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Facts
The Assessee claimed amortization of telecom license u/s 35ABB and depreciation on telecom spectrum u/s 32. The AO disallowed depreciation but allowed alternative relief u/s 35ABB. Subsequently, the AO initiated rectification proceedings u/s 154, alleging excess deduction u/s 35ABB and made an addition. The CIT(A) referenced two separate appeals, declared the appeal 'Allowed' without deciding the specific issue of the s. 154 addition, and also disallowed an amount of Rs. 2,77,04,74,906/- which was beyond the scope of the appeal before it.
Held
The Tribunal held that the AO erred in passing the rectification order u/s 154 for an alleged double deduction, as the Assessee's claims were distinct. It also found that the CIT(A) erred by not deciding the actual issue in dispute and by exceeding its jurisdiction in disallowing an amount that was not part of the current appeal. Consequently, the Tribunal deleted both the addition made by the AO u/s 154 and the disallowance made by the CIT(A).
Key Issues
1. Whether the AO correctly made an addition under Section 154 by alleging excess deduction when the Assessee made two distinct claims (amortization u/s 35ABB and depreciation u/s 32). 2. Whether the CIT(A) erred by not deciding the appeal on its merits and exceeded its jurisdiction by making a disallowance beyond the scope of the appeal pending before it.
Sections Cited
Section 253, Section 154, Section 143(3), Section 35ABB, Section 32, Section 250
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Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: BEFORE SHRI SHAMIM YAHYA & SHRI YOGESH KUMAR U.S.
The Assessee preferred the present Appeal aggrieved by the order of the Ld. CIT(A) dated 28/03/2024 for Assessment Year 2016-17. The Assessee raised following Grounds and additional Grounds which reproduced as under: - Grounds of appeal
“Based on the facts and circumstances of the case and in law, the Appellant respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 ('the Act') against the order dated March 28, 2024 passed by the learned Commissioner of Income-tax (Appeals) National Faceless Appeal Centre, Delhi
('referred to as learned CIT(A)') in relation to the appeal filed against the rectified assessment order dated March 31, 2023 passed by the Assistant Commissioner of Income Tax, Circle 25(1), New Delhi ('referred to as learned AO') under section 154 read with section 143(3) the Act on the following grounds which are independent and without prejudice to one another.
Ground No. 1: Opportunity of being heard not granted
On the facts and circumstances of the case, the learned CIT(A) in its order has erred in disposing-off the appeal ex-parte without granting any opportunity of being heard to the Appellant and thereby, violating the principles of natural justice.
Ground No. 2: Reference of two separate appeals made in the Order passed by the learned CIT(A) • On the facts and circumstances of the case, the learned CIT(A) in its order has erred in making reference to two separate appeals filed by the Appellant against two separate Orders pertaining to the subject year and thereby, making it unclear as to which appeal has been disposed by the learned CIT(A). • On the facts and circumstances of the case, the learned CIT(A) in its order has erred in mentioning certain details of the subject appeal (appeal against the rectified order dated March 31, 2023) in the heading of the order, whereas the concluding facts along with decision provided in the order relates to the separate appeal filed against the order passed under section 201(1)/201(1A) of the Act for the subject year. • On the facts and circumstances of the case, the learned CIT(A) has erred by not disposing the rectification application filed under section 154 of the Act against the subject order passed by the learned CIT(A).
Ground No. 3: Without prejudice to the above, the appeal filed before learned CIT(A) against the order passed under section 154 read with section 143(3) of the Act should be allowed basis the merits of the case.
Tata Teleservices Ltd. Vs. ACIT • On the facts and circumstances of the case, the learned CIT(A) has erred by not disposing of the following grounds of appeal filed against the Order passed under section 154 read with section 143(3) of the Act on merits.
