THE IMPUGNED DEDUCTION TO THE EXTENT OF NET AMOUNT OF MISCELLANEOUS INCOME ONLY. THIS REVENUES GROUND AS WELL AS ITS MAIN APPEAL ITA NO.948/AHD/2011 PARTLY SUCCEED FOR STATISTICAL PURP OSES. ASSESSMENT YEAR 2007-08 ASSESSEES APPEAL ITA NO. 7 75/ AHD/2011 14. THE ASSESSEE RAISES FOLLOWING SUBSTANTIVE GROUN DS IN ITS APPEAL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSIST ANT COMMISSIONER OF INCOME-TAX CIRCLE 8 AHMEDABAD IN DISALLOWING TRADE DISCOUNT OF RS.10 15 41 664 OFFER ED TO THE PRE-PAID DISTRIBUTORS DURING THE PERIOD JANUARY TO MARCH 2007 BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA ) OF THE INCOME-TAX ACT 1961 (ACT). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE CIT(A) ERRED IN HOLDING THAT THE TRADE DISCOUNT GIV EN IS IN THE NATURE OF COMMISSION AND HENCE SUBJECT TO APPLICABI LITY OF THE PROVISIONS OF SECTION 194H OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED HOLDING THAT THE INTEREST INCOME O F RS 6 04 36 534 IS NOT DERIVED FROM THE BUSINESS OF THE APPELLANT'S INDUSTRIAL UNDERTAKING AND HENCE NOT EL IGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 15. BOTH PARTIES AGREE THAT THIS TRIBUNAL IN ASSESS EES CASE ITSELF FOR A.Y.2008-09 ITA NO.386/AHD/2011 DECIDED ON 07.07.2015 HAS ADJUDICATED THE VERY ISSUE IN ITS FA VOUR. IT HOLDS THAT HONBLE KARNATAKA HIGH COURT IN BHARTI A IRTEL LTD. ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 11 - VS. DCIT (2015) 372 ITR 33 (KARNATAKA) DECIDES THE VERY ISSUE AGAINST THE REVENUE THAT SECTION 194H TDS LIA BILITY DOES NOT ARISE IN CASE AN ASSESSEE SELLS PREPAID CA RDS OF RS.100/- VALUE AT RS.80/- TO BE THE SALE PRICE TREA TED AND BALANCE RS.20/- ARE NOT REFLECTED IN ACCOUNTS TO TH E DISTRIBUTOR. THIS COORDINATE BENCH FURTHER HOLDS T HAT VARIOUS HONBLE HIGH COURTS I.E. VODAFONE ESSAR CELLULAR LT D. VS. ACIT 332 ITR 255 (KERLA) CIT VS. IDEA CELLULAR LTD. 325 ITR 148 (DELHI) AND BHARTI CELLULAR LTD. VS. ACIT 200 TAXMA N 254 (KOLKATA) DECIDE THE ISSUE AGAINST THE ASSESSEE. I T HOWEVER CONCLUDES THAT HONBLE JURISDICTIONAL HIGH COURT HA S NOT ADJUDICATED THIS ISSUE EITHER WAY AND THEREFORE TH E JUDICIAL OPINION FAVOURING THE ASSESSEE HAS TO BE ADOPTED. LD. DEPARTMENTAL REPRESENTATIVE AT THIS STAGE STATES TH AT HONBLE KOLKATA HIGH COURT IN HUTCHINSON EAST LTD.S CASE 5 9 TAXMAN.COM 176 FURTHER SUPPORTS ITS CAUSE. THE LEG AL POSITION HOWEVER REMAINS THE SAME THAT HONBLE JURI SDICTIONAL HIGH COURT HAS NOT DECIDED THE ISSUE TILL DATE. SH RI SOPARKAR INVITES OUR ATTENTION TO ABOVE TRIBUNALS DECISION REMITTING THE ISSUE BACK TO THE ASSESSING OFFICER FOR FACTUAL VER IFICATION AS FOLLOWS: 24. IN THE LIGHT OF THE ABOVE DISCUSSIONS AND PAR TICULARLY AS THERE IS NO DISPUTE THAT