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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
2 | P a g e ITAs No.1204 & 1493/MUM/2018 ुनवाई की तारीख / Date of hearing: 28.08.2019 घोषणा की तारीख / Date of pronouncement : 28.08.2019 AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
These Cross appeals of are arising out of the order of Commissioner of Income Tax (Appeals)-14, Mumbai in Appeal No. CIT(A)-14/IT-251/16-17 dated 29.12.2017. The Assessment was framed by the Dy. Commissioner of Income Tax-Circle 8(3)(1), Mumbai (in short DCIT/ITO/ AO) for AY 2014-15 vide dated 30.12.2016, under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The first issue in this appeal of assessee, in CIT(A) confirming the action of the AO in disallowing claim of depreciation on an amount paid to DoT for purchase of 3G Spectrum. For this assessee has raised the following ground No.1: -
1. Erred in upholding the order of Assistant Commissioner of Income Tax 8(3)(1), Mumbai (‘AO’) for disallowing depreciation nclaim of ₹ 132.67 Crs. under section 32 of the Act on amount paid to DoT for purchase of 3G Spectrum and restricting the allowance thereof to ₹ 62.89 Crs. Being proportionate of the amount as applicable for the year as per section 35ABB of the Act.”
3 | P a g e ITAs No.1204 & 1493/MUM/2018 3. At the outset, the learned Counsel for the assessee stated that this issue is squarely covered by Tribunal’s decision of this co-ordinate Bench of this ITAT in the case of Idea Cellular Limited vs. PCIT in for AY 2011-12 vide order dated 06.12.2017, wherein it is held as under: - “20. From the above judgment of Hon’ble Supreme Court in the case of Smifs Securities Ltd. (supra) and the facts of the present case, it is clear that the assessee has rightly claimed depreciation under section 32 of the Act on 3G spectrum. It means that the expenditure towards 3G Spectrum is not expenditure for acquiring any right to operate telecommunications services. Out of the service areas in which 3G spectrum was won by the assessee, it had acquired the rights to operate telecommunication services in the year 1995- 1997 for Maharashtra, Gujarat, Uttar Pradesh West, Madhya Pradesh, Haryana. Andhra Pradesh, Kerala, Punjab telecom circles. In year 2001-02 it acquired rights for Himachal Pradesh, Uttar Pradesh East and thereafter in the year 2007-08 for Jammu & Kashmir. Even if 3G Spectrum was not applied or allotted, assessee could have still continued providing telecommunication services under existing license. The license to operate telecom services is issued u/s. 4 of the Indian Telegraph Act, 4 | P a g e ITAs No.1204 & 1493/MUM/2018 1885 which provide rights to establish and operate telecom services. As stated above, without such license one is not ever eligible to bid for 3G Spectrum. 3G Spectrum fees are merely for right to use a particular frequency/spectrum while providing telecommunication services. In view of the above, even the provisions of section 35ABB of the act are not applicable to such payment. In view of these facts, we are of the view that the assessee is entitled for claim of depreciation on merits also and AO has rightly allowed the claim while framing assessment under section 143(3) of the Act and the revision order of CIT Under section 263 of the Act is bad in law. Accordingly, we quash the revision order.”
When this was confronted to the learned CIT Dr, he only relied on the order of the AO and that of the CIT(A).
We have noted the fact and find that the AO during the course of assessment proceedings enquired to justify the reason for claiming the depreciation amounting to ₹ 132.67 Crs during the year on 3G Spectrum fees of ₹ 1257.83 Crs paid by the assessee in AY 2011-12. The assessee vide its submission dated 26.12.2016 contended that said 3G Spectrum fees qualifies as an “Intangible asset” eligible for depreciation at the rate of 25% as per provision of Section 32 of the Act and advanced various contentions in support of its claim. However, the AO was of the opinion that said capital expenditure on account of acquisition of 3G 5 | P a g e ITAs No.1204 & 1493/MUM/2018 Spectrum fees is covered under Section 35AAB of the Act and is required to be amortized as per provisions of Section 35ABB of the Act over the period of 20 years for which 3G Spectrum has been allocated and accordingly disallowed the depreciation claim of ₹ 69,78,00,000/- on said 3G Spectrum fees. We noted that this issue is squarely covered by the co-ordinate bench decision of Idea Cellular Limited (supra). Following the co-ordinate Bench decision, we allow this issue of assessee’s appeal.
The only issue in the appeal of Revenue in is as regards to the order of CIT(A) deleting the disallowance made by AO in regard to payment made towards roaming charges/ services provided by other telecom services without deduction of TDS under section 194J of the Act and thereby, made disallowance by invoking the provisions of section 40(a)(ia) of the Act. For this Revenue has raised, the following two grounds: - “1. Whether on the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the disallowance of ₹ 58,32,12,839/- made under section 40(a)(ia) of the I.T. Act 1961 without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer.
2. whether on the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the disallowance made under section 40(a)(ia) of the I.T. Act 1961 despite the fact that the assessee had failed to deduct TDS and that the provisions of Section 40(a)(ia) are 6 | P a g e ITAs No.1204 & 1493/MUM/2018 very clear and there is no ambiguity which calls for any judicial pronouncement.”
At the learned Counsel for the assessee stated that this issue is covered by the Tribunal’s decision in assessee’s own case in 2044, 2045 & 2045/2014 for AYs 2009-10, 2010-11, 2011-12 & 2012-13 respectively wherein, Tribunal while deciding the issue on raising of demand under section 201(1) and 201(1A) of the Act, considered the issue of failure of the assessee to deduct tax at source under section 194J of the Act, in respect of payments made towards roaming services provided by other telecom service providers, and Tribunal finally held that the assessee is not liable to deduct TDS by observing in Para 13 as under: - “13. In the present case, undisputedly, the Assessing Officer has not obtained any report from the technical expert to ascertain the fact whether there is any human intervention in providing cellular services. It is patent and obvious that the Assessing Officer has relied upon the technical report obtained in case of Vodafone Essar Mobile Services Ltd. Therefore, we are not in a position to know whether the facts relating to human intervention in assessee’s case is similar to the facts in case of Vodafone Essar Mobile Services Ltd. However, after analysing the report submitted by the technical expert Shri Tanay Krishna, in case of Vodafone Essar Mobile Services Ltd., who 7 | P a g e ITAs No.1204 & 1493/MUM/2018 incidentally also submitted the report in case of Bharti Cellular Ltd., and the cross–examination of Shri Tanay Krishna, the ITAT, Kolkata Bench, has found that the roaming / inter connectivity services are rendered automatically without any human intervention. It is evident from the order passed under sections 201(1) and 201(1A), that the Assessing Officer relying upon the technical report obtained in case of Vodafone Essar (Supra), has raised the demand against the assessee inferring that roaming charges ware in the nature of fees for technical services, hence, coming within the purview of section 194J. However, as stated earlier, the very same report from the technical expert in case of Vodafone Essar Mobile Services Ltd., was considered and analysed by the Tribunal, Kolkata Bench (supra) and the Bench held that there is no human intervention in providing the roaming services. That being the case, following the observations of the Tribunal, Kolkata Bench, referred to above, we hold that the roaming / inter– connectivity charges paid by the assessee to other telecom networks not being in the nature of fees for technical services will not attract the provisions of section 194J. That being the case, assessee was not required to deduct tax at source on payment of roaming charges in terms of section 194J. In view of the aforesaid, we