Income Tax Appellate Tribunal - Mumbai
Idea Celluar Ltd ( Successor To Idea ... vs Department Of Income Tax on 5 August, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "I",
MUMBAI
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. 3665/Mum/2011
Assessment Year : 2004-05
DCIT -3(2) M/s. Idea Cellular Ltd.
Room No.608, 6th Floor (Successor to Idea Mobile
Aayakar Bhavan Communication Ltd.)
Mumbai-400 020. 5th floor, Windsor, Off CST Rd.
Vs.
Near Vidyanagari, Kalina
Santacruz (E)
Mumbai-400 098.
PAN No.AAACE 1646 D
(Appellant) (Respondent)
ITA No. 5966/Del./2010
Assessment Year : 2004-05
M/s. Idea Cellular Ltd. DCIT -Circle 11(1)
(Successor to Idea Mobile New Delhi.
Communication Ltd.)
5th floor, Windsor, Off CST Rd.
Vs.
Near Vidyanagari, Kalina
Santacruz (E)
Mumbai-400 098.
PAN No.AAACE 1646 D
(Appellant) (Respondent)
Assessee by : Shri Ronak G. Doshi
Revenue by : Shri S.D. Srivastava
Date of hearing : 05/08/2013
Date of Pronouncement : 14/08/2013
2 ITA No.3665/11 & 5966/10
A.Y.04-05
Idea Cellular Ltd.
ORDER
PER B. RAMAKOTAIAH, AM:
These are cross appeals by the assessee and the revenue against the orders of CIT(A)XI, New Delhi, dated 28.10.2010.
2. Briefly stated, M/s. Idea Mobile Communications Ltd. was a company incorporated on 25/05/1995 as Escotel Mobile Communications Ltd. which changed its name to the above name on 01/07/2004. On 01/04/2006 the said company was amalgamated to Idea Cellular Ltd. which is the present appellant in these appeals. We have heard the ld. Counsel and the ld. DR.
3. Revenue has raised the following ground in its appeal.
"1. On the facts and in circumstances of the case and in law, the ld. CIT(A) erred in not holding that the assessee is entitled for eligible deduction u/s. 35ABB amounting to Rs.7,18,89,454/- on account of variable license fees as against Rs.34,41,65,000/- claimed by assessee."
2.1 The AO allowed an amount of Rs.7,18,89,455/- as variable licence fee as against claim of Rs.34.41 crores. The ld. CIT(A) following the orders in assessment year 2001-02 and also orders of ITAT in ITA No.310/Del./2006 dated 16.12.2009, allowed the assessee's claim, hence, Revenue is aggrieved.
2.2 This issue was crystallized by the orders of the ITAT for the assessment year 2001-02 wherein it was decided as under :-
"The issue raised is that ld. Commissioner of income Tax(A) has erred in upholding an addition of Rs.26,92,54,013/- (Rs.22,84,86,443 - 1, 92,32,340/- i.e. 1/5th of 28,84,86,443/-3 ITA No.3665/11 & 5966/10
A.Y.04-05 Idea Cellular Ltd.
towards variable License fee paid to the Department of Telecommunication in accordance with the new regime of to the new revenue sharing regime.
3. Before us ld. counsel of the assessee submitted that the issue is squarely overed in favour of the assessee by the decision of this tribunal in Bharti Cellular Ltd.Vs. DCIT in ITA No. 5335/Del/2003. In this case the issue raised as follows:
"The ld. AO had erred both on facts and in law in holding sum of Rs. 29 ,56, 20, 000 /- to the capital expenditure being the variable revenue sharing fee paid pursuant to the migration of the appellant to the New Telecom Policy 1999 regime whereby the Government had upto the date of the migration i.e. 1.8.1999 quantified the fixed fee payable by the appellant upto 31.7.1999 and thereafter fixed a basis for the revenue sharing fee. The CIT(A) has further erred in confirming the action of the AO and in not treating Rs. 29,56,20,000/- to be revenue expenditure".