THE FACTUAL MATRIX OF ALL THE CASES BEFORE THE HON'BLE NON JURISDICTIONAL HIGH COURTS WERE MATERIA LLY THE SAME AS IN THIS CASE IN CONFORMITY WITH THE ESTEEMED VIEWS OF HON'BLE KARNATAKA HIGH COURT IN BHARTI AIRTEL'S CASE (SUPRA ) AND HOLD AS FOLLOWS: (A) ON THE FACTS OF THE CASE AND AS IS EVIDENT FRO M A READING OF THE AGREEMENTS BEFORE US THE ASSESSEE HAS SOLD BY WAY OF PREPAID VOUCHERS E-TOP UPS AND PREPAID SIM CARDS THE 'RIG HT TO SERVICE' ON PRINCIPAL TO PRINCIPAL BASIS TO ITS DISTRIBUTORS. A S EVIDENT FROM THE TERMS AND CONDITIONS FOR SALE PLACED AT PAGE 136 O F THE PAPER- ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 12 - BOOK NOT ONLY THAT THE SALE WAS FINAL AND THE ASSE SSEE WAS NOT RESPONSIBLE FOR ANY POST-DELIVERY DEFECTS IN THE SE RVICES IT WAS SPECIFICALLY AGREED THAT 'NO REQUEST OF REFUND OF A NY MONEY SHALL BE ENTERTAINED BY VEGL (I.E. THE ASSESSEE) UNDER ANY C IRCUMSTANCES'. (B) THE FACT THAT THERE ARE CERTAIN CONDITIONS AND STIPULATIONS ATTACHED TO THE SALE OF THIS RIGHT OF SERVICE BY TH E ASSESSEE TO HIS DISTRIBUTORS DOES NOT AFFECT THE CHARACTER OF SALE ON PRINCIPAL TO PRINCIPAL BASIS. (C) SECTION 194 H COMES INTO PLAY ONLY IN A SI TUATION IN WHICH 'ANY PERSON ........RESPONSIBLE FOR PAYING..... TO A RESIDENT ANY INCOME BY WAY OF COMMISSION' PAYS OR CREDITS SUCH ' INCOME BY WAY OF COMMISSION' . HOWEVER SINCE AT THE TIME OF THE ASSESSEE SELLING THESE RIGHTS FOR A CONSIDERATION TO THE DIS TRIBUTOR THE DISTRIBUTOR DOES NOT EARN ANY INCOME THE PROVISION S OF SECTION 194 H DONOT COME INTO PLAY ON THE TRANSACTION OF SALE O F THE RIGHT TO SERVICE BY THE ASSESSEE TO HIS DISTRIBUTORS. THE CO NDITION PRECEDENT FOR ATTRACTING SECTION 194H OF THE ACT IS THAT THER E SHOULD BE AN INCOME PAYABLE BY THE ASSESSEE TO THE DISTRIBUTOR (D) SO FAR AS THE TRANSACTION OF SALE OF 'RIGHT TO SERVICE' BY THE ASSESSEE TO HIS DISTRIBUTOR IS CONCERNED WHILE IT HAS INCOME POTENTIAL AT A FUTURE POINTS OF TIME (I.E. WHEN THI S RIGHT TO SERVICE IS SOLD AT A PROFIT BY THE DISTRIBUTOR) RATHER THAN E ARNING INCOME DISTRIBUTORS INCUR EXPENDITURE FOR THE PURCHASE OF PREPAID CARDS. THEREFORE AT THE TIME OF THE ASSESSEE SELLING THES E PRE-PAID CARDS HE IS NOT IN POSSESSION OF ANY INCOME BELONGING TO THE DISTRIBUTOR. ACCORDINGLY THE QUESTION OF ANY INCOME ACCRUING OR ARISING TO THE DISTRIBUTOR AT THE POINT OF TIME OF SALE OF PREPAID CARD BY THE ASSESSEE TO THE DISTRIBUTOR DOES NOT ARISE. (E) IN A SITUATION IN WHICH THE ASSESSEE HAS CREDIT ED THE SALE PROCEEDS AT THE TRANSACTION VALUE (IN CONTRAST WITH THE TRANSACTION BEING SHOWN AT FACE VALUE AND THE DIFFERENCE BETWEE N FACE VALUE AND THE TRANSACTION VALUE CREDITED TO THE DISTRIBUT OR) THE TAX DEDUCTION LIABILITY