Income Tax Appellate Tribunal - Mumbai
Reliance Jio Infocomm Limited,Mumbai vs Pr Cit-3, Mumbai on 12 March, 2026
आयकरअपीलीयअिधकरण ायपीठमुंबईम।
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, MUMBAI
BEFORE SHRI AMIT SHUKLA, JM &
SHRI ARUN KHODPIA, AM
I.T.A. No.3583/Mum/2025
(Assessment Year: 2020-21)
Reliance Jio Infocomm Ltd., PCIT-3,
9th Floor, Maker Chambers IV, Aayakar Bhawan, MK Road
222, Nariman Point, Vs. Mumbai - 400020
Mumbai-400021.PAN:
AABCI6363G
Assessee - अपीलाथ / Appellant Revenue - थ / Respondent
:
Assessee by : Shri Madhur Agarwal a/w Shri
Nimesh Vora and Ms. Moksha
Mehta, AR
Revenue by : Shri Umashankar Prasad, CIT-DR
Date of Hearing : 16.12.2025
Date of Pronouncement : 12.03.2026
ORDER
Per Arun Khodpia, AM:
The captioned appeal is instituted by the assessee, emanates from the order u/s 263 of the Income Tax Act, 1961 (in short "The Act"),dated 31.03.2025, passed by the Principal Commissioner of Income Tax, Mumbai-3 (in short "ld. PCIT), for the assessment year 2020-21. Arises from the assessment order passed u/s 143(3) of the Act dated 27.09.2023 by the assessment Unit, Income Tax Department (in short "Ld. AO").
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Reliance Jio Infocomm Ltd.
2. The ground of appeal raised by the assessee are as under:
Grounds of appeal:
The Appellant objects to the order dated 31st March 2025 passed under section 263 of the Income-tax Act, 1961 (the Act') by Pr. Commissioner of Income Tax-
3, Mumbai (hereinafter referred to as the "learned PCIT") for the Assessment Year 2020-21 on the following, among other grounds:
On the facts and circumstances of the case and in law, the learned PCIT:
Order u/s 263 of the Act is bad in law, illegal, ultra-vires
1. erred in passing the order u/s 263 of the Act without appreciating that the assessment order passed by the Assessment Unit (FAO) u/s 143(3) r.w.s. 1448 of the Act dated 27/09/2023 is neither erroneous nor prejudicial to the interest of the revenue;
2. erred in setting aside the assessment completed u/s 143(3) r.w.s. 144B of the Act by the FAO as erroneous and prejudicial to the interest of revenue without appreciating that such an action can be taken only by learned PCIT having jurisdiction under Faceless regime:
3. erred in re-visiting and setting aside the assessment to the file of the FAO for verification on the same issues which were already called for and decided vide the assessment order u/s 143(3) r.w.s. 144B of the Act dated 27/09/2023 and same were also explained in detail to the learned PCIT in the proceedings u/s 263 of the Act;
Related to deduction claimed u/s 35ABA
4. erred in holding that claim u/s 35ABA of the Act towards acquisition of right to use spectrum is invalid due to the failure to meet the "actual payment"
requirement, 2 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
5. failed to appreciate that Section 35ABA of the Act read with Rule 64 of the Income-tax Rules. 1962 ('the Rules') aims to bring parity in the tax treatment where a person makes full upfront payment or opts for deferred payment option:
6. failed to appreciate that the details related to claim of deduction under section 35ABA of the Act have already been examined by the FAO during the original assessment proceedings for AY 2020-21 and was accepted as such; Related to claim of tax depreciation
7. erred in holding that that the entire addition of assets made under the block Plant & Machinery during the year by the Appellant were not fully utilized for the business purpose of the Appellant, since the same are classified in the books of accounts under capital work in progress,
8. failed to appreciate that the tax depreciation is claimed on the assets which have already been put to use;
9. failed to appreciate that the details related to claim of tax depreciation has already been examined by the FAO during the original assessment proceedings for AY 2020-21 and was allowed as such;
10. Without prejudice to the above, failed to appreciate that no disallowance of depreciation can be made on the opening written down value of the assets; The Appellant craves leave to consider all the grounds of appeal as without prejudice to each other and craves leave to add, amend, alter or delete any or all the above grounds of appeal, either before or during the hearing of the Appeal or till the final disposal of the Appeal.
3. Briefly stated, the assessee filed its return of Income for the AY 2020-21 on 13.02.2021. Assessment u/s 143(3) was completed on 27.09.2023, 3 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
determining the assessed loss at Rs. (-) 1276,96,48,212/-, as against the returned loss of Rs. (-) 10619,52,55,711/-.
3. Subsequently, the case of assessee company has been taken up for revisionary proceedings, invoking the provisions of section 263 of the Act. A notice U/s 263 was issued on 03.03.2025 by the ld. PCIT, raising concern qua assessee's claim and entitlement for (i) deduction u/s 35ABA and (ii) depreciation as per IT Act, stating that, the impugned assessment order dated 27.09.2023 was passed by the Ld. A O without making any proper enquiry and verification on the aforesaid issues, which should have been made and corresponding additions / disallowance after making such enquiries, which ought to have been made. The subject assessment order, therefore, deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. In response to the aforesaid notice, initiating the revisionary proceedings, assessee challenged the revisionary jurisdiction as well as the issues on merits, but the Ld. PCIT was not convince with the submissions of assessee and treated the same as untenable. Accordingly, held the subject assessment order to be erroneous so far as prejudicial to the interest of revenue within the meaning of section 263 of the Act. Consequently, the order u/s 263 was concluded by setting aside the assessment order u/s 143(3) r.w.s. 144B dated 27.09.2022 to the Ld. AO, with the directions to examine the issues discussed and make 4 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
necessary disallowance / additions to the income of the assessee after affording opportunity of being heard to the assessee.
5. Being aggrieved with the aforesaid revisionary order u/s 263, the assessee is in appeal before us in the instant appeal.
6. At the threshold, Ld. Counsel of the assessee (Ld. AR) narrated the facts of the case and briefed about the assessment, which was later chosen for revisionary proceedings u/s 263. A written note dated 10.01.2026, consisting the submission made during the physical hearing was submitted by the assessee, explaining the stand of revenue, assessee's contentions, relevant provisions of Act, relevant case laws and the prayer, which is extracted here under for the sake of completeness:
I. Deduction u/s. 35ABA of the Act:
FACTS 3.1. The Appellant had incurred capital expenditure for acquiring 'the right to use spectrum' for telecommunication services from Department of Telecommunications ("DoT"), Government of India. The fee payable towards acquiring 'the right to use spectrum' is one-time fee payable by the acquiror for use of spectrum for a number of years. DoT also gives an option, to make the deferred payments in instalments during the term of right to use the spectrum (i.e., 20 years). The payment made under the deferral option is more than the one-time payment as the interest component is factored in by DoT in determining the deferred installments. The Appellant had opted and was allowed to make payments under the deferred 5 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
payment model. Accordingly, the Appellant paid instalments to DoT on deferred basis.
3.2. For the year under consideration, the Appellant has made the instalment payment of Rs. 1370 crores (excluding interest) to DoT. 3.3. Under section 35ABA of the Act, capital expenditure incurred to acquire spectrum rights are deductible by spreading it equally over the term for which right to use spectrum is granted and for which "payment has actually been made." 3.4. The expression "payment has actually been made" is defined in Rule 6A(1) of the Income-tax Rules, 1962 ("the Rules") read with clause (iii) of Explanation to section 35ABA of the Act. For spectrum acquired under the deferred payment option, "payment has actually been made" means the amount that would have been payable if the assessee had chosen full upfront payment (i.e. payment excluding interest), regardless of the year of liability.
