DCIT, New Delhi v. M/s. Bharti Infotel Ltd., New Delhi

ITA 4501/DEL/2010 | 2002-2003
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 450120114 RSA 2010
Assessee PAN AAACB2798R
Bench Delhi
Appeal Number ITA 4501/DEL/2010
Duration Of Justice 11 month(s) 19 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Bharti Infotel Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-09-2011
Date Of Final Hearing 20-09-2011
Next Hearing Date 20-09-2011
Assessment Year 2002-2003
Appeal Filed On 11-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NOS. 4501 & 4502(DEL)/2010 ASSESSMENT YEARS: 2002-03 & 2003-04 DEPUTY COMMISSIONER OF M/S BHA RTI INFOTEL LTD. INCOME-TAX CIRCLE 2(1) VS. (FORM ERLY KNOWN AS BHARTI TELENET NEW DELHI. LTD.) H-5/12 QUTAB AMBIENCE MEHRAULI ROAD NEW DELHI-30. PAN-AAACB2798R (APPELLANT) (RESPON DENT) APPELLANT BY : MRS. GEETMALA MOHANTY CIT DR RESPONDENT BY: SHR I ANIL BHALLA C.A. DATE OF HE ARING : 20.09.2011 DATE OF PRONOUNCEMENT: 30.09.2011. ORDER PER K.G. BANSAL : AM BOTH THESE APPEALS INVOLVE SIMILAR GROUNDS IN REGARD TO NATURE OF VARIABLE LICENSE FEE PAID TO DEPARTMENT OF TELECOM MUNICATION (DOT FOR SHORT) AND DEDUCTION OF INTEREST RELATABLE TO INTEREST-FREE LOANS GRANTED TO SUBSIDIARIES/GROUP COMPANIES. THE GROUNDS DI FFER ONLY IN RESPECT OF THE AMOUNT INVOLVED IN THE TWO YEARS. THE CAS E OF THE REVENUE IS THAT THE FEE PAID TO THE DOT HAS TO BE AMORTIZED IN ACCO RDANCE WITH THE PROVISION CONTAINED IN SECTION 35-ABB OF THE ACT AND THE INTEREST-BEARING LOANS HAVE BEEN DIVERTED FOR NON-BUSINESS PURPOSES TO THE SUBSIDIARIES/GROUP ITA NOS. 4501 & 4502(DEL)/2010 2 COMPANIES THEREFORE INTEREST PAID ON BORROWED FUNDS IS NOT DEDUCTIBLE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 2. IN REGARD TO THE FIRST GROUND IT IS THE COMMON POSITION THAT THE ISSUE STANDS COVERED BY THE DECISION OF H BENCH OF DE LHI TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR ASSESSMENT YEAR 2000-01 IN ITA NO. 829(DEL)/2004 DATED 24.07.2009 A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NOS. 141 TO 144. IT HAS BEEN HELD THAT T HE FEE PAID TO DOT AND THE INTEREST PAID IN RESPECT OF THE FEE CONSTITUTE THE REVENUE EXPENDITURE. RELYING ON THIS DECISION GROUND NO. 1 IN BOTH T HE APPEALS IS DISMISSED. FOR THE SAKE OF READY REFERENCE THE RELEVANT POR TION OF THE ORDER RELIED UPON IS REPRODUCED BELOW:- 3. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTE NTION AND GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS NOT MADE ANY INDEPENDENT DISCUSSION ON THE ISSUE. THE LD. CIT(A) WAS OF THE OPINION THAT FACTS ARE IDENTICAL TO THE FACT OF M/S BHARTI CELLULAR LTD. AND AFTER EXTRACTING HIS FINDING IN THAT CASE HE UPHELD T HE ACTION OF THE AO IN THE CASE OF ASSESSEE. FROM THE ASSESSME NT ORDER IT EMERGES OUT THAT ASSESSEE HAD CLAIMED A SUM OF RS. 5 10 72 110/- UNDER THE HEAD VARIABLE LICENCE FEE PAID. THE AO ON A DETAILED ANALYSIS OF THE NATURE OF PAYM ENT ETC. HAVE ARRIVED AT A CONCLUSION THAT ENTIRE LICENCE FEE CLAIMED BY THE ASSESSEE UNDER THE HEAD VARIABLE LICENSE FEE PAI D AS REVENUE EXPENDITURE FOR THE YEAR UNDER CONSIDERA TION IS NOT ALLOWABLE. IN HIS OPINION IT HAS TO BE AMORTIZED OVER THE ITA NOS. 4501 & 4502(DEL)/2010 3 REMAINING PERIOD OF THE TERM OF LICENSE I.E. 17 YEARS. PROPORTIONATELY HE ALLOWED A DEDUCTION OF RS. 30 04 241/- IN THIS YEAR. IN THIS WAY HE DISALLOWED A SUM OF RS . 