UNDER SECTION 194H DOES NOT ARI SE. WHILE LEARNED COUNSEL FOR THE ASSESSEE HAS STATED AT THE BAR THAT THE SALE PROCEEDS ARE CREDITED AT THE TRANSACTION VALUE THI S ASPECT OF THE MATTER IS TO BE VERIFIED BY THE ASSESSING OFFICER AND IN CASE THE SALES IS ACCOUNTED FOR AT THE FACE VALUE TO THAT E XTENT THE TAX WITHHOLDING LIABILITY IS TO BE SUSTAINED 16. WE FOLLOW SUIT IN THE IMPUGNED ASSESSMENT YEAR AS WELL IN ABSENCE OF DISTINCTION ON FACTS OR LAW IN ASSESS EES CASE OF PRECEDING ASSESSMENT YEAR AND IMPUGNED ASSESSMENT Y EAR ON THE VERY ISSUE. THIS ASSESSEES SUBSTANTIVE GRO UND IS ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 13 - HOWEVER REMITTED BACK TO THE ASSESSING AUTHORITY FO R FACTUAL VERIFICATION IN ABOVE TERMS. IT SHALL BE APPRECIAT ED IF THE LD. ASSESSING OFFICER FINALIZES BOTH ASSESSMENT YEARS PROCEEDINGS TOGETHER AS PER LAW. THIS GROUND IS TA KEN AS ACCEPTED FOR STATISTICAL PURPOSES. 17. THIS LEAVES US WITH THE ISSUE OF INTEREST INCOM E OF RS.6 04 36 534/- AND ITS ELIGIBILITY FOR SECTION 80 IA DEDUCTION. ASSESSING OFFICER ONCE AGAIN INVOKED D ERIVED FROM REASONING TO DENY THE SAME. HE QUOTED CASE L AW OF PANDIAN CHEMICALS (SUPRA) AND THAT OF STERLING FOOD S 237 ITR 579 (SC) IN SUPPORT. THE CIT(A) UPHOLDS ASSESS ING OFFICERS ACTION. 18. WE HAVE HEARD BOTH THE PARTIES ARGUING IN FAVOU R OF THEIR RESPECTIVE STANDS. THERE IS NO DISPUTE THAT THIS INTEREST INCOME ARISES ON SHORT TERM ADVANCES AND FIX DEPOSI TS OUT OF FUNDS IN THE NORMAL COURSE OF BUSINESS. THE CORRES PONDING FIGURES ARE STATED TO BE ASSESSEES SURPLUS FUNDS F OR CONDUCTING ITS TELECOMMUNICATION BUSINESS. THIS CR UCIAL PLEA HAS NOWHERE BEEN REBUTTED BY BOTH THE LOWER AUTHORI TIES IN THEIR RESPECTIVE ORDERS. HONBLE JURISDICTIONAL HI GH COURT IN (2015) 54 TAXMANN.COM 317 EMPIRE PUMPS PVT. LTD. VS . ACIT HOLDS THAT SUCH AN INTEREST INCOME HAVING DIRECT NE XUS HAS TO BE CONSIDERED AS TO HAVE BEEN DERIVED FROM THE B USINESS. WE FURTHER REITERATE THAT DELHI BENCH OF THIS TRIBU NAL IN BSNLS CASE (SUPRA) HAS ALREADY HELD THAT THIS DERI VED FROM CONCEPT DOES NOT APPLY IN CASE OF A TELECOMMUNICATI ON SERVICE PROVIDER U/S.80IA (2A) NONOBSTANT CLAUSE ENVISAGIN G ONLY ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 14 - PROFITS AND GAIN OF THE ELIGIBLE BUSINESS AS ALLOWA BLE FOR THE IMPUGNED DEDUCTION. WE FOLLOW THE VERY REASONING H EREIN AS WELL TO ACCEPT THIS ASSESSEES LATTER GROUND AS WEL L. ITS APPEAL ITA NO.775/AHD/2011 IS PARTLY ALLOWED. ASSESSMENT YEAR 2008-09 ASSESSEES AND REVENUES CR OSS APPEALS ITA NOS.2126 & 2469/AHD/2011 19. WE COME TO ASSESSEES APPEAL ITA NO.2126/AHD/20 11 RAISING THE FOLLOWING SUBSTANTIVE GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSIST ANT COMMISSIONER OF INCOME-TAX CIRCLE 8 AHMEDABAD IN MAKING AN ADDITION OF TRADE DISCOUNT OF RS.51 68 27 814 OF FERED TO THE PRE-PAID DISTRIBUTORS BY APPLYING THE PROVISION S OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT 1961 (ACT). 