3.5. In view of the provisions of section 35ABA of the Act, the Appellant claimed a proportionate deduction u/s 35ABA of Rs. 3935 crores. The detailed working for deduction claimed u/s 35ABA is enclosed at Page No. 72 of the Paper Book. ASSESSING OFFICER'S VIEW:-
3.6. During the assessment proceedings, Ld. AO raised several queries asking the Appellant to clarify reason for high liabilities, give break-up of deductions claimed (incentive related) to which the Appellant had duly responded from time to time with a detailed working and computation of deduction claimed u/s. 35ABA. The same is summarized as under:
Notices issued by the AO Submission filed by the
Appellant
In the notice u/s. 143(2) of the Act, In response, vide letter dated
6
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dated 29.6.2021, one of the issues for 14.7.2021, the Appellant stated
which clarifications were required that the liabilities comprise
had the following issue: deferred payment liabilities
towards DOT for spectrum.
"ii. High Creditors/liabilities." Reference to Note 15 to 21 of
the financial statements was also
[Please refer Pg. 52 of the Paper drawn, which clearly disclosed
Book amount payable to DOT of Rs.
18,839 crs and the fact that it had
opted for deferred payment for a
specified portion of the auction
price. Please refer the letter at
Pg. 61 and the notes to financial
statements at Pg. 28 of the Paper
Book.
As per notice u/s. 142(1), dated The Appellant, vide its
26.10.2022, following query was submission dated 09.1.2023,
raised: provided break-up of the
expenses which included the
"1. Please submit the details with disclosure w.r.t. deduction u/s.
regard to the claim of expenses 35ABA along with a detailed
admissible under the Act, for each working giving list of all the
head/item as claimed by you in the spectrums, their allocation
computation of income totaling period, and computation of claim
Rs.27113,54,85,476/-under also made u/s. 35ABA of the Act.
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various heads and substantiate the Please refer Pg. 67, 70 and 72 of
admissibility of the claim with the Paper Book.
documentary evidences. You are also
required to justify as to how the
claim is admissible as per the
provisions of the I.T.Act and also
state whether the necessary
conditions with regard to the same
have been fulfilled or not."
[Please refer query no. 1 at Pg. 66 of
the Paper Book).
As per notice u/s. 142(1), dated Vide its submission dated
2.9.2023, following queries were 7.9.2023, the Appellant provided
raised: break-up of total
deductions/exemptions/rebates
"2. (1) Furnish the details of claimed, as per which appx. 97%
deductions, exemptions and rebate of the claim was made u/s
claimed during the year along with 35ABA of the Act. The same
supporting documents was again accompanied by the
detailed working giving list of
(iii) Provide the comparison of all the spectrums, etc.
reported, income deductions
/exemptions / rebate claimed, current [Please refer Pg. 82, 87 and 88
year/carried forward loss set- of the Paper Book).
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Reliance Jio Infocomm Ltd.
off/adjusted, advance tax paid, self-
assessment tax paid, TDS deducted, In the same submissions, the
total tax paid, refund claimed for the Appellant also provided break-
current year under consideration and up of deductions claimed under
previous two years. "any other Submission filed by
the Appellant amount
5. It is seen from the ITR filed for the allowable... of Rs. 14818 crs,
Α.Υ.2020-21 that amount Rs. which included deduction u/s.
14818,54,81,379/-claimed as any of 35ABA of Rs. 3935 crs.
was other amount allowable as [Please refer Pg. 83 and 91 of the
deduction in the Schedule BP, Paper Book]
Provide the break-up and details of
the same."
[Please refer Pg. 75, 76 of the Paper
Book].
3.7. Having gone through the above details filed in response to 3 different notices, the claim for deduction u/s. 35ABA was allowed in the assessment order.
PCIT's Direction u/s. 263:
3.8. Learned PCIT issued notice u/s. 263 of the Act, dated 3.3.2025, wherein:
i) referring to note 16 of the financial statements, he noted that Rs. 18,839 crs was payable to the DOT;
ii) he opined that condition for claiming deduction u/s. 35ABA is that the amount should actually be paid to DOT;
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Reliance Jio Infocomm Ltd.
iii) He inferred that deduction u/s 35ABA is availablefrom the year in which the payment is made till the year when the spectrum comes to an end;
iv) He referred to AO's action in disallowing deduction u/s 35ABA in AY 2018-19 basis actual payment made to DOT and alleged that the AO did not verify the aspect of actual payment made t DOT in AY 2020-21 (year under consideration) [Please refer Notice u/s. 263 at Pg. 496-497 of the Paper Book] 3.9. Ultimately, in the impugned order, he held that Rule 6A(1)(h) does not override the principal requirement of "actual payment". The rule standardizes the computation but does not override the core requirement of section 35ABA of the Act. He, then, concluded that the claim under Section 35ABA is invalid due to the failure to meet the "actual payment" requirement. [Please refer para 9 and 9.1 Pg. 17 of the impugned PCIT's order).
3.10. Since in the preceding year, the AO has made disallowance on the same issue, the AO has been directed by the Ld. PCIT to make proper enquiry/verification and make disallowance, if required.
Please refer Para 9.1 at Pg. 17 of the impugned PCIT's order SUBMISSIONS BEFORE HON'BLE ITAT: -
A. The deductibility u/s. 35ABA read with Rule 6A does not restrict deduction only on actual payment:
3.11. At the outset, the Appellant invites attention to the statutory provision of section 35ABA which reads as -
"35ABA. (1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to use spectrum for telecommunication services either before the commencement of the business or thereafter at any time during any previous year and for which payment has actually been made to obtain a right to use spectrum, there shall, subject to and in 10 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure."
3.12. As per the provisions of section 35ABA of the Act, the entire capital expenditure, for which "payment has actually been made", is allowable as a deduction by apportioning the same equally over the life span for which spectrum is granted to the Assessee. [Provisions relating to apportionment of expenditure is referred in proposition no. B, from pg. 9 below).
3.13. The expression "payment has actually been made" is defined in clause
(iii) of Explanation to section 35ABA of the Act as -
a) the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee;
or
b) payable in such manner as may be prescribed | Rule 6A of the Income-tax Rules, 1962 ("the Rules")].
3.14. Rule 6A(1) of the Rules further defines the expression "payment has actually been made" as -
(a) Where an assessee has opted for full upfront payment. "Payment has actually been made would mean the actual payment of expenditure irrespective of accrual of liability,
(b) Where an assessee has opted to make deferred payment, "payment has actually been made" would mean "the amount which would have been payable by the assessee had he opted for full upfront payment of spectrum fee irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee." 11 ITA No. 3583/Mum/2025
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3.15. The above referred Rule 6A(1) brings parity in the tax treatment where a person makes full upfront payment or opts for deferred payment option. The primary difference between the amount payable to the DOT under a full payment option and a deferred payment option, is the interest cost which is payable with each deferred installment under the deferred payment option. Thus, Rule 6A(1) clearly provides for same deduction to assessees' irrespective of whether one opts for one-time payment or deferred payment.
3.16. Rule 6A(2) further provides that in case the Assessee defaults with any of the conditions specified in the scheme of the DOT, then the AO shall re-compute the deduction u/s. 35ABA by deeming the total amount of spectrum fee paid upto the date of termination as "payment actually been made". Thus, sub-rule (2) of Rule 6A confirms the position that until the spectrum right is terminated, "payment actually has been made" would mean the amount that was payable had the assessee opted for the full payment scheme for the purposes of claiming deduction u/s. 35ABA of the Act.
3.17. In view of the above, the only possible inference is that under the deferred payment option, the deductible amount is based on what would have been payable upfront had the assessee opted for one-time payment option, and not based on installments which also include a component of interest. This ensures that the deduction reflects the actual spectrum cost, maintaining parity between payment methods.
