Income Tax Appellate Tribunal - Mumbai
Millenium Telecom Ltd, Mumbai vs Ito 5(2)(3), Mumbai on 7 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "D", MUMBAI
BEFORE SHRI R.C. SHARMA (AM) AND SHRI RAM LAL NEGI (JM)
ITA No. 34/MUM/2017
Assessment Year: 2003-04
ITA No. 5779/MUM/2010
Assessment Year: 2004-05
ITA No. 4149/MUM/2015
Assessment Year: 2005-06
M/s Millennium Telecom Limited, The Income Tax Officer-5(2)(3),
Office of DGM (1A & RA), Aayakar Bhavan, M.K. Road,
1st Floor, Telephone Exchange Mumbai - 400020
Building, V. S. Marg, Prabhadevi, Vs.
Mumbai - 400028
PAN: AADCM3056G
(Appellant) (Respondent)
ITA No. 730/MUM/2014
Assessment Year: 2004-05
The Income Tax Officer-5(2)(3), M/s Millennium Telecom Limited,
Aayakar Bhavan, M.K. Road, Office of DGM (1A & RA),
Mumbai - 400020 1st Floor, Telephone Exchange
Vs. Building, V. S. Marg, Prabhadevi,
Mumbai - 400028
PAN: AADCM3056G
(Appellant) (Respondent)
Assessee by : Shri A.K. Pradhan (AR)
Revenue by : Shri Chaitanya Anjaria (DR)
Date of Hearing: 17/09/2018
Date of Pronouncement: 07/12/2018
ORDER
PER RAM LAL NEGI, JM
These appeals have been filed by the same assessee and the revenue.
ITA No. 5779/Mum/2010 for the A.Y. 2004-05, ITA No. 4139/Mum/2015 for 2 ITA Nos. 730/MUM/2014, 34/MUM/2017,5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 A.Y. 2005-06 and 34/Mum/2017 are the assesses's appeal against the order dated 14.05.2010 passed by the Commissioner of Income Tax (Appeals)- (for short the CIT (A) -09, Mumbai, order dated 09.03.2015 passed by the CIT (A)- 10, Mumbai and order dated 28.09.2016 passed by the CIT (A)-10, Mumbai respectively vide which the concerned CITs (A) have dismissed the appeals filed by the assessee against the assessment order passed by the AO u/s 143 (3), 143 (3) r.w.s. 250 and 143 (3) r.w.s. 250 of the Act respectively. Vide appeal No. 730/Mum/2014, the department has challenged the order passed by the Ld. CIT (A), whereby the Ld. CIT (A) has deleted the penalty levied by the AO u/s 271 (1) (c) of the Act. Since, all the appeals pertain to the same assessee, these were clubbed and heard together and are being disposed of by this common and consolidated order for the sake of convenience.
ITA No. 34/MUM/2017 (Assessment Year: 2003-2004)Brief facts of the case are that the assessee company, a 100% subsidiary of Mahanagar Telephone Nigam Ltd. engaged in the business of retendering services, Cyber Café and Telephone and Internet services, filed its return of income for the relevant assessment year declaring the total income of Rs. 4,38,820/-. The AO completed the assessment u/s 143 (3) of the Act and accepted the return filed by the assessee allowing the claim of the assessee u/s 80IA. Subsequently, the CIT-5, Mumbai passed order u/s 263 and set aside the order on the ground that the AO has wrongly allowed the claim u/s 80IA of the Act. Accordingly, the AO passed the assessment order u/s 143 (3) read with section 263. The assessee's appeal against the said order was dismissed by the CIT (A). In the appeal against revision order passed u/s 263 of the Act, the ITAT set aside the issue regarding assessee's claim u/s 80IA of the Act to the AO. Accordingly, the AO completed the assessment u/s 143 (3) r.w.s. 250 of the Act determining the total income at Rs. 1,14,74,050/-. The assessee challenged the order passed by the AO on the ground that the AO has not 3 ITA Nos. 730/MUM/2014, 34/MUM/2017, 5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 followed the directions given by the ITAT while passing the order giving effect to the ITAT order. The Ld. CIT (A) after hearing the assessee dismiss the appeal holding that the AO has rightly held that the assessee is not entitled for deduction u/s 80IA(4)(ii) holding that the AO has rightly followed the order passed in the assessee's case pertaining to the A.Y. 2005-06. The assessee has filed the present appeal against the impugned order passed by the Ld. CIT(A).
2. The assessee has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):-
1. "The Commissioner of Income Tax (Appeals) has erred by not considering the direction of learned Judges of ITAT and has mechanically passed the Assessment Order by relying on the previous Assessment orders of AO for A.Y. 2005-06 dated 30.03.2013.