1.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN HOLDING THAT THE TRADE DISCOUNT GIV EN IS IN THE NATURE OF COMMISSION AND HENCE SUBJECT TO APPLICABI LITY OF THE PROVISIONS OF SECTION 194H OF THE ACT. 1.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT IN T HE GIVEN CASE TRADE DISCOUNT GIVEN TO PREPAID DISTRIBUTORS HAS NO T BEEN CLAIMED AS DEDUCTION AND HENCE PROVISIONS OF SECTI ON 40(A)(IA) OF THE ACT ARE NOT APPLICABLE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED IN HOLDING THAT THE INTEREST INCOM E OF RS 13 17 00 000 IS NOT DERIVED FROM THE BUSINESS OF TH E APPELLANT'S INDUSTRIAL UNDERTAKING AND HENCE NOT EL IGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. BOTH PARTIES STATE AT THE OUTSET THESE TWO SUBSTAN TIVE GROUNDS RAISED IN THE INSTANT APPEAL STAND COVERED IN VIEW OF OUR FINDINGS IN ASSESSEES APPEAL FOR 2007-08 DECID ED HEREINABOVE. WE APPRECIATE THIS FAIR STAND TOWARDS THE BENCH. BOTH THESE GROUNDS ARE ACCEPTED IN THE LIGH T OF OUR ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 15 - DISCUSSION HEREINABOVE IN PRECEDING PARAGRAPHS. NE EDLESS TO SAY THE ASSESSING OFFICER SHALL VERIFY NECESSARY F ACTS RELEVANT TO THE FIRST SUBSTANTIVE GROUND. ITA NO.2126/AHD/2 011 PARTLY SUCCEEDS. 20. WE COME TO REVENUES APPEAL ITA NO.2469/AHD/201 1 NOW RAISING THE FOLLOWING SUBSTANTIVE PLEADINGS: 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI V AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.117 05 76 000/- MADE BY THE ASSE SSING OFFICER ON ACCOUNT OF LICENCE FEES (AFTER ALLOWING DEDUCTION U/S.35ABB OF THE ACT) PAID TO THE 'DEPARTMENT OF TELECOMMUNICATION'. 2) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV ; AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1 08 00 000/- MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF PROPORTIONATE EXPENDITURE INC URRED IN RELATION TO EARNING ADVANCE INCOME. 3) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING OFFICER TO CONSIDER THE A.Y.1997-98 INSTE AD OF A.Y. 1996-97 AS THE FIRST YEAR FOR THE PURPOSE OF CLAIMI NG THE ALLOWANCE U/S.80IA OF THE ACT. 4) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEDUCTION U/S.80IA OF THE ACT AND IN DIRECTING THE ASSESSING OFFICER TO APPLY THE AMENDED PROVISIONS APPLICABLE FROM A.Y.2000-2001 TO THE APPELLANT AS P ER LAW. 5) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.80IA OF TH E ACT ON INCOME EARNED FROM SHARING FIBRE CABLES AND CELL SI TES TO THE ASSESSEE. 6) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G TO ALLOW THE CLAIM FOR DEDUCTION U/S.80IA OF THE ACT F ROM REVENUE OF RS.5 90 000/- FROM SHARING FIBRE CABLES AND RS.9 63 000/- FOR SHARING CELL SITES AND I.E. TOWE RS ETC. WITH OTHER SERVICE PROVIDERS. ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 16 - 7) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF CLAIM FOR DEDUCTION U/S.80IA OF THE ACT ON LATE PAYMENT CHARGES AND CHEQUE BOUNCE CHARGES RECE IVED FROM THE CUSTOMER. 21. LD. COUNSEL REPRESENTING BOTH PARTIES INFORM TH E BENCH THAT THE CIT(A) IN THE LOWER APPELLATE FINDINGS UND ER CHALLENGE HAS ADJUDICATED FIRST ISSUE OF LICENSE FE E IN ASSESSEES FAVOUR BY PLACING RELIANCE ON THIS TRIBU NALS DECISION IN ITS OWN CASE FOR ASSESSMENT YEAR 2006-0 7 DECIDED ON 29.01.2010 HOLDING THE SAME AS REVENUE EXPENDITU RE. WE FIND NO REASON TO ADOPT A DIFFERENT VIEW IN ABSENCE OF ANY DISTINCTION ON FACTS AND LAW BEING POINTED OUT. TH E FIRST SUBSTANTIVE GROUND IS REJECTED. 22. THE REVENEUES SECOND SUBSTANTIVE GROUND POSSES CHALLENGE TO THE CIT(A)S FINDINGS DELETING DISALLO WANCE OF PROPORTIONATE EXPENSES OF RS.1 08 00 000/- INCURRED IN RELATION TO ADVANCE INCOME AS UNDER: 3.6 DECISION I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION FILED BY THE LD.AR OF THE AP PELLANT THE A.O. HAS MADE THE DISALLOWANCE OF EXPENDITURE WITH RESPE CT TO ADVANCE INCOME BY HOLDING THAT MARKETING SALES AND DISTRIB UTION EXPENSES SHOULD ALSO BE ALLOCATED TO THE YEAR IN WHICH THE R EVENUE IS RECOGNIZED. IT IS THE CLAIM OF THE APPELLANT THAT T HESE EXPENSES ARE NOT DIRECTLY RELATED TO THE EARNING OF REVENUE AND THEREFORE SHOULD NOT BE APPORTIONED IN THE YEAR OF RECOGNI TION OF REVENUE. I AM INCLINED TO ACCEPT THE SUBMISSION MADE BY THE AP PELLANT. THE APPELLANT HAS BEEN CONSISTENTLY FOLLOWING A SYSTEM OF ACCOUNTING THE INCOME ON THE BASIS OF SERVICES RENDERED. THE E XPENSES THAT ARE DIRECTLY RELATED TO THE USES OF TALK TIME IN TH E SIM CARD SUCH AS 1UC CHARGES LICENSE FEE ROAMING CHARGES ETC. ARE CHARGED TO THE PROFIT AND LOSS ACCOUNT ON PROPORTIONATE BASIS WHER EAS THE FIXED EXPENSES SUCH AS BUSINESS AND SALES PROMOTION COST OF GOODS SOLD AND OTHER SELLING AND 'DISTRIBUTION EXPENSES HAVE N OT BEEN CHARGED IN PROPORTION TO THE REVENUE BUT HAS BEEN CHARGED F ULLY. IT IS A GENERALLY ACCEPTED PRINCIPLE OF ACCOUNTING THAT THE FIXED COSTS ARE ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 17 - NOT LINKED TO REVENUE AND WOULD BE INCURRED WHETHER OR NOT THE APPELLANT UNDERTAKES ANY SALE OR RENDER ANY SERVICE . SIMILARLY VARIABLE EXPENSES ARE DIRECTLY LINKED TO THE LEVEL OF ACTIVITIES I.E. THE USAGE OF TALK TIME BY THE CUSTOMER. THE APPELL ANT HAS CORRECTLY FOLLOWED THE