3.18. Thus, on a plain as well as on purposive reading of section 35ABA r.w.r. 6A, it is clear that there is no mandate of considering or restricting the deduction u/s. 35ABA subject to the actual payment made to DoT.
B. The interpretation of the Ld. PCIT of restricting deduction u/s. 35ABA to actual payment leads to absurdity:
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3.19. The LD. PCIT erred in holding that the Rule 6A goes beyond the provisions of the Act. The Ld. PCIT has clearly misunderstood the meaning and purport of clause (iii) of the Explanation to section 35ABA. The Ld. PCIT has completely disregarded the second part of the Explanation which defines the term "payment has actually been made to include an amount 'payable in such manner as may be prescribed'. Therefore, it is clear that the term "payment has actually been made"
not only includes the amount which has actually been paid but also payable in such manner as may be prescribed. The assessee submits that the interpretation of the Ld. PCIT would in fact render half of clause (iii) of Explanation to section 35ABA otiose.
3.20. Without prejudice, the Appellant submit that even otherwise the direction of the Ld. PCIT is not sustainable. The Appellant submits that Ld. PCIT, while giving direction to the AO to make enquiry/verification and make disallowance, if required, has referred to the disallowance made by the AO in AY 2018-19. In the re assessment order for AY 2018-19, dated 29.03.2024, the AO has restricted deduction u/s. 35ABA to the extent of the actual payment made in that year. Please refer para 5.6 of the assessment order for AY 2018-19 at Pg. 205 of the Paper Book).
3.21. In this regard, the Appellant, once again, invites attention to the statutory provision of section 35ABA which allows deduction of the spectrum fee in each of the relevant previous year equal to an "appropriate fraction". The relevant provision reads as -
"35ABA. (1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to use spectrum for telecommunication services either before the commencement of the business or thereafter at any time during any previous year and for which payment has actually 13 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
been made to obtain a right to use spectrum, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure."
3.22. The expression "appropriate fraction" is defined in clause (ii) to Explanation to section 35ABA(1) of the Act as the numerator of which is one and the denominator of which is the total number of the relevant previous years. 3.23. The expression "relevant previous years" is defined in clause (i) to Explanation to section 35ABA(1) of the Act. As per the definition:
i) In a case where the spectrum fee is paid before commencement of business, the relevant previous years would be the previous year from which the business is commenced and the subsequent previous years during which the spectrums is in force.
ii) For other cases, the previous year during which the spectrum fee is paid and the subsequent previous years during which the spectrum is in force.
3.24. Thus, it is unambiguously clear that the deduction is only permissible in proportion to the number of years during which the spectrum available to the Appellant. There is no provision u/s 35ABA of the Act, similar to the provisions of section 43B which allows a deduction on payment basis and to the extent of actual payment made.
3.25. Thus, restricting deduction to actual payment is ultra vires the provisions of the Act.
3.26. The Appellant further submits that if the PCIT's interpretation is applied and then apportionment as per the provisions of section 35ABA of the Act is made, the same would leads to absurdity. The same is demonstrated through an illustration attached herewith as Annexure 'A'. On perusal of the said illustration, Your 14 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
Honours would observe that following the interpretation of the Appellant the deduction u/s. 35ABA of the Act has been worked out evenly for all the 10 years of Rs. 1,000. However, by applying the interpretation of the Ld. PCIT, the deduction in first year works out at Rs. 200, whereas during the last 3 years, it worked out at Rs. 1293, Rs. 1793, and Rs. 3793, respectively.
3.27. It has been consistently held by the courts that statutory provisions must be interpreted in a manner that avoids absurdity or manifest injustice. Where a plain and literal construction of the language employed by the Legislature would lead to an unreasonable or unintended result, such interpretation ought to be modified so as to give effect to the true legislative intent. It is recognized that language is an imperfect instrument for expressing human intention, and therefore, a purposive and rational construction should be adopted to accomplish the object of the statute. (K.P. Varghese vs. ITO [1981] 131 ITR 597 (SC), CIT vs. J.H. Gotla [1985] 156 ITR 323 (SC)) 3.28. In view of the foregoing, the Appellant prays that deduction u/s. 35ABA of the Act be held allowable as claimed by the Appellant in the return of income. II. Depreciation claimed u/s. 32(1) of the Act:
FACTS 3.29. The Appellant has setup wide network of telecom infrastructure comprising of tower, fiber, telecom equipment, electronics, etc. The Appellant started its operations of providing digital services in F.Y. 2016-17. 3.30. For the year under consideration, the Appellant had approximately 387.5 million number of subscribers as on 31/03/2020 and it earned revenue from operations amounting to Rs. 54,316 crores. [Please refer profit and loss account at Pg. 4 of the Paper Book).15
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3.31. Since the operations of Appellant's business had already commenced during F.Y. 2016-17, the assets were put to use and the Appellant started claiming depreciation thereon. Since the Appellant was in the developing phase in building wide telecommunication infrastructure. the new assets kept added to the block of asset each year after the commencement of operation in F.Y. 2016-17. During the relevant year, the Appellant claimed depreciation of Rs. 11,317 crs. on plant and machinery.
ASSESSING OFFICER'S VIEW: -
3.32. During the assessment proceedings, Ld. AO raised several queries asking the Appellant to furnish details of the additions of property, plant and equipment and proof of date on which they came to operation. The Appellant had duly responded from time to time and furnished the required details and evidences. The same is summarized as under:
Notices issued by the AO Submission filed by the
Appellant
In the notice u/s. 142(1) of the Act, In response, vide letter dated
dated 2.9.2023, following query was 19.7.2023, the Appellant
raised: explained in detail the kind of an
4. On perusal of the cash flow infrastructure required for
statements, it is found that you have operating its business and step
purchased the properties, the plants by step process for deployment
& the equipment's valuing Rs. of such infrastructure and that
51,771/-crores. Furnish the details of the assets require due time to be
abovementioned purchases and the able to put into use.
proof for date on which it came into
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operation to business for the relevant Please refer Pg. 101 of the Paper
AY 2020-21." Book).
[Please refer query no. 4 at Pg. 94 of
the PaperBook.]
In the notice u/s. 142(1) of the Act, The Appellant vide its
dated 2.9.2023, following query was submission dated 12.9.2023, in
raised: addition to detailed note on
capitalization of assets, had
4. During the relevant A.Y.2020-21, given the list of assets
there is huge addition to assets capitalized for the purpose of
accounts under the categories section 32 of the Act. It also
Buildings and Plant and Machinery. furnished copy of sample
Regarding the same, furnish the invoices and summary of
copies of ledger of both the asset additions of assets during the
categories along with the relevant year.
documentary evidence to prove that [Please refer Pg. 123-125 of the
the respective assets were put to use Paper Book.]
during the year as detailed in 3CD
report for the A.Y.2020-21."
"9. Furnish the detailed depreciation
schedule as per the Income tax Act to
substantiate the claim of Rs.
11316,56,93,470/- for relevant
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A.Υ.2020-21." the
[Please refer query no. 4 and 9 at Pg.
117-119 of the Paper Book).
3.33. Having gone through the above details, the AO allowed depreciation as claimed by the Appellant in the return of income.
PCIT's Direction u/s. 263:
3.34. Ld. PCIT compared the amount of depreciation debited to profit and loss account at Rs. 7,396 crs and the depreciation claimed in the computation of income at Rs. 11,316 crs and therefore, alleged that though the assets were not capitalized in the books of accounts, depreciation has been claimed on the same for Income-tax purposes. Ld. PCIT alleged that the assets were not completely used in the business for the relevant assessment year and still depreciation was claimed since the same was classified in the books of accounts under capital work in progress as the assets were not working in accordance with the Quality of Service ("QOS") standards intended by the management. Please refer para 3 to 3.1 at Pg. 3 of the impugned PCIT's order.
