Income Tax Appellate Tribunal - Mumbai
Idea Cellular Ltd, Mumbai vs Assessee on 14 March, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL " I " BENCH, MUMBAI
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BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND
SHRI RAJENDRA, ACCOUNTANT MEMBER
vk;dj vihy la[;k/ITA NO.3260/Mum/2008
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M/s Idea Cellular Ltd. Additional Commissioner of
Windsor, 5th Floor, Vs. Income Tax, Range 3(2)
Off. CST Road, Mumbai.
Near Vidya Nagari,
Kalina, Santa Cruz (East)
Mumbai - 400 098.
PAN:- AAACB21OOP
Appellant Respondent
vk;dj vihy la[;k/ITA NO.3493/Mum/2008
¼fu/kkZj.k o"kZ@Assessment year:- 2001-02
Income Tax Officer M/s Idea Cellular Ltd.
(3)(2)(1) Vs. Windsor, 5th Floor,
Room No. 673, 6th Floor, Off. CST Road,
Aayakar Bhavan, Near Vidya Nagari,
Mumbai - 400 020. Kalina, Santa Cruz (East)
Mumbai - 400 098.
PAN:- AAAFJ1402D
Appellant Respondent
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Assessee By/fu/kkZ Shri J.D. Mistry
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Revenue By/jktLo Shri P.K. Shukla & Shri O.P, Singh
Date of hearing 29.04.2014
Date of pronouncement 13.05.2014
ORDER
Per Vijay Pal Rao, JM
These cross appeals are directed against the order dated 14.03.2008 of CIT(A) for the assessment year 2001-02. The assessee has raised following grounds in this appeal.
M/s Idea Cellular Ltd.
Ground No.1: Disallowance of Expenses of Rs. 3,94,75,619/-
1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the Additional Commissioner of Income Tax, Range 3(2), Mumbai (" the AO") in disallowing amount of Rs. 3,94,75,619/- being amount written off by the Appellant in respect of expenses on abondoned projects on the ground tht the entire expenditure has been incurred for the purpose of bringing into existence a new source of income and hence such expenditure is capital in nature.
Ground No. 2.: Disallowance of Additional claim u/s 35ABB of the Act.
1. On the fact and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO of disallowing Rs. 11,24,92,260/- being the amount of license fees paid by TATA Cellular Ltd to Department of telecommunication upto December 31, 2000, on the ground that the claim was made by a letter without filing a revised return of income.
Ground no. 3: Amount paid towards Revenue share Expenses be allowed as Revenue Expenditure u/s 37 of the Act.
1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not entertaining the additional ground in allowing deduction u/s 37 or u/s 35ABB fo the Act on Revenue Share Expenses on the ground that the claim was not emanating from the Return of Income and even was not taken before the AO in the assessment proceedings.
2. Ground No. 1 is regarding disallowance of expenditure on abondoned project.
2.1 During the course of assessment proceedings, the AO noted that the assessee has incurred expenses on abondoned project to the tune of Rs. 3,94,75,619/-. On query from the AO, the assessee submitted that the assessee was required to put up cellsites for enabling its business. In certain cases the assessee had incurred expenses for putting up cellsites but this could not be completed and were abondoned. The assessee claimed that the expenses were incurred for the purpose of its business and, therefore, is allowable as business expenditure. The AO disallowed the claim of the assessee on the ground that the expenditure has been spent by the assessee on sites to bring into existence the new asset and new source of income.
2M/s Idea Cellular Ltd.
Accordingly the AO held that the loss incurred due to abondonment of project, is capital in nature and accordingly disallowed the deduction claimed by the assessee.
2.2 On appeal, the CIT(A) has concurred with the view of the AO and held that the expenses incurred on cell sites were definitely capital expenses, when such a project is abondoned, the entire expenditure incurred is a capital loss..