ACCOUNTING PRINCIPLES HE HAS BEEN MAI NTAINING ITS ACCOUNTS FOR THE EARLIER YEARS BY FOLLOWING THIS AC COUNTING PRINCIPLE. THE DECISION RELIED ON BY THE AO IN THE CASE OF TAPARIA TOOLS LIMITED (260 ITR 102) IS RENDERED IN RESPECT OF ALLOWABILITY OF DEFERRED REVENUE EXPENSES WHICH IS NOT THE FACTS IN THE PRESENT CASE AND CANNOT BE APPLIED. CONSIDERING THE ABOVE MENTIONED FACTS AND CIRCUMSTA NCES THE A.O. WAS THEREFORE NOT JUSTIFIED IN MAKING AN ADDITION BY REJECTING THE CONSISTENT AND REGULAR METHOD OF ACCOUNTING BY THE APPELLANT WITHOUT ANY SOUND BASIS. ACCORDINGLY THE GROUND OF APPEAL IS ALLOWED AND THE DISALLOWANCE MADE BY THE A.O. IS DE LETED. 23. HEARD BOTH PARTIES. IT HAS COME ON RECORD THAT ASSESSEE IS FOLLOWING THE VERY ACCOUNTING SYSTEM ON THE BASI S OF SERVICES RENDERED SINCE EARLIER ASSESSMENT YEARS. THE ASSESSING OFFICER IN HIS ORDER PLACES RELIANCE ON H ONBLE BOMBAY HIGH COURT DECISION IN CASE OF TAPARIA TOOLS LTD. (2003) 260 ITR 102 TO INVOKE MATCHING CONCEPT. HON BLE APEX COURT REVERSES THE SAME IN ITS DECISION REPORT ED AT (2015) 372 ITR 605 (SC). THE REVENUES ARGUMENTS SUPPORTING THE ASSESSING OFFICERS STAND ARE ACCORD INGLY DECLINED. THIS SECOND SUBSTANTIVE GROUND FAILS. 24. THE REVENUES THIRD SUBSTANTIVE GROUND SEEKS TO TREAT ASSESSMENT YEAR 1996-1997 INSTEAD OF 1997-98 AS THE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF SECTION 80IA DED UCTION. THIS TRIBUNAL IN ASSESSMENT YEARS 2006-07 & 2007-08 HAS ALREADY HELD THE LATER ASSESSMENT YEAR TO BE THE IN ITIAL ASSESSMENT YEAR. WE FOLLOW THE SAME HEREIN AS WEL L IN ABSENCE OF ANY DISTINCTION BEING POINTED OUT AT REV ENUES BEHEST. THIS THIRD SUBSTANTIVE GROUND IS THUS REJE CTED. ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 18 - 25. THE REVENUES FOURTH SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS WRONGLY HELD THAT THE ASSESSE IS ELI GIBLE FOR SECTION 80IA DEDUCTION THEREBY DIRECTING THE ASSESS ING OFFICER TO APPLY AMENDED PROVISIONS FROM ASSESSMENT YEAR 2000-01 IN ITS CASE. WE NOTICE THAT THIS TRIBUNAL IN A.Y. 2006-07 HAS ALREADY ADJUDICATED THE VERY ISSUE IN A SSESSEES FAVOUR ON SIMILAR LINE. THIS SUBSTANTIVE GROUND IS THUS DECLINED. 26. THE REVENUES NEXT SUBSTANTIVE GROUND AVERS THA T THE CIT(A) HAS WRONGLY DIRECTED THE ASSESSING OFFICER T O ALLOW SECTION 80IA DEDUCTION ON ASSESSEES INCOME FROM SH ARING FIBRE CABLES AND CELL SIDES. WE FIND THAT THE CIT( A) FOLLOWS TRIBUNALS ORDER FOR A.YS. 2005-06 & 2006-07 IN ASS ESSEES CASES ITSELF. WE PLACE RELIANCE ON THE SAME TO AFF IRM THE CIT(A) FINDINGS UNDER CHALLENGE. THIS REVENUES GR OUND IS ACCORDINGLY REJECTED. 