3.35. Ld. PCIT also observed that in AY 2018-19, depreciation as per Companies Act, 2013 (for short, "Companies Act") was Rs. 3576 crs and as per Income-tax Act was Rs. 16620 crs. Ld. PCIT noted that after verifying the details filed by the Appellant, the AO, in AY 2018-19, observed that the assets on which depreciation claimed were not put to use by the assessee and restricted the allowable depreciation at Rs.3576 which was computed as per companies Act. Ld. PCIT alleged that since the facts of the issue is similar to that of the year under 18 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
consideration, the AO erroneously allowed depreciation without carrying necessary verification. [Please refer para 3.2 at Pg. 3 of the impugned PCIT's order). 3.36. Ld. PCIT concluded that the classification under capital work in progress is not merely an accounting entry but reflects the company's admission that the assets were not in their intended operational state. He held that the tax claim for depreciation is premature if assets are not yet deemed usable per the company's own policies. Since in the preceding year, the AO has made disallowance on the same issue, the AO is directed to make proper enquiry/verification and make disallowance, if required. [Please refer para 10 and 10.1 at Pg. 17-18 of the impugned PCIT's order].
SUBMISSIONS BEFORE HON'BLE ITAT: -
A. Depreciation under the Companies Act and Income-tax Act are not comparable:
i. Difference in rates of depreciation:
3.37. The Appellant submits that under the Companies Act, the wireless telecommunication equipment and components are depreciated based on the expected pattern of consumption of the expected future economic benefits over its useful life. The depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013. In Appellant's case, the effective rate of depreciation comes to approximately 3% p.a. 3.38. For the purpose of the Income-tax Act, 1961, the depreciation is claimed as per the rates of depreciation prescribed under the provisions of the Income-tax Act, 1961 read with Rule 5 (New Appendix I) of the Income-Tax Rules, 1962. The assets under consideration, are thus depreciable at 15% p.a. 3.39. Therefore, when the rate of depreciation in the financials is @ 3% whereas the rate of depreciation for income-tax purposes is 15%, the actual amount of 19 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
depreciation claimed in the financials and the income-tax return cannot be compared. Therefore, the Appellant submits that the invocation of jurisdiction under section 263 of the Act, merely on the basis that the amount of depreciation claimed in the financials is less than in Income-tax return without even considering the difference in rate is clearly unsustainable.
ii. Difference in point of time of capitalization of Assets under Companies Act and Income-tax Act:
3.40. As per the accounting policy regularly followed by the Appellant for preparing its financial statements, the Appellant capitalizes the assets only when they are in the location and condition necessary for it to be capable of operating in the manner intended by management. This policy is in line with Para 55 of the Indian Accounting Standard ("IndAS") 16 on Property, Plant and Equipment, which reads as under:
"55. Depreciation of an asset begins when it is available for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by management Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with Ind AS 105 and the date that the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. However, under usage methods of depreciation the depreciation charge can be zero while there is no production"
3.41. Thus, until the assets reach the condition which is capable of operating in the manner intended by management, even if the assets have been put to use, the 20 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
Appellant continues to classify / account these expenses under capital work-in- progress in the books of account.
3.42. Whereas, under the provisions of section 32 of the Income-tax Act, the depreciation is deductible as long as the assets are put to use for the purpose of business. There is no provision of meeting the company's own policies for its usability.
3.43. In view of the above, the PCIT's action of comparing the amount of depreciation as per Companies Act and that claimed u/s. 32 of the Act itself is unreasonable and unwarranted.
3.44. Moreover, Ld. PCIT's conclusion that depreciation under the Act is premature if assets are not usable as per company's policies is clearly contrary to the facts on record.
B. Entries in books of account are not determinative for computing income under the Act:
3.45. It is well-settled law that the manner of accounting shall not determine the taxability of income or allowability of any expenditure. The taxability of income and allowability of an expense shall be determined on the basis of provisions of income-tax law as contained in the Act and as explained by various courts from time-to-time. The admissibility of a claim or otherwise should primarily and predominantly be on the basis of claims made by the assessee in the return of income.
3.46. Reliance in this regard, among others, is placed on the below judgements:
Taparia Tools Limited v. JCIT [2015] 55 taxmann.com 361 (SC) Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) CIT v. India Discount Co. Ltd. [1970] 75 ITR 191 (SC) 21 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
Tutikorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC) CIT u. Reliance Foot Print Limited (2017) ITA No. 948 of 2014 (Bom HC) CIT v. M/s. Reliance Supply Chain Solutions Ltd. (2017)892 of 2014(Bom H C) 3.47. The Hon'ble Mumbai ITAT in Appellant's own case for AY 2018-19, [2023] 149 taxmann.com 197 (Mumbai Trib.), also followed the above legal position while allowing certain expenditure which were pre-dominantly revenue in nature but for the purposes of books of account, were classified under "capital work in progress" till the time the assets had not reached the condition as intended by the management. It was held that the expenses which are incurred for running the business are revenue expenditure for the purpose of income tax irrespective of the treatment of the same by the assessee in its account books." 3.48. In view of the foregoing legal position, the PCIT's direction the AO to verify the issue and make disallowance, if required, by comparing depreciation claimed u/s. 32 of the Act with that provided in the books of account is not in accordance with law and does not cause any prejudice to the interest of revenue.
III. Revision u/s. 263 of the Act:
3.49. Ld. PCIT, in the impugned revision order, has held that the powers of revision u/s. 263 could be invoked even in cases where the assessment order contained error for lack of reasoning or a stereotyped order simply accepting the version of the assessee. [Please refer para 8.8 at Pg. 17 of the impugned revision order]. 3.50. The Appellant submits that above observation is contrary to the legal position established by the Courts. In fact, the revision jurisdiction could not be invoked merely because the assessment order is silent on the issues which were examined by the assessing officer. CIT vs. Gabriel India Ltd. [1993] 203 ITR 108; CIT v. 22 ITA No. 3583/Mum/2025
Reliance Jio Infocomm Ltd.
Fine Jewellery (India) Ltd [2012] 372 ITR 303 (Bom.) (HC); Sunray Cotspin (P.) Ltd. v. PCIT (2020) 79 ITR 193 (ITA No 5239/DEL/2019) (Delhi)(Trib.)) 3.51. In the foregoing submissions, the Appellant has already demonstrated that both the issues were examined by the AO during the original assessment proceedings. This fact is not disputed as Ld. PCIT. The PCIT has not even invoked Explanation 2 to section 263 of the Act. Hence, it it is clear that the AO has examined the issues in question during the original assessment proceedings. 3.52. Moreover, on merits of both the issues, the Appellant has explained that the interpretation of the Ld. PCIT and his suggestion to make disallowances (basis the disallowances made in AY 2018-19) itself was without any statutory support. Allowing deduction u/s. 35ABA to the extent of actual payment and restricting depreciation to the amount provided in the books of account is contrary to the law. 3.53. At this juncture, attention is invited to the decision of Hon'ble Bombay High Court in case of PCIT vs. Coastal Gujarat Power Ltd. [2019] 264 Taxman 244, wherein the facts of the case stood on a weaker footing as the AO did not even carry out detailed enquiries. Hon'ble High Court quashed the revision proceedings by holding that mere lack of detailed enquiries would not be sufficient to enable the Commissioner to exercise revisional power. It was further observed that-
9.......... In our opinion, if the Tribunal has come to the correct conclusions in law and said conclusions are based on materials already on record, it would be futile to reinstate the order of the Commissioner, which in turn, would require the Assessing Officer to carry out the same exercise and axiomatically come to the same conclusion. This line, we are adopting, is within the fold of the requirement of the order of Assessing Officer being 'erroneous'. In other words, if it can be demonstrated that the order was not erroneous, the order of revision would, in any case, require an interference. The matter can be looked from slightly different 23 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
angle. If while examining the order of the A.O. Commissioner notices that, though the A.O. was not examined for claim of the assessee, but the claim itself is legally tenable, would (it) be judicial in exercisingand set aside the assessment? The answer may be in the negative."