2.3 Before us, Shri J.D. Mistri, Ld. Senior Counsel for assessee submitted that the expenditure in question has been incurred for setting up/construction of cell towers which were abondoned due to unavoidable circumstances/reasons as it was not found if and suitable in the area of operation, therefore, the expenditrue was incurred for the purpose of existing business of the assessee and not intended for any new business. Since the towers could not be brought into existence, therefore, the expenditure on the abondoned project is allowable business expenditure. In support of his contention, the Ld. Senior Counsel has referred the various decisions, however reliance is placed on the deicision of Hon'ble Jharkhand High Court in the case of CIT Vs. Tata Robins Fraser Ltd. ( (211 Taxman 257). The Ld. Senior Counsel has submitted that the Hon'ble High Court has held that the pre-operational expenses on an abondoned project can be treated as revenue expenditure and not capital expenditure. He has stressed the point that in the case of the assessee the project of construction of tower were abondoned due to the reasons that the sites were not found suitable, therefore, the decision in the case of Tata Robins Fraser Ltd. is squarely applicable in the facts of the assessee's case.
2.4 On the other hand, the Ld. DR has submitted that the expenditure has been incurred not only on suvey of the sites but also for the development of the sites as well as feasibility report, therefore, the expenditure of such nature is in the capital field and loss due to the abondonment of the project would certainly 3 M/s Idea Cellular Ltd.
be a capital loss and not revenue loss. He has relied uon the orders of authorities below and reiterated that the entire expenditure has been incurred for the purpose of brining into existence new asset and new source of income. Therefore, the expenditure of such nature is not allowable as revenue expenditure.
2.5 We have considered the rival submissions as well as relevant material on reocord. There is no dispute that the expenditure in question was incurred by the assessee for the purpose of construction/erection of cellular towrers which were abondoned due to the reason that the same were not found suitable. The authorities below have disallowed the claim of the assessee on two reasons viz. (i) the expenditure has been incurred for bringing up a capital asset into existence.(ii) the capital asset being cellular sites/towers would be the new source of income. As far as the cellular towers being new source of income is concerned, we find, that the towers were being erected for the purpose of assessee's own business of providing cellular services to its customers. Therefore, the tower is only a mean through which the assessee is able to provide cellular services and it is not an independent source of income It is only to facilitate the assessee to manage and run the business of providing cellular services in a more efficient, convenient and profitable manner. Therefore, when the towers are not exclusively meant for leasing out to third parties for earning the revenue but used for transmission of telephone signals of assessee's own cellular services then it cannot be said that the towers which are used for the assessee's own business are new source of income. A cellular tower can be a new independent source of income if it is erected exclusively for leasing out to the other operators. Since this project of erecting towers is undisputedly abondoned by the assessee, therefore, there is no question of any new asset came into existence. The expenditure no doubt has been incurred wholly and exclusively for the purpose of assessee's business. Therefore, to examine the allowability of such expenditure u/s 37(1), the only requirement 4 M/s Idea Cellular Ltd.
which has to be seen is that the expenditure is of revenue nature and not capital nature. There are series of decisions wherein the Hon'ble High Courts and Hon'ble Supreme Court has laid down the principle that if an expenditure is incurred for doing the business in a more convenient and profitable manner and has not resulted in brining any new asset into existence then such expenditure is allowable business expenditure. It is also pertinent to note that in the case in hand the expenditure has been incurred only in respect of the existing business and not for setting up of a new business or line of business. An identical issue has been considered by the Hon'ble High Court of Jharkhand in the case of CIT Vs.Tata Robins Fraser Ltd Vs. (supra), and held in para 12 to 16 as under:-
"12. So far as issue relating to the lease of the articles are concerned, that has been answered in Tax Appeal Nos. 3 of 2000, 4 of 2000, 5 of 2000, 6 of 2000 and 8 of 2000. In Tax Appeal No. 7 of 2000, one more issue is involved and that is relating to the claim of the assessee of spending an expenditure to the tune of Rs. 3,16,490. It has been on the ground that the assessee though had one project in contemplation, but that was not completed and the project was abandoned, therefore, it is an abortive expenditure. The expenditure incurred by the assessee is as under :-
Architectural fee in respect of abandoned Rs.