2. The Commissioner of Income Tax (Appeals) has erred in not considering the Infrastructure installed of the assessee for providing Telecommunication services.
3. The Commissioner of Income Tax (Appeals) has erred in not considering Internet Service Provider License obtain by the assessee for providing Telecommunication and Internet services.
4. The Commissioner of Income Tax (Appeals) has erred in not considering the Affidavit of the Telecom Engineer in respect of Telecommunication Services provided by the Assessee.
5. The Commissioner of Income Tax (Appeals) has erred in confirming disallowance of deduction u/s 80IA and addition of Rs. 1,10,35,233/- to the income without considering the technical parameters of the case.
6. The Commissioner of Income Tax (Appeals) has erred in confirming non credit of Rs. 59,83,525/- Income Tax directly attached from the Assessee's bank account on 30th March, 2009.4 ITA Nos. 730/MUM/2014, 34/MUM/2017,
5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06
7. The Commissioner of Income Tax (Appeals) has erred in confirming computation of Interest u/s 234B and 234C due to the non credit of Rs. 59,83,525/- whereby the Assessee is Entitled to substantial refund with interest."
3. Before us, the Ld. counsel for the assessee submitted that the Ld. CIT (A) has wrongly confirmed the assessment order passed by the AO, without considering the directions of the ITAT. The Ld. CIT (A) has erred in not considering that assessee had created infrastructure and obtained internet service provider license for providing telecommunication services. The Ld. Commissioner has further erred in not considering the contents of affidavit of Sh. Ajay Kumar Sahu, Telecom Engineer submitted by the assessee before the AO during the assessment proceedings pertaining to the assessment year 2004-05 to substantiate its claim. The Ld. CIT (A) has further erred in confirming disallowance of deduction u/s 80IA and making addition of Rs. 1,10,35,233/- to the income of the assessee without considering the technical parameters fulfilled by the assessee. The Ld. counsel further submitted that the CIT (A) has erred in confirming non credit of Rs. 59,83,525/- directly attached from the assessee's bank account on 30th March, 2009. In the light of the aforesaid facts, the Ld. counsel for the assessee submitted that the contents of the affidavit go to the root of the issue in question, and since the authorities below has not considered the same while passing assessment order and the appellate order, the matter requires re-examination in the light of the contents of the affidavit.
4. On the other hand, the Ld. Departmental Representative (DR) relying on the order passed by the Ld. CIT (A) submitted that since the AO has passed the assessment order taking into consideration the entire facts of the case and material on record and the submissions made before by the assessee, there is no infirmity in the order passed by the Ld. CIT (A) to interfere with. The Ld. 5 ITA Nos. 730/MUM/2014, 34/MUM/2017, 5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 counsel further submitted that in the assessees case for the assessment year 2005-06, AO had examined all technical issues which are involve in this appeal and since the AO had decided the issue involved in this case by taking into consideration of the findings of AO in the assessment order for the A.Y. 2005- 06, the Ld. CIT(A) has rightly confirmed the action of AO and held that the assessee is not eligible for claim of deduction u/s 80IA (4)(ii) of the Act
5. We have heard the rival submissions and also gone through the material on record in the light of the rival contentions of the parties. The coordinate Bench vide its order dated 18.09.2013 passed in assessee's appeal ITA No. 5949/Mum/2008 set aside the order dated 31.03.2008 of the CIT (A) passed u/s 263 of the Act and directed the AO to verify as to whether the services being rendered by the assessee constitutes basic or Cellular Telecommunication services or the same constitute only an application of such services so as to determine the eligibility of assessee's claim u/s 80IA(4)(ii) of the Act. The relevant para of the order of the coordinate Bench reads as under:-
"Continuing further, we, however, make it clear that we are not in any manner making any observation toward the merits of the case, which the AO shall be at full liberty, rather, duty bound to examine and adjudicate in the set aside proceedings. That is, we confirm the set aside of the assessment under reference, and also vacate the other directions by the ld. CIT to enable reframing the assessment by the Revenue with regard to the deductibility in law of the assessee's claim u/s 80-IA(4)(ii). The matter would thus stand to be decided in accordance with law per a speaking order after hearing the assessee in the matter, deciding the issue under reference, i.e. the provision or otherwise by the assessee of the telecommunication services, whether basic or cellular, viz, radio paging, domestic satellite services, network of trunking, broadband network and internet services, over the specified period. The assessee has provided and, accordingly, its revenue 6 ITA Nos. 730/MUM/2014, 34/MUM/2017, 5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 stream/s for the year is from e-tendering, besides cyber café services (implying access to internet facility) and sale of internet packs. The controversy to be resolved, as we see it, is thus if the said services could be said to constitute basic or cellular telecommunication services, or do it's services constitute an application of such services. The focus therefore at all times should be on the services being provided by the assessee, i.e. as distinct and in contradistinction to the (input) services utilized by it in providing it's (output) services. Further, if the basic or cellular telecommunicatio0n services, either as such or in its different forms, as for example those specified in the provision are subject to licensing or other regulatory processes, the relevant policy of the telecom sector regulator (Department of Telecommunications (DOT) or the Telecom Regulatory Authority (TRAI) could again be a useful guide in the matter . The onus to establish its claims though shall be on the assessee. We decide accordingly."