27. THE REVENUES NEXT SUBSTANTIVE GROUND PLEADS TH AT THE LOWER APPELLATE AUTHORITY HAS WRONG DIRECTED THE AS SESSING OFFICER TO ALLOW SECTION 80IA DEDUCTION TO THE ASSE SSEE ON ITS INCOME OF RS.5.9LACS AND 9.63LACS FROM SHARING OF F IBRE CABLES AND CELL SIDES; RESPECTIVELY. HEREIN ALSO WE FIND THAT THE CIT(A) PLACES RELIANCE UPON TRIBUNALS ORDER INDICA TED IN THE PRECEDING PARAGRAPH. THIS REVENUES GROUND ALSO ME ETS THE SAME OUTCOME ACCORDINGLY. 28. THE REVENUES LAST SUBSTANTIVE GROUND STATES TH AT THE CIT(A) HAS WRONGLY DELETED THE DISALLOWANCE OF SECT ION 80IA ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 19 - DEDUCTION CLAIM ON LATE PAYMENT CHARGES/CHEQUE BOUN CE CHARGES RECEIVED FROM CUSTOMERS. DEEM IT APPROPRIA TE TO EXTRACT THE CIT(A)S FINDINGS UNDER CHALLENGE READI NG AS FOLLOWS: 8.5 DECISION I HAVE CAREFULLY PERUSED THE ASSESSME NT ORDER AND THE WRITTEN SUBMISSION FILED BY THE LD.AR OF THE AP PELLANT. THERE ARE TWO COMPONENTS OF THIS GROUND OF APPEAL. ONE IS RELATED TO CHEQUE BOUNCE CHARGES AND THE OTHER IS L ATE PAYMENT CHARGES RECEIVED BY THE APPELLANT. FOR THE SAKE OF CONVENIENCE BOTH COMPONENTS ARE DISCUSSED SEPARATE LY HEREUNDER: 8.6.1. CHEQUE BOUNCE CHARGES: THE CHEQUE BOUNCING CHARGES ARE THE CHARGES WHICH T HE BANK LEVIES FROM THE APPELLANT AFTER THE CHEQUE RE CEIVED FROM THE CUSTOMERS BOUNCES AFTER DEPOSITING THE SA ME IN THE BANK ACCOUNT OF THE APPELLANT. THESE CHARGES ARE TH AN RECOVERED FROM THE CUSTOMER BY THE APPELLANT. THERE FORE THESE CHARGES ATE IN THE NATURE OF REIMBURSEMENT OR REPLENISHMENT OF THE PENAL CHARGES PAID BY THE APPE LLANT TO THE BANK. THESE CHARGES ARE NOT LINKED TO THE BUSIN ESS OF TELECOMMUNICATION OF THE APPELLANT: THEREFORE THE CHEQUE BOUNCE CHARGES RECOVERED FROM THE CUSTOMERS CANNOT BE SAID TO BE DERIVED FROM THE TELECOMMUNICATION BUSINESS O F THE APPELLANT. THE JUDGMENT OF JURISDICTIONAL GUJARAT H IGH COURT IN THE CASE OF NIRMA INDUSTRIES LIMITED V DCIT (SUP RA) IS NOT APPLICABLE IN THE PRESENT CASE AS THE FACTS ARE DIF FERENT AND THE ISSUE INVOLVED IN THAT CASE WAS THE LATE PAYMEN T CHARGES RECEIVED FROM THE CUSTOMERS. HOWEVER THE APPELLANT HAS POINTED OUT THAT HE HAS INCURRED BANK CHARGES OF RS . 32.2 MILLION DURING THE ASSESSMENT YEAR AS AGAINST WHICH THE CHEQUE BOUNCING CHARGES RECOVERED FROM THE CUSTOMER WERE RS. 7.22 MILLION AND THEREFORE THE CHEQUE BOUNCE CHARGES SHOULD BE ADJUSTED FROM THE BANK CHARGES PAID BY TH E CUSTOMERS. I AM INCLINED TO ACCEPT THIS ARGUMENT O F THE APPELLANT AS THE CHEQUE BOUNCING CHARGES RECOVERED FROM THE CUSTOMERS ARE INFACT THE CHARGES THAT HAS BEEN PAID TO THE BANK AS PENAL CHARGES. THE A. O. IS THEREFORE DIR ECTED TO WORK OUT THE DEDUCTION U/S. 80IA AFTER REDUCING THE CHEQUE BOUNCE CHARGES FROM THE BANK CHARGES. . 