1.
project 2,57,335/-
2. Old capital work in progress abandoned Rs. 46,379/-
3. Cost of damaged cabinets Rs. 12,776/-
13. The company's contention was that the company had entrusted the study and design, detail working and drawings of a multi-storied (12 storied) building to a party names Acme Compartments Pvt. Ltd., Calcutta. After the preliminary work was undertaken, the project was to be abandoned due to adverse soil and other adverse conditions at the proposed site. The assessee company had to incur some expenditure on preliminary work. It was said that all designs, drawings etc. became useless and that was why the expenditure was written off. After narrating the detail facts in respect of the above expenditure, it has been claimed that it may be treated to be abortive expenditure. The Assessing Officer rejected the claim of the assessee as misconceived on the ground that it is a case of capital expenditure. The C.I.T.(Appeals) also upheld the said finding but the Tribunal has reversed the finding.
14. In the case of Indo Rama Synthetics (I) Ltd. v.
CIT [2009] 185 Taxman 277 (Delhi) it has been held that if expenditure has been incurred for setting up a new unit which was subsequently abandoned, then the aforesaid expenditure will be treated as revenue in nature as no new industrial asset came in existence.
5M/s Idea Cellular Ltd.
15. The Tribunal has relied upon the judgement of the Calcutta High Court delivered in the case of CIT v . Graphite India Ltd. [1996] 221 ITR 420 and decision of the Hon'ble Supreme Court in the case of Jonas Woodhead & Sons (India) Ltd. v. CIT [1997] 224 ITR 342/ 91 Taxman 1 and Allembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377/ 43 Taxman 312 (SC) and held that in view of the ratio of above judgements, if the expenditure is incurred for acquisition of an asset which gives or renders enduring benefit to the assessee, naturally it is to be considered as capital expenditure otherwise revenue expenditure.
16. Substantially this is also a question of fact where an expenditure incurred by the assessee was of the revenue in nature or it was a capital expenditure. However, in view of the fact that question has been framed and we have narrated the facts of the case including the break-up of the expenditure which includes the fee of Rs. 2,57,335/- paid to the Architect and some expenses of Rs. 46,379/- incurred on old capital work in progress which was abandoned and cost of damaged cabinets and that too, amounting to Rs. 12,776/-, total expenditure including all three of the heads is Rs. 3,16,490/-. It is not in dispute that the project could not be accomplished because of the reason that the place where it was to be undertaken had a poor quality of soil and all the construction already damaged. The other articles bought by the assessee also got damaged and, therefore, in that fact situation, the Tribunal was fully justified in holding that such expenditure which may be pre-operational expenditure for a project can be treated to be a revenue expenditure actually and not a capital expenditure."
2.6 Since the expenditure has been incurred for the project which could not be accomplished and it was intended to facilitate the assessee's business activity to be carried out more conveniently and profitably, therefore, the said expenditure is an allowable revenue expenditure. Hence by following the decision of Hon'ble High Court of Jharkahdn in the case of CIT Vs. Tata Robins Fraser Ltd. (supra), we set aside the order of authorities below qua this issue and allow the claim of the assessee.
3. Ground No. 2 is regarding disallowance of claim u/s 35ABB of the Income Tax Act.
3.1 On 01st January 2001, the assessee company taken over TATA Cellular Ltd and accordingly the TATA cellular Ltd. merged with the assessee. At that point of time the license fee was paid by the operators as fixed license fee 6 M/s Idea Cellular Ltd.
under the license agreement. The TATA Cellular Ltd had paid the license fee upto 31st December 2000 and also claimed the expenditure u/s 35ABB. From 01st January 2001 on wards. The assessee paid the license fee for the area of operation which were earlier with the TATA Cellular Ltd. merged with the assessee. In the return of income the assessee did not make claim u/s 35ABB with respect to the licensefee paid by the TATA Cellular Ltd upto 31st December 2000. However during the assessment proceedings the assessee claimed that in terms of section 35ABB, consequent to the amalgamation of TATA Cellular Ltd, with the assessee the entire license fee paid by the TATA Cellular Ltd till 31st December 2000 ought to have been allowed to the assessee. The AO declined to accept the claim of the assessee.