6. In the light of the observations of the coordinate Bench we agree with the Ld. counsel for the assessee that the contents of the affidavit sworn by Sh. Ajay Kumar Sahu, Telecom Engineer are relevant to ascertain the claim of the assessee. However, we notice that the authorities below has not examined the contents of the affidavit dated 16.01.2015 vide which, the deponent has confirmed that the assessee has fulfilled the technical specifications issued by the Govt. of India, Ministry of Communication Department of Telecommunication 'guidelines and general information for internet service provider (ISP)' No. 845-51/97. As per sub-clause (ii) of clause (4) of Section 80IA any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic cellular service, network of trunking, broadband network and internet services on or after the first day April 1995, but before the 31st day of March, 2005, is eligible for deduction of an amount equal to 100% of the profits and gains derived from such business for ten consecutive assessment years. So in order to ascertain whether the services of the assessee fall within the ambit of the aforesaid 7 ITA Nos. 730/MUM/2014, 34/MUM/2017, 5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 provisions, AO has neither examined the deponent nor given any findings on the contents of the affidavit. The AO has not pointed out any document or policy of the Department of Telecommunication or Telecom Regulatory Authority to justify its action. The Ld. CIT(A) has also not touched this aspect during the appellate proceedings. Under these circumstances, the issue requires fresh determination in the light of the contents of the affidavit aforesaid.
7. In the light of the aforesaid facts, we consider it appropriate to sent this issue back to the AO for deciding the issue afresh after considering the contents of the affidavit aforesaid and conducting verification to ascertain the claim of the assessee u/s 80IA(4)(ii) of the Act in accordance with the observations of the coordinate Bench made in the assessee's appeal discussed above. We accordingly set aside the impugned order and send this appeal back to AO for determining the issue afresh, considering the contents of affidavit aforesaid after giving a reasonable opportunity of being heard to the assessee.
8. The second issue raised by the assessee pertains to non-credit of Rs. 59,83,525/-, Income Tax directly attached from assessee's bank account on 30th March, 2009. As per the order of the Ld. CIT (A), this issue does not arise from the impugned order passed by the Ld. CIT (A) as only three grounds were raised by the assessee before the Ld. CIT (A).
9. The third ground issue pertains to charging interest u/s 234B and 234C of the Act. Since, the charging of interest under the aforesaid sections is mandatory and of consequential nature, the said ground does not require any adjudication.
ITA No. 5779/MUM/2010 (Assessment Year: 2004-2005) and ITA No.4139/MUM/2015 (Assessment Year: 2005-2006) 8 ITA Nos. 730/MUM/2014, 34/MUM/2017, 5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 The assessee has raised the identical grounds in ITA No. 5779/Mum/2010 for A.Y. 2004-05 and ITA No. 4139/Mum/2015 for A.Y. 2005-06.
2. Since, we have set aside the issue pertaining to the claim of the assessee u/s 801A(4)(ii) of the Act and send the matter back to the AO for fresh consideration, consistent with our findings in the assessee's case having same set of facts and issues, we set aside the impugned order passed by the Ld. CIT (A) in the present case and send the matter back to the AO for fresh consideration in the light of the contents of affidavit submitted by the assessee after giving a reasonable opportunity of being heard to the assessee.
3. The Second issue pertains to interest u/s 234B and 234C and 234D in both the appeals. Since, the charging of interest under the aforesaid sections is mandatory and of consequential nature, the said ground does not require any adjudication.
ITA No.730/MUM/2014 (Assessment Year: 2004-2005)The revenue has filed the present appeal against the order dated 21.11.2013 passed by the Ld. CIT (A) vide which the Ld. CIT (A) has deleted the penalty levied by the AO u/s 271 (1)(c) of the Act.
2. The revenue has raised the following effective ground of appeal against the impugned order passed by the Ld. CIT (A):-
1. "On the facts and in the circumstances of the case and as per law, the Ld. CIT (A) erred in deleting the penalty order passed by the A.O. u/s 271 (1) (c) of the Income Tax Act, 1961, imposing penalty of Rs. 28,17,432/-."