8.6.2.LATE PAYMENT CHARGES: THE LATE PAYMENT CHARGES ARE RECOVERED FROM THE CUS TOMERS FOR THE DELAY IN PAYMENT OF TELEPHONE BILLS. THESE CHARGES ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 20 - ARE IN INEXTRICABLY LINKED TO THE BUSINESS OF THE A PPELLANT AND ARE COLLECTED AT THE TIME OF BILLING. THESE ARE TH EREFORE IN THE NATURE OF TRADING RECEIPT WHICH IS DERIVED BY THE A PPELLANT WHILE RENDERING TELECOMMUNICATION SERVICES. I AM T HEREFORE INCLINED TO AGREE WITH THE SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT HAS RIGHTLY RELIED ON THE DECISION OF JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF NI RMA INDUSTRIES LIMITED V/S. DCIT [283 ITR 402]. IT WAS HELD THAT INTEREST CHARGED ON LATE PAYMENT BY CUSTOMERS ARE I N THE NATURE OF TRADING RECEIPT AND HENCE ELIGIBLE FOR TH E DEDUCTION UNDER SECTION 80I OF THE ACT THE NATURE OF CHARGES RECEIVED BY THE APPELLANT ARE SIMILAR TO THE CHARGES IN THE NIRMA'S CASE ACCORDINGLY IT IS HELD THAT THE INCOME IN R ESPECT OF LATE PAYMENT CHARGES ARE IN THE NATURE OF TRADING R ECEIPT AND HENCE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IA OF THE ACT. 8.6.3. ACCORDINGLY THIS GROUND OF THE APPELLANT IS PARTLY ALLOWED. 29. IT IS APPARENT QUA THE FIRST HEAD OF CHEQUE BOU NCE CHARGES THAT CIT(A) HAD DIRECTED THE ASSESSING OFFI CER TO WORK OUT THE NET FIGURE THEREOF WITH THOSE PAID TO THE B ANK. THE ASSESSEES CASE WAS THAT ITS CHEQUE BOUNCE CHARGES RECEIVED ARE ALREADY LESS THAN THOSE PAID TO THE BANK. THE ASSESSING OFFICER HAS ADMITTEDLY NOT REJECTED THIS FACTUAL PO SITION. HE FURTHER FIND THAT THE CIT(A) FOLLOWED HONBLE JURIS DICTIONAL HIGH COURTS DECISION IN CASE OF NIRMA INDUSTRIES L TD. (SUPRA) TO CONCLUDE THAT ASSESSEES LATE PAYMENT CHARGES AR E IN FACT TRADING RECEIPTS COLLATED AT THE TIME OF BILLING. THE REVENUE FAILS TO POINT OUT ANY ILLEGALITY OR IRREGULARITY T HEREIN QUA BOTH THESE SIDES. WE REITERATE THAT THE CIT(A) HAS ALRE ADY HELD THE FORMER SUM AS NOT DERIVED FROM THE ELIGIBLE UNDERTA KING. WE FIND NO REASON IN THIS FACTUAL BACKDROP TO INTERFER E WITH THE SAME. THIS REVENUES GROUND IS ALSO REJECTED. SO IS ITS APPEAL ITA NO.2469/AHD/2011. ITA NOS. 948 775 2126 & 2469/AHD/2011 (VODAFONE E SSAR GUJARAT LTD.) - 21 - 30. THE REVENUES APPEAL ITA NO.948/AHD/2011 IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS ITA NO.2469/AHD/2011 IS DISMISSED. THE ASSESSEES BOTH APPEALS I.E. ITA NO.775/AHD/2011 AND ITA NO.2126/AHD/2011 ARE PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF SEPTEMBER 2016.] SD/- SD/- (PRAMOD KUMAR) (S. S. GODA RA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30/09/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ --. . /0 / DR ITAT AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0