3.2 On appeal, CIT(A) has confirmed the action of AO on the ground that the assessee has made this claim by a letter without claiming in the return of income or revised return of income. Thus the CIT(A) was of the view that the claim made by a simple letter without filing a revised return is not a valid claim.
3.3 Before us, the Ld.Senior Counsel has submitted that as per the provisions of section 35ABB(6), in a case of amalgamation the provisions of sub-section 2 to 4 shall not apply to the amalgamating company but these provisions of this section shall apply to the amalgamated company as they would have applied to the amalgamating company when the later has not transferred the business. Thus the Ld. Senior Counsel has submitted that under the provisions of section 35ABB(6), the license fee paid by the TATA Cellular Ltd for the entire financial year/previous year relevant to the assessment year under consideration for the period prior to the amalgamation is eligible for deduction u/s 35ABB in the hands of the amalgamated company i.e. assessee. He has further contended that the claim made by the TATA Cellular Ltd in respect of license fee u/s 35ABB has been rejected by the AO as it was not allowable in the hands of amalgamating company. Thus the revenue is taking 7 M/s Idea Cellular Ltd.
contrary stand by applying the provisions for refusing the claim of TATA Cellular Ltd amalgamated with the assessee and at the same time not accepting the claim of the assessee. On the point of admission of claim without revised return of income, he has relied upon the decision of hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (229 ITR
383) as well as the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs.Pruthvi Brokers & Shareholders Pvt. Ltd. (346 ITR 336) and submitted that the power and jurisdition of CIT(A) is not restricted only to entertain the claim made in the return of income.
3.4 On the other hand, the Ld. DR has heavily relied upon the orders of authorities below.
3.5 We have considered the rival submissions as well as relevant material on record. Initially the assessee has claimed the amortization of license fee relating to the TATA Cellular Ltd only for post amalgamation period of three months w.e.f 1.1.2000 to 31st March 2001, however during the course of assessment proceedings the assessee made a claim for the entire year u/s 35ABB for the license fee paid in respect of the TATA Cellular Ltd amalgamated with the assessee. The CIT(A) has allowed the claim of three months and disallowed for nine months only on the ground that the assessee has not made the claim in the revised return of income. The restriction on the jurisdiction for entertaining a fresh claim otherwise than a revised return is applicable only of the AO and not of the appellate authorities. There is no fetter on the power and jurisdiction of the appellate authorities to entertain a fresh claim if no new facts are required to be investigated to adjudicate such fresh claim. The Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra) has observed at page 386 as under:-
8M/s Idea Cellular Ltd.
"Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross- objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier".
3.6 Therefore, in the facts and circumstances of the case we are of the view that there is no bar in entertaining the present claim in question by the CIT(A) even without filing the revised return. On merits it is apparent that the provisions of section 35ABB(6) permits such claim only in the hands of the amalgamated company and not in the hands of the amalgamating company. For ready refernce we quote sub-section (6) of section 35ABB.
"(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the licence to the amalgamated company (being an Indian Company),-
(i) The provisions of sub-section (2),(3) and (4) shall not apply to the amalgamated company and;
(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter ahd not transferred the license.] 3.7 Sub-section (6) makes it clear that in a scheme of amalgamation if the amalgamating company sales or transfer the license to the amalgamated 9 M/s Idea Cellular Ltd.
company then license fee paid for the entire year is eligible for amortization u/s 35ABB only in the hands of amalgamated company. Accordingly in view of the above discussion, we allow the claim of amortization of license fee relating to Tata Cellular Ltd merged with assessee for entire year u/s 35ABB.