3. Before us, the Ld. Departmental Representative (DR) relying on the order passed by the AO submitted that since it has been established that the assessee is not eligible for deduction u/s 80IA(4)(ii) of the Act and despite that the assessee has claimed wrong deduction so as to reduce genuine tax liability 9 ITA Nos. 730/MUM/2014, 34/MUM/2017, 5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 on its earning, the Ld. CIT (A) has wrongly deleted the penalty of Rs. 28,17,432/-. Therefore, the impugned order is liable to be set aside.
4. On the other hand, the ld. counsel for the assessee submitted that the department has not initiated any proceedings in respect of the A.Y. 2003-04, 2004-05 and 2005-06, however, initiated the proceedings u/s 271 (1)(c) of the Act and imposed penalty in the assessment year 2004-05. The Ld. counsel for the assessee relying on the order passed by the Ld. CIT (A) submitted that since the claim of the assessee was bona fide, the Ld. CIT (A) has rightly deleted the penalty.
5. We have heard the rival submissions and also perused the material on record. The Ld. CIT (A) has deleted the penalty holding as under:-
"5.1 I have carefully and dispassionately considered the facts and circumstances of the case, statement of facts, relevant assessment order, written submission, relied upon case laws and the arguments made by the LAR before the undersigned. After considering the rival submission, it is noted that the issue of claim of reduction u/s 80IA on which penalty has been levied y the AO appears to be a highly debatable issue, because in the immediately preceding assessment year i.e. AY 2003-04, which was completed after scrutiny u/s 143 (3) of the I T Act, the AO was also agreeing to the claim of the appellant that it is entitled to the deduction u/s 80IA. It is further noted that even in original assessment in the current assessment year i.e. AY 2004-05, which was completed on 25/09/2006 u/s 143 (3), the AO allowed the deduction claimed by the appellant. Therefore, under these circumstances I agree with the contention of the appellant that it was under the bonafide belief that it is entitled for deduction u/s 80IA. Therefore, under these circumstances it is quite apparent that on the issue in question two opinion are possible, therefore it is not a fit case for attracting the provisions of sec. 271 (1) (c). Otherwise, also the appellant has furnished all material facts regarding the claim of deduction u/s 80IA and it is not a case of furnishing of any wrong, false or incorrect particulars of income. Therefore, under these circumstances I 10 ITA Nos. 730/MUM/2014, 34/MUM/2017, 5779/MUM/2010 & 4139/MUM/2015 Assessment Years: 2003-04, 2004-05 & 2005-06 agree with the LAR that in the light of the decision of Hon'ble Apex Court in case of M/s Reliance Petro Products Pvt. Ltd. (supra), penalty u/s 271 (1) (c) is not justified. Hence, the same is directed to be deleted."
6. We notice the Ld. CIT (A) has deleted the penalty observing that in claim of the assessee is bona fide as the AO had allowed the deduction u/s 80IA claimed by the assessee in the original assessment order passed u/s 143(3) of the Act and the deduction was denied subsequently on the basis of the order passed by the Ld. CIT (A) u/s 263 of the Act. However, this issue is covered by the judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Reliance Petroproduct (P) Ltd., 322 ITR 0158 in which the Hon'ble Supreme Court has held that mere making of the claim, which is not sustainable in law by itself does not amount to furnishing of inaccurate particulars of income of the assessee within the meaning of section 271(1)(c) of the Act. Moreover, the issue has not attained finality and the eligibility of the assessee for deduction u/s 80IA is yet to be determined by the authorities below in terms of the observations of the ITAT in all the assessment years under consideration including the assessment year 2004-05. Under these circumstances, we dismiss the appeal of the revenue and direct the AO to delete the penalty.
In the result, appeals filed by the assessee are allowed for the statistical purposes and the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 7th December, 2018.
Sd/- Sd/-
(R.C. SHARMA) (RAM LAL NEGI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
मुंबई Mumbai; दिन ुं क Dated: 07/12/2018
Alindra, PS
11
ITA Nos. 730/MUM/2014, 34/MUM/2017,
5779/MUM/2010 & 4139/MUM/2015
Assessment Years: 2003-04, 2004-05 & 2005-06
आदे श प्रतितिति अग्रेतिि/Copy of the Order forwarded to :
1. अपील र्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयक्त(अपील) / The CIT(A)-
4. आयकर आयक्त / CIT
5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai
6. ग र्ड फ ईल / Guard file.
आदे शानुसार/ BY ORDER, सत्य दपि प्रदि //True Copy// उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण, मुंबई / ITAT, Mumbai