3.54. In view of the foregoing decision, the Appellant submits that if the claim made by the Assessee is otherwise tenable in law, then revision is impermissible even though detailed inquiries were not made by the AO. Thus, since the claims made by the Appellant are in accordance with the law the assessment order cannot be considered as "erroneous" on account of inadequate inquiry and, the same cannot be revised u/s. 263 of the Act.
3.55. The Appellant further submits the AO, in AY 2019-20, has already accepted the claim of the Appellant qua both the issues for which revision jurisdiction is exercised u/s. 263 of the Act after raising specific show cause notices and considering the responses of the Appellant. The AO, during the re-opened assessment for AY 2019-20, vide show cause notice dated 19.3.2025, proposed disallowance u/s. 35ABA of the Act by restricting it to the amount paid during the year and proposed disallowance of depreciation u/s 32 of the Act by restricting the same to the amount provided in the books of accounts (Please refer Pg. 228-231 and Pg. 231-234 of the Paper B,However, upon detailed response filed by the Appellant vide letter dated 24.3.2025, the AO accepted claims of the Appellant on both the issues and did not make any adjustment regarding the issues in the appeal in the final assessment order passed u/s. 143(3) r.w.s. 147 of the Act on 29.3.2025, i.e. 2 days before the impugned revision order was passed. [Please refer the response letter at Pg. 240-243 and 243 246 and the re-assessment order at Pg. 345-346 of the Paper Book.
24 ITA No. 3583/Mum/2025
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3.56. Since the AO himself has accepted Appellant's claim on these issues in immediately preceding assessment year, the PCIT's direction of making similar disallowance to that made in AY 2018-19 is fallacious and in fact, it substantiates that there was no prejudice caused to the revenue in allowing deductions u/s. 35ABA and 32(1) of the Act as claimed by the Appellant.
3.57. In view of the settled legal position that the views expressed in one year are binding for the subsequent years and that the stand of the parties cannot be permitted to change in absence of any change in facts or materials, the Department, having allowed and accepted the claim of the Appellant for deduction u/s. 35ABA and u/s. 32(1) of the Act in AY 2019-20, cannot alter the position in subsequent years without any material change in facts and legal position. [Radhasoami Satsang vs. Commissioner of Income-tax [1992] 193 ITR 321 (SC); Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273 (SC)) 3.58. As regard definite finding in the impugned order, the Appellant submits that Ld. PCIT, before giving direction to the AO to verify the issue and make disallowance, if required, has clearly held that the deduction u/s. 35ABA of the Act is allowable only on actual payment. On the issue of depreciation, too, he clearly gave his finding that since the assets were still in the capital work in progress the assets were not used for the purpose of business. Besides, at the time of giving direction, Ld. PCIT has referred to the re-assessment order for AY 2018-19, wherein the AO had made disallowances on the grounds on which Ld. PCIT has invoked revisional jurisdiction. Thus, in view of Herdillia Chemicals Ltd. v. CIT [1996] 221 ITR 194 (Bom)(HC), the merits of the issues shall be decided in the appeal against the impugned revision order as Ld. PCIT has given definite findings on both the issues.
25 ITA No. 3583/Mum/2025
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3.59. It is respectfully submitted that the peculiar nature of jurisdiction under section 263 mandates that the Tribunal adjudicates within the framework of the Commissioner's reasoning and cannot introduce new grounds or modify the directions issued by the Commissioner. CIT v. Jagadhri Electric Supply & Industrial Co. (1983) 140 ITR 490 (P&H High Court); CIT v. L.F. D'Silva (1991) 192 ITR 547 (Karnataka High Court).
3.60. In view of the foregoing, the Appellant humbly prays that the issues in the present appeal be decided on merits and it be held that no prejudice has been caused by the deductions claimed u/s. 35ABA and 32(1) made by the Appellant in the return of income.
7. In rebuttal to the aforesaid submissions of the assessee, Ld. CIT-DR representing the revenue had strongly opposed to the contentions of the assessee, supported the impugned order of Ld. PCIT and had furnished a written response dated 17.02.2026, for the ready reference culled out as under:
Sub: Written Submission in the case of RELIANCE JIO INFOCOMM LIMITED, PAN AABCI6363G in ITA No. 3583/MUM/2025 for the Α.Υ. 2020-21 Reg. Kindly refer to the above.
The Assessee's appeal was fixed for hearing before the Hon'ble ITAT. 'D' Bench, Mumbai on 16.12.2025and heard on that date itself. During hearing, it was directed by bench to submit the stand of both parties in writing containing summary of arguments put forth by both parties.
26 ITA No. 3583/Mum/2025
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2 The matter before the Hon'ble Bench is whether order u/s 263 of the Act was valid or not and whether invoking of section 263 by the Pr.CIT as per law on the grounds that order passed by AO is erroneous and prejudicial to revenue or not
3. PICIT noticed that assessee company was allotted 'Spectrum Allotment amounting to Rs.57,746/- crores from the Department of Telecommunication and the same was shown under fixed assets schedule. Further, the assessee company has amortised an amount of Rs.3935,86,43,868/- u/s 35ABA of the act for relevant A.Y 2020-21 3.1 It was also observed by PCIT that during the assessment proceedings u/s 143(3), the issue whether the assessee has paid the entire amount of Rs 3935,86,43,868/- claimed as deduction u/s 35ABA was actually paid during the year under consideration or not was not verified by the FAO. 3.2 During the previous year (A.Y. 2018-19), on same facts of the case on same issue, the assessee has claimed deduction u/s 35ABA amounting to Rs.3977,34,65,680/- being expenditure for obtaining right to use Spectrum for telecommunication services. During the assessment proceedings, the AO obtained the letter issued by DoT mentioning the amount actually paid and it was found that assessee has made payment of Rs.1454,89,28,774/- only to the DoT towards installment under deferred payment in respect of auction held in 2014. After verifying the facts and considering the submissions of the assessee, the access deduction amount of Rs 2522,46,36,906/- claimed u/s35ABA of the act was disallowed and added to the total income.
However, in the A.Y. 2020-21, the actual payments made by the assessee company to the DoT wasn't verified and, without verifying the issue. FAO erroneously allowed the entire amount of Rs.3955,86,43,868/- claimed as deduction u/s 35ABA 27 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
of the Act. No query whatsoever regarding claim u/s 35ABA was raised by AO during Assessment proceedings: A notice u/s 142(1) dated 02/09/2023 issued to the assessee. In Q.No. 5 assessee was asked to provide the break-up and details of an amount of Rs 14818,54,81,379/- that was claimed as any other amount allowable as deduction in the Schedule BP, shown in the ITR filed for the A.Y. 2020-21. In response vide letter dated 12/09/2023 from page no. 122 to 129 of paperbook, the appellant submit breakup which includes deduction u/s 35ABA. Thereafter, AO has not at all call any details related to deduction claim u/s 35ABA. Although in previous year disallowance was made u/s 35ABA which was very much in knowledge of FAO 3.3 Therefore, section 263 applies in this case: (a) the order sought to be revised contained error for lack of reasoning; (b) the order sought to be revised proceeds on incorrect assumption of facts and apples the law incorrectly, and (c) stereotype orders passed by the Assessing officer simply accepting the version of the assessee. 3.4 The assessee has contended that the acquisition cost qualifies for deduction u/s 35ABA, asserting that the deferred payment structure should not impact the eligibility of the deduction. However, this contention of the assessee is not acceptable. Section 35ABA explicitly mandates that the amount should "Actually be paid." The company's interpretation that a mere liability under the deferred payment scheme qualifies for deduction contradicts the explicit language of the statute. The explanation provided in Rule 6A(a)(b) does not override the principal requirement of "actual payment.