4. Ground No. 4 is regarding claim for revenue sharing license fee to be allowed u/s 37(1).
4.1 In the return of income the assessee has not claimed the deduction in respect of amount paid towards revenue sharing expenses to the Govt. of India as it was capitalized in the books of accounts. Only before the CIT(A) the assessee has raised an additional ground towards the amount paid under revenue sharing basis of license fee. The CIT (A) has rejected the claim of the assessee on the ground that this issue has not emerged from the order of assessment.
4.2 Before us, the Ld. Senior Counsel has submitted that so far as the issue of admission of additional ground is concerned, the same is covered by the decision of Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra) as well as the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs.Pruthvi Brokers & Shareholders Pvt. Ltd (Supra). On merits the Ld. Senior Counsel has submitted that this issue is covered by the various decisions of Hon'ble High Courts as well as this Tribunal. He has referred the following decisions:-
(i) CIT Vs. Bharti Hexacom Ltd. (221 Taxman 323) (Delhi)
(ii) Idea Mobile Communications Ltd. Vs. DCIT ( ITA No. 310/Del/2006) (Mum)
(iii) DCIT Vs. Idea Mobile Communications Ltd. (2012) (ITA No. 5635/mum/2011(Mum) 10 M/s Idea Cellular Ltd.
(iv) DCIT Vs. Idea Mobile Communications Ltd. (2013) (ITA No.3665/Mum/2011)(Mum)
(v) Videsh Sanchar Nigam Ltd V. JCIT (81 ITD 456) (Mum)
(vi) Mahanagar Telephone Nigam Limited Vs. ACIT (8 SOT 376)(Del)
(vii) Bharati Cellular Limited Vs. DCIT (ITA No. 5335/Del/03)
(viii) Bharati Airtel Ltd. Vs. ACIT (2010) (41 SOT 175) (Mum)
(ix) Cosmat Max Limited Vs. DCIT (29 SOT 436/ITA No. 728/Del/05)(Del)
(x) ACIT Vs. Vodafone Gujarat Ltd. (38 SOT 51)(Ahd.) 4.3 Ld. Counsel has submitted that in all the above cited decisions it has been held that license fee paid on revenue sharing basis is allowable as revenue expenditure.
4.4 On the other hand the Ld. DR has submitted that no claim was made by the assessee either in the return of income or during the course of assessment proceedings, therefore, there is no grievance of the assessee against the assessment order under consideration. He has referred the provisions of section 253 and submitted that the appeal before, the CIT(A) can be filed only in the case when the assessee is aggrieved by the order of Assessing Officer. Since the assessee has not made any claim before the AO and therefore, there was no question of grievance of the assessee against the assessment order and consequently no appeal is maintainable on an issue not emerging from the assessment order.
4.5 We have considered the rival submissions as well as relevant material on record. So far as the admissibility of the fresh claim first time before the appelate authority is concerned, we find that an identical issue was before the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra). The issue in the said case emerged from the fact that the assessee offered an amount to tax in the return of income which was not taxable as income. The inclusion of the said amount was not objected by the 11 M/s Idea Cellular Ltd.