4 80 67 869/- AND ON SIMILAR LOGIC INTEREST PAID BY ASSESSEE ON THIS LICENCE FEE HAS BEEN ADDED BACK. IN THE CASE OF M/S B HARTI CELLULAR LTD. THE TRIBUNAL HAS MADE FOLLOWING OBSERVATION WHILE ADJUDICATING THE ISSUE:- 7. IN REGARD TO GROUND NO. 3 IT WAS SUBMITTED BY LD. AR THAT THE AO HAD ERRED IN HOLDING THE EXPE NDITURE BEING THE VARIABLE REVENUE SHARING FEE PAID PURS UANT TO THE MIGRATION OF THE ASSESSEE TO THE NEW TELECOM POLICY 1999 AS A CAPITAL EXPENDITURE. IT WAS THE SUBMISSION THAT THIS ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF MAHANAGAR TELEPHONE NIGAM LTD. REPORTED IN 100 TTJ 1 AS ALS O THE DECISION IN THE CASE OF COMSAT MAX LTD. IN ITA NOS. 728 AND 701(DEL)/2005. IT WAS THE SUBMISSI ON THAT THE ASSESSEE HAD PAID LICENCE FEE BY WAY OF REVENUE SHARE AT 15% OF THE GROSS REVENUE OF THE COMPANY W.E.F. 1.8.99. DURING THE RELEVANT ASS ESSMENT YEAR THE COMPANY HAD ACCEPTED THE MIGRATION TO THE REVENUE SHARING REGIME. IT WAS THE SUBMISSION THAT THE PAYMENT MADE BY THE ASSESSEE UNDER THE NEW TELECOM POLICY OF 1999 WAS REVENUE IN NATURE. 8. IN REPLY THE LD. DR SUPPORTED THE ORDERS OF AO AND CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE ALSO PERUSED THE ORDER OF THIS TRIBUNAL IN THE CASE O F MTNL REFERRED TO SUPRA. IT IS NOTICED THAT THE BOMBAY BENCH OF THIS TRIBUNAL IN THE CASE OF MTNL HAS AFTER CONSIDERING THE VARIOUS DETAILS AND SUBMISSIONS OF THE ASSESSEE AND THE REVENUE THEREIN HAS HELD THAT THE LICENCE FEE WAS PAID ONLY FOR THE USE OF THE RIG HT TO DO THE BUSINESS OF TELECOM PROVIDER. THE SAID RIGHT DID NOT GIVE RISE TO ANY CAPITAL ASSET. FURTHER THE B OMBAY BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOW: ITA NOS. 4501 & 4502(DEL)/2010 4 8. REVOCATION OF LICENSES- THE CENTRAL GOVERNMENT MAY AT ANY TIME REVOKE ANY LICENCE GRANTED U/S 4 ON THE BREACH OF ANY OF THE CONDITIONS THEREIN CONTAINED OR IN DEFAULT O F PAYMENT OF ANY CONSIDERATION PAYABLE THEREUNDER. FROM PERUSAL OF S. 8 OF THAT ACT IT IS NOW EVIDEN T THAT UNDER THE CIRCUMSTANCES THE LICENCE IS REVOKED THE APPELLANT SHALL NOT BE ABLE TO CARRY ON ITS BUSINESS OF TELEPHONE SERVICES UNLESS IT H AD PAID SUCH A LICENCE FEE TO THE GOVERNMENT. THE IRRESISTIBLE CONCLUSION THEREFORE WOULD BE THAT PAYMENT OF LICENCE FEE IS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS CARRIED O N BY IT. THE SAME IS THEREFORE AN ALLOWABLE DEDUCTI ON U/S 37 OF THE ACT. SINCE THE LIABILITY STANDS PAI D DURING THE YEAR UNDER CONSIDERATION WE DIRECT TH E AO TO ALLOW THE DEDUCTION TO THE APPELLANT. 10. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M TNL REFERRED TO SUPRA WE ARE OF THE VIEW THAT THE VAR IABLE REVENUE SHARE LICENCE FEE PAID PURSUANT TO THE MIGRATION OF THE ASSESSEE TO THE NEW TELECOM POL ICY OF 1999 IS LIABLE TO BE ALLOWED AS REVENUE EXPEND ITURE AND WE DO SO. IN THE CIRCUMSTANCES AO IS DIRECT ED TO DELETE THE ADDITION MADE BY HOLDING THE VARIABL E REVENUE SHARE FEE PAID TO BE CAPITAL EXPENDITURE . IN THE CIRCUMSTANCES GROUND NO. 3 IN ASSESSEES APPE AL STANDS ALLOWED. 