It is worthwhile to mention here that in the preceding years also, the AO has made disallowance on the same issue in assessee's own case. Thereafter, the order of AO is erroneous and prejudiced to revenue as AO can't take different stand on same set of facts in different AY's and rule of consistency has to be followed by the AO. 28 ITA No. 3583/Mum/2025
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Therefore, Pr.CIT has directed the AO to make proper enquiry/verification and make disallowance. if required.
4. Regarding the claim of depreciation in respect of certain assets. On perusal of the assessee's submission, it is evident that the assets were not completely used in the business for the relevant assessment year since the same is classified in the books of accounts under capital work in progress. Further, the assets were not commenced its operations since the assessee was not work in progress. Further, the assets were not commenced its operations since the assessee was not working in accordance with the Quality of Service (QoS) standards intended by the management. Therefore, it is evident that the entire addition of assets made under the block Plant & Machinery during the year by assessee were not fully utilized for the business purpose of the assessee. Hence, the entire addition of asters during the year is not eligible for claiming depreciation.
4.1 During assessment proceedings for AY 2018-19, the AO observed that there is huge difference in claim of depreciation due to the adoption of different method to classify the assets under Companies Amendment Act, 2013 and Income Tax Act, 2013. After verifying the details filed by the assessee and facts of the case, the AO observed that the assets on which depreciation claimed were not put to use by the assessee. Accordingly, the AO restricted the allowable depreciation at Rs. 3576.54,37,356/- and the balance depreciation of Rs. 13044,38,61,905/- being excess claim of depreciation was disallowed and added back to the total income of the assessee. The facts on the issue of allowability of depreciation for the year under consideration are on the same lines in the current year i.e AY 2020-21 also. The entire depreciation claim of the assessee i.e. Rs. 11316,56,93,470/- was erroneously allowed by the AO without carrying our necessary verification 29 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
5. The FAO has neglected the fact that the assessee has claimed deduction u/s35ABA and wrong amount of depreciation. The AO has failed to examine the issue of allowability of deduction and depreciation claimed by the assessee. Therefore, it is evident that the order u/s 143(3) r.w.s. 144B of the IT Act is deemed to be erroneous in so far as it is prejudicial to the interest of revenue.
6. During the hearing before Hon'ble bench, it was admitted by the appellant also that the AO has not done any enquiry related to claim of depreciation and verification of deduction u/s 35ABA except calling for details of deduction claim in scheduled BP in routine and casual manner and without further enquiry. It is respectfully submitted that while validity of order u/s 263 of the Act on merits of the case should not be decided at this stage more particularly when the AO has not done any enquiry in this regard during the assessment proceedings. It is respectfully submitted that the Hon'ble Bench may decide the case on validity of the order u/s 263 of the Act only and not decide the case on merit because nothing can be done on merit at the level of Hon'ble Bench when AO has not brought on record anything and has not discussed the case on merit. it is also worth to mention here that both issues have not been adjudicated so far by any appellate forum.
7. Therefore, merit of the case has not been examined at the stage of appellate authority. Also, here the issue is that The Pr.CIT while exercising the power of section 263 of the Act, on the basis of whether enquiry was done by the AO or not and whether it was prejudicial to the Revenue or not. As discussed above in 3 and 5, it is a clear case of lack of enquiry by AO. It is also a case of prejudicial to the revenue.
8. Therefore, it is humbly submitted that the order passed u/s 263 of the Act by the Pr.CIT should be held as proper and the case should not be decided on merits because no finding was given by the AO on merit.
30ITA No. 3583/Mum/2025
Reliance Jio Infocomm Ltd.
8. Per contra, a rejoinder dated 23/02/2026 was filed by the assessee, to contradict and point out some factual error in the submission of the revenue, reproduced as under:
Submission in response to the submission dated 17/02/2026 filed by the Ld. Department Representative (DR) clarifying factual errors. With reference to the captioned appeal heard on 16/12/2025, the Bench had directed Appellant as well as Department to file submissions. Appellant has filed submissions and has shared with the office of DR as well. Appellant has also received the submissions filed by the DR on 17/02/2026 (copy enclosed as Annexure 1). Appellant would like to draw your attention to the incorrect facts captured in said submissions.
In Para 3.2 of the written submission filed by Ld. DR, it is stated that -
"AO has not at call any details related to deduction claim u/s 35ABA. Although in previous year disallowance was made u/s 35ABA which was very much in knowledge of FAO".
The above fact is not correct, as the disallowance for AY 2018-19 was made vide order under section 147 dated 29/03/2024 (refer the copy of order at page no. 153 to 213 of the paper book and the date of the order is mentioned on page 153 of the paper book), which was subsequent to the order under section 143(3) dated 27/09/2023 passed for AY 2020-21.
The Appellant requests your Honours to kindly consider the abovementioned correct facts and oblige.
31ITA No. 3583/Mum/2025
Reliance Jio Infocomm Ltd.
We trust that your Honours will accede to our request.
9. We have considered the rival submissions, perused the material available on record and the judicial pronouncements relied upon by the parties. The present appeal of assessee challenges the revisionary jurisdiction assumed u/s 263 of the Act by the ld. PCIT,on account of dissatisfaction to the findings of ld. AO quathe claim of assessee for deduction under section 35ABA and depreciation u/s 32(1) of the Act. The ld. PCIT has directed the ld. AO to conduct proper enquiry / verification, if required with respect to the aforesaid two issues leading to disallowances in the hands of assessee.
10. Adverting to the first issue i.e. deduction under section 35ABA, ld. Counsel of the assessee submitted that the assessee had incurred certain capital expenditure for acquiring the right to use spectrum for telecommunication services from the Department of Telecommunication (DoT), Government of India. There were two options available to settle /pay the fee payable towards acquiring of the said rights. The acquirer of the right can either make the entire payment under onetime fee option (upfront) or to make the deferred payment in installments during the term of right to use the spectrum (in present case the period is 20 years). It is further clarified that, if the deferred payment option is opted by the acquirer of right then certain interest component,also factored in by the DoT to determine the deferred installments. The assessee opted for deferred payment. A worksheet showing aggregate payment and deferred payment on 32 ITA No. 3583/Mum/2025 /Mum/2025 Reliance Jio o Infocomm Ltd.
year-to-year basis has been submitted before us, the same is extracted hereunder for better analysis of the issue under consideration.
10.1 The main controversy in the present matter revolvesaround the interpretation of provisions of section 35ABA r.w.r. 6A by the ld. PCIT and the assessee, which are diverse and contradicting.
contradicting 10.11 To construe and deliberate upon conflict between the parties, tthe bare provisions of section 35ABA are culled out as under:
"Expenditure for obtaining right to use spectrum for telecommunication services. 35ABA. (1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to use spectrum for telecommunication services either before the commencement of the business or thereafter at any time during any previous year and for which payment has actually been made to obtain a right to use spectrum, there shall, shall subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure.
33 ITA No. 3583/Mum/2025
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(2) The provisions contained in sub-sections (2) to (8) of section 35ABB, shall apply as if for the word "licence", the word "spectrum" had been substituted. (3) Where, in a previous year, any deduction has been claimed and granted to the assessee under sub-section (1), and, subsequently, there is failure to comply with any of the provisions of this section, then,--
(a) the deduction shall be deemed to have been wrongly allowed;
(b) the Assessing Officer may, notwithstanding anything contained in this Act, re-
compute the total income of the assessee for the said previous year and make the necessary rectification;
(c) the provisions of section 154 shall, so far as may be, apply and the period of four years specified in sub-section (7) of that section being reckoned from the end of the previous year in which the failure to comply with the provisions of this section takes place.