assessee even before the CIT(A) and only after filing appeal before the Tribunal the assessee raised a ground by way of forwarding a letter. In those facts, Hon'ble Supreme Court has held that when it is found that non taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal first time so long as relevant facts are on record in respect of that item. We have already reproduced the relevant finding of the Hon'ble Supreme Court in the foregoing paras while discussing the ground no. 2. It is clear from the decision of Hon'ble Supreme Court that when a claim which is otherwise allowable /permissible but was not allowed as the assessee did not claim the same in the return of income, there is nothing under law to prevent the assessee to raise such claim before the appellate authorities if the facts relating to such new claim are already on record and do not require any investigation. Accordingly in the facts and circumstances of the case when the denial of claim by CIT(A) is not on the ground that it is not allowable but for want of such claim before the AO and further on merits this issue is covered by the series of decisions as relied upon by the assessee then we are of the view that the CIT(A) has committed an error in not admitting the additional ground raised by the assessee. Hence this ground stands admitted. On merits there are various decisions where this issue has been decided by holding that the license fee paid under revenue sharing is an allowable revenue expenditure. In the latest decision of Hon'ble High Court of Delhi dated 9th December 2013 in the case of CIT Vs. Bharati Hexacom ltd. & Others, one of the issues before the Hon'ble High Court was regarding the allowability of variable license fee on revenue sharing basis paid under the new telecom policy of 1999. The Hon'ble High Court has discussed the issue and held in para 42 and 47 as under:-
"42 The next obvious question is, on what basis apportionment should be done and what could be the proportion of apportionment between capital and revenue expenditure. In this regard it would be appropriate and proper to divide the licence fee into two periods i.e. before and after 31-7-1999. The licence fee paid or payable for the period upto 31-7-1999 i.e. the date set out in the 1999 12 M/s Idea Cellular Ltd.
policy should be treated as capital and the balance amount payable on or after the said date should be treated as revenue
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47. In view of the aforesaid findings, the substantial question mentioned above in item Nos.1 to 9 is answered in the following manner:
(i) The expenditure incurred towards licence fee is partly revenue and partly capital. Licence fee payable upto 31st July, 1999 should be treated as capital expenditure and licence fee on revenue sharing basis after 1st August, 1999 should be treated as revenue expenditure.
(ii) Capital expenditure will qualify for deduction as per Section 35ABB of the Act."
4.6 We further note that this Tribunal in the cae of Mahanagar Telephone Nigam Ltd. Vs. ACIT(supra) as well as in the cae of ACIT Vs. Vodafone Essar Gujarat Ltd. (supra) along with other no. of decision has taken a similar view. Following the decisions of Hon'ble Delhi High Court in the case of CIT Vs. Bharati Hexacom ltd. & Others as well as other decisions relied upon by the assessee, we allow the claim of the assessee.
4.7 Before parting with the appeal of the assessee we note that the assessee has filed additional grounds, however, the same are only repetition of ground no. 2 and 3 raised along with form No. 36, therefore, the additional ground raised by the assessee becomes infructuous.
5. The revenue has raised only ground as under:-
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of foreign exchange loss of Rs. 22,38,39,000/- by holding that the principle amount was not utilized by the assessee for acquisition of capital assets"
5.1 The assessee has borrowed funds in foreign currency for payment of license fee. At the end of the year due to fluctuation in foreign exchange rate the loss was incurred. This loss has been clubbed in 13 M/s Idea Cellular Ltd.
schedule 17 of the Balance Sheet relating to the interest and fiancial charges and has been specified as net loss on foreign exchanger fluctuation. The AO denied the claim of the assessee on the ground that the loss under consideration has led to increase in liability towards repayment of loan and such increase in the liability cannot be equated with the payment of interest.
5.2 On appeal, the assessee contended before the CIT(A) that for the A.Y. 1998-99 similar fluctuation gain was allowed to them as revenue expenditure. The assessee has also relied upon the decision of Hon'ble Supreme Court in the case of UPSIDC (225 ITR 703) as well as other decisions including the decision of Special Bench of this Tribunal in the case of ONGC Ltd. (77 TTJ 387). The CIT(A) allowed the claim of the assessee by following the decisions relied upon by the assessee.
5.3 Before us, the Ld. DR has heavily relied upon the order of AO and submitted that part of the loan was used for fixed license fee paid by the assessee which has been treated as capital in nature, therefore, the notional loss due to foreign exchange fluctuation is not allowable claim being capital item. He has further submitted that the assessee has not fully utilized the foreign exchange borrowings for the purpose for which it was taken whereas under the rules and scheme of ECB, the assessee cannot use the borrowings other than the purpose, therefore, the entire loss on foreign exchange fluctuation should be disallowed.