11. IN REGARD TO GROUND NO. 4 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIR MING THE ACTION OF THE AO IN DISALLOWING THE INTEREST ON T HE LICENCE FEE PAID TO THE DOT GOVERNMENT OF INDIA HOLDING THE SAME TO BE CAPITAL EXPENDITURE ON TH E GROUND THAT THE VARIABLE REVENUE SHARING FEE PAID HAD BEEN HELD AS CAPITAL EXPENDITURE. AS WE HAVE A LREADY ITA NOS. 4501 & 4502(DEL)/2010 5 HELD THAT THE VARIABLE REVENUE SHARING FEE PAID PURSUANT TO THE MIGRATION OF THE ASSESSEE TO THE NEW TELECOM POLICY OF 1999 IS REVENUE EXPENDITURE CONSEQUENTLY THE INTEREST ON THE LICENCE FEE PA ID WOULD ALSO BE IN THE REVENUE FIELD. IN THE CIRCUMSTANCE S THE AO IS DIRECTED TO DELETE THE SAID ADDITION AND GRANT THE ASSESSEE BENEFIT OF THIS EXPENDITURE U/S 37(1) OF THE ACT. IN THE CIRCUMSTANCES GROUND NO. 4 IS AL LOWED. 4. THERE IS NO DISPARITY OF FACTS IN THE CASE OF ASSESSEE. THEREFORE WE ALLOW BOTH THE GROUNDS OF APPEAL AND DELETE THE DISALLOWANCE. WE DIRECT THE AO TO ALLOW THE CLAIM OF ASSESSEE FOR REVENUE EXPENDITURE. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. 3. IN REGARD TO GROUND NO. 2 ALSO IT IS THE ADM ITTED POSITION THAT IT STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN TH E CASE OF THE ASSESSEE IN ITA NO. 3167(DEL)/2005 FOR ASSESSMENT YEAR 2001- 02 PLACED IN THE PAPER BOOK ON PAGE NOS. 152 TO 175. RELYING ON THI S DECISION GROUND NO. 2 IN BOTH THE APPEALS IS ALSO DISMISSED. FOR THE SAKE OF READY REFERENCE THE RELEVANT PARAGRAPHS OF THE DECISION ARE REPRODU CED BELOW:- 17. IN GROUND NO. 2 THE GRIEVANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8 80 36 863/- WHICH HAS BEEN ADDED BY THE AO BY MAKING DISALLOWANCE OF INTEREST PAID. THE AO IS OF THE OPI NION THAT ASSESSEE HAS USED INTEREST BEARING FUNDS FOR NON -BUSINESS PURPOSE. LD. CIT(A) HAS DISCUSSED THE ISSUE IN DETAIL AND HELD THAT AO FAILED TO APPRECIATE THE CONTROVER SY IN RIGHT PERSPECTIVE AND HAS DISALLOWED THE AMOUNT BY RECOR DING UNSUSTAINABLE REASONS. ITA NOS. 4501 & 4502(DEL)/2010 6 18. WITH THE ASSISTANCE OF LD. REPRESENTATIVE WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT AO HAS NOT MADE REFERENCE TO ANY DETAILS WHILE WORKING OUT THI S DISALLOWANCE. HE HAS DISALLOWED THE INTEREST E XPENSES ON SURMISES AND CONJECTURES. WHILE DECIDING GROUND NO. 1 OF THE ASSESSEE WE HAVE TAKEN NOTE OF THE ASSESSEES F INANCIAL POSITION IN THE FOREGOING PARAGRAPH. THE ASSES SEE HAS DEMONSTRATED THAT IT HAS MORE INTEREST-FREE FUNDS FOR MAKING INVESTMENT. IT HAS NOT USED ANY INTEREST BEARI NG FUNDS FOR THE PURPOSE OF INVESTMENT. LD. CIT(A) ALSO C ONSIDERED THIS ASPECT BEFORE DELETING THIS ADDITION. THUS TA KING INTO CONSIDERATION THE FUND FLOW STATEMENT EXTRACT ED IN PARAGRAPH 4 OF THIS ORDER WE DO NOT FIND ANY ME RIT IN THIS GROUND OF APPEAL RAISED BY THE REVENUE. 4. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. SD/- SD/- (I.P. BANSAL) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S BHARTI INFOTEL LTD. NEW DELHI. DY. CIT CIRCLE-2(1) NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.