Explanation.--For the purposes of this section,--
(i) "relevant previous years" means,--
(A) in a case where the spectrum fee is actually paid before the commencement
of the business to operate telecommunication services, the previous years beginning with the previous year in which such business commenced; (B) in any other case, the previous years beginning with the previous year in which the spectrum fee is actually paid, and the subsequent previous year or years during which the spectrum, for which the fee is paid, shall be in force;
(ii) "appropriate fraction" means the fraction, the numerator of which is one and the denominator of which is the total number of the relevant previous years;
(iii) "payment has actually been made" means the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee or payable in such manner as may be prescribed.
10.12 The applicable provision of Rule 6Ahaving its crucial role herein to read along,also reproduced as under:
"[Expenditure for obtaining right to use spectrum for telecommunication services. 6A. (1) For the purpose of section 35ABA, the term "payment has actually been made" shall mean,--
(a) where an assessee has opted and been allowed by the Department of Telecommunications, Government of India to make full upfront payment of spectrum fee, the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee;
(b) where an assessee has opted and been allowed by the Department of Telecommunications, Government of India to make deferred payment, the amount which would have been payable by the assessee had he opted for full upfront 34 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
payment of spectrum fee irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee.
(2) In case of deferred payment referred to in clause (b) of sub-rule (1), where there is failure by the assessee to comply with any of the conditions specified by the scheme of the Department of Telecommunications, Government of India and Department of Telecommunications terminates the allotment or assignment of spectrum, the Assessing Officer shall, in exercise of power vested in him under sub-section (3) of section 35ABA shall re-compute the total income of the assessee for the previous year in which the deduction has been claimed and granted to him by deeming that,--
(i) the total amount of spectrum fee paid up to the date of termination is the amount of "payment actually been made";
(ii) the spectrum was in force up to the date of its termination for the purpose of computing "relevant previous year".] 10.13 As per the ld. PCIT during the year under consideration the assessee had made an actual payment of Rs. 1454.89 Crore to the DoT towards installments under deferred payment in respect of auction held in 2014. The claim of assessee under section 35ABA, was for Rs. 3977.35 crore, therefore the difference of Rs. 2522.46 crore, which does not represent the actual payment during the year under consideration,construed to be the excess claim by the assessee u/s 35ABA of the Act. The ld. PCIT referred to the provisions of section 35ABA and observed that the said section explicitly mandates that the amount should be actually paid. The ld. PCIT disregarded the interpretation by the assessee company that, a mere liability under the deferred payment scheme qualifies for deduction.PCIT opines that the explanation provided in Rule 6A(1)(b) cannot override the principal requirement in main section for actual payment. The ld. PCIT further added that the Rules, merely provides a reference for determining the deductible amount but does not eliminate the need for actual 35 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
payment. Accordingly, the ld. PCIT, emphasizing the need of actual payment, has directed the ld. AO to re-examine the assessee's claim for deduction under section 35ABA and to make the disallowance.
10.14 This issue is challenged by the assessee before us on two counts,(i) to defy the assumption of revisionary jurisdiction u/s 263 by the Ld. PCIT in contravention of the provisions of law, that the issue was exhaustive examined by the ld. AO during the assessment proceedings by issuance of notice under section 143(2) dated 29.06.2021, 26.10.2022 and 02.09.2023. The aforesaid notices raised certain queries relating to admissibility of expenditure claimed by the assessee totaling to Rs. 27113.55 crores under various head,including assessee's claim for deduction under section 35ABA for Rs. 3935.86 crores. It is submitted that after having gone through such exhaustive queries and explanations by the assessee, the ld. AO has allowed the claim of deduction under section 35ABA to the assessee, therefore invoking the provisions of section 263 for assuming revisionary jurisdiction by the ld. PCIT to impose his opinion to disturb a plausible view taken by the ld. AO is not permitted in the eyes of law. Accordingly, the jurisdiction assumed by the ld. PCIT was challenged by the assessee with the submission that the issue regarding the claim of deduction under section 35ABA by the assessee before the ld. AO was duly examined by the ld. AO who had sought explanations on the issue on the multiple occasions during the course of assessment proceedings and all the 36 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
details pertains to the such deduction were furnished by the assessee, therefore revisional provisions under section 263 for which satisfaction of twins conditions was required could not be fulfilled in the present case. The twin conditions are that the assessment order is erroneous as well as prejudicial to the interest of revenue. Reliance was placed on the decisions in the case of Malabar Industrial Company Ltd. vs. CIT [2000] 243 ITR 83 (SC), wherein the Hon'ble Apex Court has held that the ld. PCIT has to satisfy the twin conditions, namely (a) the order of ld. AO sought to be revised is erroneous and (ii) it is prejudicial to the interest of revenue. If one of them is absent the recourse cannot be had to section 263(1) of the Act. To explain the meaning of "the erroneous judgment", Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. [1993] 203 ITR 108 (Bom.) have explained that "erroneous judgment means one rendered according to courts practice of law, but contrary to the law upon mistaken view of law or upon erroneous application of legal principles", the assessment order cannot be branded as erroneous by the Commissioner simply because, according to him the order under revision was to be written more elaborately. The section does not visualize a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. The assessee explained before the ld. PCIT that there is a difference between lack of enquiry and inadequate enquiry. Only the cases having lack of enquiry, the Commissioner is empowered to exercise his revisional powers. Reliance was placed on the decision of CIT vs. Vikash Polymer [2012] 341 ITR 537. On a 37 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
perusal of the aforesaid submissions by the assessee before the ld. PCIT, so before us, we are of the considered view that certain enquiries were conducted by the ld. AO qua the claim of deduction of assessee under section 35ABA and duly responded by the assessee, the claim was then allowed by the ld. AO, with no adverse findings or inference drawn in the assessment order. Since, there was an addition on the same issue in earlier year, though as clarified by the ld. AR that the said assessment for AY 2018-19 was completed on 29.03.2024, which was after completion of the assessment on 27.09.2023 for AY 2020-21 (relevant year), therefore the ld. AO has no occasion to came across the findings in the assessment under section 147 for AY 2018-19. Also,once the necessary enquiries were made by ld. AO and has taken a plausible view the ld. PCIT was incorrect to invoke the provisions of section 263 for initiating the revisionary proceedings, so as to substitute his view over the view of the ld. AO. Under such facts and circumstances, we find substance in the submissions of ld. AR that the revisionary powers were used by the ld. PCIT,are against the settled principle of law and therefore the impugned revisionary order passed u/s 263 of the Act, exercising the powers without satisfaction of the twin conditions would be liable to be struck down.
10.15 Apropos, the (ii) contention on merits qua the admissibility of claim of assessee in terms of provisions of section 35ABA, we observed that the provisions of section 35ABA permits the assessee to allow the claim of 38 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
deduction in respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to use spectrum for telecommunication services either before commencement of the business or thereafter at any time during the previous year and for which 'payment has actually been made' to obtain a right to use spectrum, shall be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure. Further the appropriate fraction is explained in Explanation No. (ii) of the said section means "the fraction, the numerator of which is one and the denominator of which is the total number of the relevant previous years". Explanation (iii)clarifies the meaning of "the payment has actually been made, that'the actual payment' on expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee or payable in such manner as may be prescribed.