5.4 On the other hand, the Ld. Senior Counsel has submited that this issue has been considered and decided by this Tribunal in the assessee's own case for A.Y. 1998-99. Further in the earlier assessment years 14 M/s Idea Cellular Ltd.
whenever there was gain due to foreign exchange fluctuation, the assessee has offered to tax as income which was accepted by the revenue, therefore, once the fluctuation gain has been accepted as income and taxed then the loss cannot be given a different treatment. He has relied upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Woodward Governor India P. Ltd. (312 ITR 254) (179 Taxmann 326) (SC). He has also relied upon the following decisions:-
(i) CIT Vs. U.P. State Industrial Development Corporation ( 225 ITR 703)(SC)
(ii) Bharath Heavy Electricals (239 ITR 756) (Del)
(iii) ONGC v. CIT (83 ITD 151) (Del) (SB)
(iv) DCIT V Idea Cellular Limited (ITA No. 2242/M/2008)
(v) Samtex Fashions Ltd. [2008] (24 SOT 116) (Del)
(vi) Sutlej Cotton Mills Limited (116 ITR 1) (SC).
5.5 We have considered the rival submissions as well as relevant material on record. There is no dispute that for the A.Y. 1998-99, an identical issue came before this Tribunal and the Tribunal has held that the loss due to foreign exchange fluctuation is an allowable expenditure in para 8 as under:-
"8 We have considered the rival submissions. We have considered the statement by the learned counsel of the assessee and also taking note of the findings of the CIT(A). We are of the view that the order of the CIT(A) does not call for any interference. The details of the utilization of the loans are at page 27 of the assessee's paper book. The details of the loans utilized for revenue purposes as given in page No. 23 of the assessee's paper book have also been perused by us. The loan-wise bifurcation of foreign exchange loans as given at page no. 28 has also been considered. In the light of these documents, we are of the view that the CIT(A) was justified in coming to the conclusion that the exchange loss claimed by the assessee in P&L Account relates to loan availed for the purpose of meeting revenue expenditure In the light of the decision of Special Bench in the case of ONGC Ltd. (Supra), we are of the view that the claim deserves to be allowed. We may also point out that Hon'ble Supreme Court in the case of CIT Vs. Woodward Governor India (P) Ltd., 179 15 M/s Idea Cellular Ltd.
Taxman 326 (SC) has also approved the principles which have been laid down by the Special Bench in the case of ONGC Ltd. (supra) For all the above reasons, we do not find any ground to interfere in the order of CIT(A). Consequently, 2nd ground of appeal of the revenue is also dismissed.
5.6 We further note that the revenue has consistently been allowing the claim of the assessee on foreign exchange loss as revenue loss since A.Y. 1998-99 to A.Y 2005-06 except the A.Y. under consideration i.e. 2001-02. When the revenue is consistently allowing the claim of the assessee or taxing the gain arising from the foreign exchange fluctuation as income of the assessee for all three assessment years prior to the assessment year under consideration and four subsequent assessment years, therefore, we do not find any reason to interfere with the order of CIT(A) in allowing the claim of the assessee by following the order of this Tribunal. Hence the ground of revenue's appeal is rejected.
6.. In the result appeal of the assessee is allowed whereas that by the revenue is dismissed.
Order pronounced in the open court today i.e 13-05-2014
Sd/- Sd/-
(Rajendra) (Vijay Pal Rao)
ys[kk lnL;)
(Accountant Member/ys lnL; U;kf;d lnL;)
(Judicial Member/U;kf;d lnL;
Mumbai dated 13-05-2014
SKS Sr. P.S,
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "I" Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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M/s Idea Cellular Ltd.
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