PR. COMMISSIONER OF INCOME TAX-9 vs. VODAFONE MOBILE SERVICES LTD

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ITA/730/2016HC DelhiDLHC01183669201607 November 2016Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MS. JUSTICE DEEPA SHARMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the question of law urged by the revenue, concerning whether the payments were capital or revenue in nature, did not arise. This decision was based on a prior judgment of the same court in Commissioner of Income Tax vs. Bharti Hexacom Ltd, (2014) 220 Taxmann 323 (Del). In that precedent, it was held that such payments are revenue and cannot be treated as capital expenditure. Since no other substantial questions of law were pleaded by the revenue, the appeal was dismissed. The operative direction was the dismissal of the appeal.

What were the facts?

The Pr. Commissioner of Income Tax-9 (Revenue) appealed against an order of the Income Tax Appellate Tribunal (ITAT). The appeal concerned Vodafone Mobile Services Ltd (Assessee) and related to assessment years not specified in the judgment. The core issue was the nature of payments made by the assessee. The assessee contended that these quarterly payments, in light of the National Telecom Policy 1999, were revenue expenditure and not capital expenditure for depreciation under Section 32. The CIT(A) and ITAT had previously accepted the assessee's position, treating the expenditure as revenue fees. The Revenue challenged this classification.

What were the issues?

1. Whether the payments made by the assessee were capital or revenue in nature, turning on the interpretation of the National Telecom Policy 1999 and its impact on the classification of such payments under the Income Tax Act, 1961. Assessee's Contentions: The assessee argued that the payments were revenue expenditure, not capital expenditure for depreciation. They relied on the National Telecom Policy 1999 and the principle that such quarterly payments are revenue in nature. Revenue's Contentions: The revenue urged that the payments were capital in nature. The judgment does not explicitly detail the revenue's specific arguments beyond framing the question.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

$~11 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 730/2016, CM Nos. 39153-39154/2016

PR. COMMISSIONER OF INCOME TAX-9 ..... Appellant Through: Mr. Rahul Chaudhry, Sr. Standing Counsel.

versus

VODAFONE MOBILE SERVICES LTD

..... Respondent

Through: Mr. Sachit Jolly, Advocate.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MS. JUSTICE DEEPA SHARMA

O R D E R %

07.11.2016

The question urged by the revenue is “whether the payments made were capital or revenue in nature?”. The assessee had urged that in the light of the National Telecom Policy 1999, the payments –made on quarterly basis were not capital- that is for depreciation under Section 32 but entitled to be treated as revenue expenditure. The CIT (A) and ITAT accepted the assessee’s contention and directed that the expenditure should be treated as falling under revenue fee by relying upon Commissioner of Income Tax vs. Fascel Limited (2009) 221 CTR 305. There is also a subsequent judgment Commissioner of Income Tax vs. Bharti Hexacom Ltd, (2014) 220 Taxmann 323 (Del), in which it was held that such payments are in fact revenue and cannot be treated as capital expenditure.

This court is of the opinion that having regard to Bharti Hexacom Ltd (supra), the question of law urged does not arise. No other substantial questions of law have been pleaded. The appeal is therefore dismissed.

S. RAVINDRA BHAT, J

DEEPA SHARMA, J NOVEMBER 07, 2016

sapna

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