10.16 For the purpose of section 35ABA the term "payment has actually been made" is further explicated in Rule 6A of the Income Tax Rules, 1962 (the Rules) extracted to supra, according to which the payment of expenditure needs to be looked into under two circumstances (i) Where the assessee has opted and been allowed by the DoT to make full upfront payment of spectrum fee, the actual payment of expenditure irrespective of the previous year in which the liability for expenditure was uncured. (ii) where the assessee has opted and 39 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
been allowed by the DoT to make deferred payment, the amount which would have been payable by the assessee had he opted for full upfront payment of spectrum fee irrespective of the previous year in which the liability for expenditure was incurred according to the method of accounting regularly employed by the assessee.
10.17 The instant case falls under the 2nd category wherein the assessee has opted to make deferred payments.
10.18 Clause (2) of Rule 6A further clarifies that in case of deferred payments, if there is a failure on the part of assessee to comply with any of the conditions specified in the scheme of DoT and the DoT terminates the allotment or assignment of spectrum, the ld. AO shall in exercise of power vested in him under sub-section (3) of section 35ABA shall re-compute the total income of assessee for the previous year in which deduction has been claimed and granted to him by deeming that (i) the total amount of spectrum fee paid up to the date of termination is the amount of payment actually been made, (ii) the spectrum was in force up to the date of its termination for the purpose of computing relevant previous year.
10.19 On a thoughtful consideration of the aforesaid provisions, we find that sub-clause (b) of Clause (1) of Rule 6A shall apply to the case under consideration, as there was no dispute regarding the other conditions prerequisite 40 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
under section 35ABA between the parties. The only issue before us is to determine, what should be the amount of actual payment which constitutes admissible deduction in terms of provisions of section 35ABA r.w.r. 6A(1)(b). We observe that section 35ABA allows the assessee to claim the capital expenditure incurred for acquiring the rights to use spectrum under appropriate fraction divided into relevant previous years. Further, the actual payment is defined in Rule 6A(1) wherein clause-(b) will be applicable in the case of assessee as the assessee has opted for deferred payments and in such circumstances the definition of 'payment has actually been made',means the amount which would have been payable by the assessee, had he opted for full upfront payment of spectrum fee. The assessee in present case has made a working of payment of spectrum fee which is extracted supra, according to which the actual payable amount (Rs. 3335.86 crores) would be allowed as deduction to the assessee irrespective of the actual payment made by the assessee. The aforesaid contention further strengthen by the explanation in clause-(2) of section 64, which empowers the AO, in case of termination of allotment, to re-compute the total income of the assessee for the previous year in which the deduction has been claimed and granted by deeming that the total amount of spectrum fee up to the date of termination is the amount of payment actually been made. We thus in terms of aforesaid observations find substance in the submissions of the assessee, wherein the computation of deduction was made in accordance with the provisions of section 35ABA r.w.r. 6A of the Rules. Accordingly, the claim 41 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
made by assessee found to be justified and acceptable on merits. The order of ld. PCIT under section 263 would therefore fails on merits also. 10.20 To arrive at the aforesaid conclusions, we have also considered the submissions of ld. CIT-DR alleging that the claim under section 35ABA was allowed by the ld. AO without making proper enquiry / verification, therefore the order of ld. PCIT was justified and deserves to be upheld. The request of ld. CIT- DR that the matter should not be decided on merits as there is a huge difference between the amount claimed by the assessee and the actual payment made. It is further submitted that since in earlier year i.e. AY2018-19, the ld. AO has made an addition under section 35ABA, which is yet to be examined at the stage of appellate authority, therefore no adjudication at this stage by the Hon'ble Bench would be called for. He requested the Bench not to decide the case on merits as there was no finding by the ld. AO on the issue.
10.21 In rebuttal to aforesaid contention of ld. CIT-DR the assessee had made a submission that there was a factual error in the submissions of the revenue that the ld. AO was failed to consider the findings of ld. AO for the AY 2018-19 wherein the claim of deduction of assessee under section 35ABA was disallowed, whereas in present case the assessment order was passed on 27.09.2023 whereas the order under section 147 for AY 2018-19 was passed later on 29.03.2024, therefore the order of ld. AO cannot be considered to be erroneous on this account. We are unable to fathom the grievance raisedby Ld. CIT-DR, as to not 42 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
deciding the issue on merits,which would lead to partial interpretation of the issue, that bar us to reach a logical conclusion on law as well as merits vide the revisionary powers exercised by the Ld. PCIT, so we reject the same.
11. Advertingto the issue regardingassessee's entitlement to claim of depreciation on certain assets, which was disputed by the ld. PCIT in the revisional proceedings under section 263. ld. AR submit that during the original assessment proceedings, enquiries were made by the ld. AO, which were responded by the assessee as described in the written submission furnished by the assessee (extracted supra). It is also submitted that wrong interpretation of work- in-progress has been set out by the ld. PCIT, as against the accounting practices of assessee company in accordance with the Indian Accounting Standard (IndAS)-16 for property, plant and equipment, according to which the depreciation of an asset begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by the Management. It is submitted that the assessee continues to classify / account for these expenses under capital work-in-progress in the books of account, whereas as per the provisions of section 32 of the Act, the depreciation is deductible as and when the asset is put to use for the purpose of business. It is also clarified that the effective rate of depreciation in Companies Act comes to approximately 3% whereas as per the Income Tax Rule, 1962 the assets under consideration are depreciable at 15%, therefore there was a huge gap 43 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
between the depreciation claimed under Companies Act and Income Tax Act. It is also clarified that the revision under section 263 was also invoked in the case of assessee for AY 2019-20 and similar issues regarding entitlement of assessee under section 35ABA as well as disallowance of depreciation were raised and remitted to the ld. AO for fresh adjudication, however upon detailed response filed by the assessee vide letter dated 24.03.2025, the ld. AO accepted the claim of assessee on both the issues and do not consider it necessary to make any adjustment regarding the issues under consideration. The copy of order under section 143(3) r.w.s. 147 of the Act on 29.03.2025 just two days before the impugned revision order was placed before us at page no. 345 and 346 of the assessee's PB. We noticed that there was no rebuttal on this aspect by the revenue that revenue itself has accepted the contention on both the above issues for AY 2019-20, under similar facts and circumstances, wherein even after revisionary proceedings, the consequential assessment was framed accepting the view adopted by the assessee, with no disallowance or adverse findings. Assessee placed reliance on the decision in the case ofRadhasoami Satsang vs. Commissioner of Income-tax [1992] 193 ITR 321 (SC); Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273 (SC) to follow the principle of consistency.
12. We find that the revisional proceedings fails on first challenge by the assessee, that the impugned assessment could not be proved to be erroneous being framed after conducting necessary enquiries. Also on merits, once the issue under 44 ITA No. 3583/Mum/2025 Reliance Jio Infocomm Ltd.
similar facts and circumstances, with no distinction brought on record by the revenue, accepted by the revenue in a consequential assessment u/s 143(3) r.w.s. 263, under directions in a revision order u/s 263 of the Act, there remains no scope for the department to raise this issue on recurring basis in ensuing years, violating the principle of consistency.
13. In backdrop of the aforesaid facts, circumstances and settled principles of law, we find force in the contentions of the Ld. AR that the revisionary proceedings initiated in the present case, vitiates on both facets. i.e., legal as well as merits of the issue, so cannot be acceded to or sustained, consequently, needs struck down and we direct to do so.
14. In result, the captioned appeal of assessee,stands allowed in terms of our aforesaid observations.
Order pronounced in the open court on 12-03-2026.
Sd/- Sd/-
(AMIT SHUKLA) (ARUN KHODPIA)
Judicial Member Accountant Member
Mumbai, Dated : 12-03-2026.
*SK, Sr. PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. DR, ITAT, Mumbai
4. Guard File
5. CIT
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ITA No. 3583/Mum/2025
Reliance Jio Infocomm Ltd.
BY ORDER,
(Dy./Asstt. Registrar)
ITAT, Mumbai
46