3.1The Tribunal adjudicated as under:
"9.We have heard the rival submissions. We have also perused the' order of this Tribunal in the case of MTNL referred to supra. Itis 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 right to do the business of telecom provider. The said right did not give rise to any capital asset. Further the Bombay Bench of this Tribunal has held as follows:-
"8. Revocation of licences - 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 of payment of any consideration payable the reunder." From perusal of 5.8 of that Act, it is now evident that under the circumstances the licence is revoked, the appellant shall not be able to carry on its business of telephone services, unless it had 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 on by it. The same is, therefore, an allowable deduction u/s. 37 of the Act. Since the liability stands paid during the year under consideration, we direct the AO to allow the deduct ion to the appellant".
10. Respectfully following the decision of the coordinate bench of this Tribunal in the case of MTNL referred to supra, we are of the view that the variable revenue share licence fee paid pursuant to the migration of the assessee to the New Telecom Policy of 1999 is liable to be allowed as revenue expenditure and we do so. In the circumstances, AO is directed to delete the addition made by holding 4 ITA No.3665/11 & 5966/10 A.Y.04-05 Idea Cellular Ltd.
the variable revenue share fee paid to be capital expenditure. In the circumstances, Ground no.3 in assessee's appeal stands allowed".
3.2.Since the facts of the present case are identical, both the counsels have fairly agreed that the same decision may be applied. Accordingly, following the above precedent, we set aside the orders of the ld. CIT(A) and decide the issue in favour of the assessee.
2.3 Similar orders were also passed in assessee's own case in assessment year 2003-04 in ITA No.5635/Mum/2011 dated 20.11.2012 and also in the case of Bharti Airtel Ltd. vs. ACIT dated 25.06.2010 in ITA Nos.398 and 422(Mum) of 2006, 2935, 2936, 3609 and 3611(Mum) of 2009 and C.O. No.176(Mum)of 2008 for assessment years 2002-03 to 2004-05 and in the case of ACIT vs. Vodafone Essar Gujarat Ltd. dated 29/01/2010 in ITA Nos.1361 and 1878(Ahd.) of 2009 for the assessment year 2006-07. Respectfully following the orders of the co-ordinate Bench, we dismiss the ground raised by the Revenue.
3. In Assessee's appeal, assessee has raised the following grounds:
" Ground -1. Disallowance of fixed license fees of Rs.23,95,81,194/- claimed u/s. 35ABB of the Act.
1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the action of the DCIT, New Delhi ( 'the AO') in disallowing amount of Rs.23,95,81,194/- (Rs.40,24,22,968/- claimed by the appellant less Rs.16,28,41,776/- allowed by the AO) from the amount claimed as a deduction u/s. 35ABB of the Act.
2. The appellant prays that AO be directed to delete the aforesaid disallowance.
Without prejudice to above:
1. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in upholding the action of AO by denying the alternative claim of the appellant of Rs.18,77,34,030/- made on the basis of the deduction u/s. 35ABB computed by Idea Cellular Ltd. in which the appellant was subsequently amalgamated.5 ITA No.3665/11 & 5966/10
A.Y.04-05 Idea Cellular Ltd.
2. The appellant prays that AO be directed to allow the claim of the appellant."
3.1 In the course of arguments the ld. Counsel for the assessee submitted that in view of the merger of the erstwhile company with M/s. Idea Cellular Ltd., the issue as contested in the above ground is not being pressed, since M/s. Idea Cellular Ltd. follows different method of claiming fixed license fees, which are in tune with the orders of the authorities. We dismiss the ground as withdrawn. 3.2 However, the assessee's counsel pressed for the alternate contention with reference to working out the basis for allowing deduction under section 35ABB. It was submitted that the ld. CIT(A) decided the issue in assessment year 2001-02 and in assessment year 2003-04 and also placed the orders and working with reference to details of payment of licence fees and status of claim of 35ABB in respect of years as under
:-
Details of payment of Licence Fees Financial Year Assessment Year Licence Fees 1995-96 1996-97 1,057,461,818 1996-97 1997-98 528,730,909 1997-98 1998-99 1,057,461,818 1998-99 1999-00 370,111,637 1999-00 2000-01 305,488,968 Total 3,319,255,150 B) Commencement of Operations The Appellant commenced its operations from July 31, 1997 (i.e. A.Y. 1998-
99) 6 ITA No.3665/11 & 5966/10 A.Y.04-05 Idea Cellular Ltd.
C) Status of claim u/s 35ABB of the Income Tax Act, 1961 (herein after referred to as "Act") and related proceedings thereto Financial Assess- Amount Remarks Year ment Year claimed in Return of income u/s 35ABB of the Act 1995-96 1996-97 NIL NA 1996-97 1997-98 NIL NA Intimation u/s 143(1) of the Act passed by the AO thus allowing Appellant's claim of deduction 1997-98 1998-99 330,456,818 u/s 35ABB of the Act.
The Appellant has filed petition u/s 264 of the Act dated May 14, 2009 which is still pending for disposal, page no. 69 to 74 of PB-
II 1998-99 1999-00 383,329,908 AO passed order u/s 143(3) of the Act wherein he allowed Appellant's claim of deduction u/s 35ABB of the Act.
The appellant has filed petition u/s. 264 of the Act dated May 14, 2009 which is still pending for disposal, page no. 75 to 80 of PAPER BOOK-II AO allowed deduction of Rs.
18,07,52,120/-
On appeal, the CIT(A) gave direction to the AO to recompute 1999-00 2000-01 402,422,968 the amount by revising the "appropriate fraction" from the inception of the license, page no.
41 to 54 of PB-II Order Giving Effect to the CIT(A) order is still pending.
7 ITA No.3665/11 & 5966/10A.Y.04-05 Idea Cellular Ltd.
No appeal has been filed in ITAT by the Department or the Appellant.
The Hon'ble CIT-IV, New Delhi passed an order u/s. 263 of the Act directing the AO to rework the deduction u/s 35ABB of the Act by considering the revised period of license of 20 years from A.Y. 1998-99.
The appellant did not press this 2000-01 2001-02 402,422,968 ground in appeal before the Hon'ble ITAT since the order the Hon'ble CIT was in line with the tax treatment of Idea Cellular Ltd.
with which the Appellant was merged from 1.4.2006.
The Appellant has filed Rectification Application u/s 154 against order giving effect to the order passed u/s. 263/143(3) of the Act which is still pending for disposal, page no. 67 and 68 of PB-II 2001-02 2002-03 402,422,968 Intimation received u/s. 143(1) of the Act thus allowing Appellant's claim of deduction u/s 35ABB of the Act.
AO allowed deduction of Rs.
16,28,41,776/-.
On appeal, the CIT(A) gave direction to the AO to recompute 2002-03 2003-04 402,422,968 the amount by revising the "appropriate fraction" from the inception of the license, page no.
41 to 54 of PB-II.
Order Giving Effect to the CIT(A) Order is still pending.
No Appeal has been filed in ITAT by the Department or the Appellant.
8 ITA No.3665/11 & 5966/10A.Y.04-05 Idea Cellular Ltd.
It was prayed that the issue has to be decided by the AO in assessment year 2001-02 and 2003-04 and in this year only consequential effect has to be given.
4. We have considered and examined the contentions. As there is a change in Telecom policy enhancing license period from 10 to 20 years on payment of one time entry fee /migration fee, the deduction is to be allowed on revised basis. The issue of revised claim was decided by Ld. CIT(A) in earlier years with certain directions to AO which are yet to be implemented. The basis of revised amount for deduction is required to be determined in the respective years by AO. Since the Revenue is not in appeal on the directions of CIT(A) in earlier years, whatever amount is quantified therein, similar amounts on that basis are to be allowed in this year, being consequential. AO is directed to determine accordingly the eligible amount in this year. With these directions, the assessee's alternate contention is treated as allowed for statistical purposes.
5. In the result, Revenue's appeal is dismissed and Assessee's appeal treated as partly allowed.
Order pronounced in the open court on 14th August, 2013.
Sd/- Sd/-
(AMIT SHUKLA ) (B. RAMAKOTAIAH )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 14/08/2013.
Jv.
9 ITA No.3665/11 & 5966/10
A.Y.04-05
Idea Cellular Ltd.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.