� On the facts and in the circumstances of the case and in law, the learned AO has erred in making an addition of INR 1,56,80,57,260 to the assessed loss by concluding that the deduction of the said amount under section 35ABB of the Act has been considered twice. � On the facts and in the circumstances of the case and in law, the learned AO has made the subject disallowance without providing any basis or reasoning, thereby such disallowance is liable be deleted.
� On the facts and in the circumstances of the case and in law, the learned AO in the impugned order passed has itself accepted the fact that two separate deductions in form of depreciation/amortization are allowable to Appellant (i) related to telecom license (ii) related to telecom spectrum, however, the learned AO has erred and contradicted itself while arriving at the conclusion in the impugned order that deduction of claim under section 35ABB has been considered twice. � On the facts and in the circumstances of the case and in law, the learned AO has erred in not appreciating the fact that the deduction under section 35ABB in the assessment order was allowed as an alternative claim to depreciation on telecom spectrum and accordingly, no double deduction has been allowed to the Appellant and the subject position has been consistently followed by tax authorities in earlier and subsequent years.
The above grounds of appeal are mutually exclusive & without prejudice to each other. The Appellant prays for leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.”
Additional Grounds of appeal: � On the facts and circumstances of the case, the learned CIT(A) has erred in disallowing the amount of INR 2,77,04,74,906/- in the order passed under section 154 r.w.s. 250 of the Income tax Act ('Act') dated July 11, 2024.
� On the facts and circumstances of the case, the learned CIT(A) has erred in ignoring the fact that amount of INR 2,77,04,74,906/- has already been allowed to the Assessee in the order passed by his predecessor in order dated September 23, 2020 while disposing the appeal filed against the assessment order passed under section 143(3) of the Act.
� On the facts and circumstances of the case, the learned CIT(A) has erred in going beyond the scope of appeal by disallowing the amount of INR 2,77,04,74,906/- which is part of separate appeal and is a part of a separate proceedings all-together and was not part of the appeal pending before his office as only the order passed under Section 154 dated March 31, 2023 was the subject matter of the appeal before the learned CIT(A). The learned CIT(A) has exceeded its jurisdiction which is not permitted in law.”
Brief facts of the case are that, the Assessee made following two claims in the return file for Assessment Year 2016-17: a) Amortization of telecom license u/s 35ABB of the Income Tax Act, 1961 ('Act') of INR 156,80,67,260/- and b) Depreciation on right to use of telecom spectrum u/s 32 of the Act of INR 423,19,13,876/-.
An assessment order came to be passed u/s 143(3) of the Act on 26/12/2018 wherein the A.O. disallowed an amount of Rs. 4,23,19,13,876/- claimed by the Assessee on right to use telecom spectrum u/s 32 of the Act. As per the A.O, the Assessee is not entitle for depreciation on suchcapital expenditure.
However, the A.O. allowed an alternative relief of Rs. 2,77,04,74,906/- u/s 35ABB of the Act qua the said amount pertaining to right to use telecoms spectrum as the A.O. was of the opinion that amortization is allowed on the said amount. Thus, the A.O. made disallowance of Rs. 1,46,14,28,970/- in the said assessment order passed u/s 143(3) of the Act. Aggrieved by the assessment order dated 26/12/2018, the Assessee preferred an Appeal before the Ld. CIT(A) against disallowances made by the A.O. including the issue of disallowance of depreciation on telecom spectrum of Rs. 4,23,18,13,876/-.
The Ld. CIT(A) vide order dated 23/09/2020, allowed the issue of tax depreciation on telecom spectrum in favour of the Assessee and full depreciation of Rs. 4,23,19,13,876/- was allowed to the Assessee.
A separate proceedings u/s 154 of the Act was initialed by the A.O. for Assessment Year 2016-17 alleging that the Assessee has been allowed excess deduction of Rs. 156,80,67,260/- u/s 35ABB of the Act. The A.O. was of the opinion that the Assessee has been allowed the deduction u/s 35ABB of the Act in the assessment order and therefore, deduction of Rs. 156,80,67,260/- already claimed by the Assessee in the income tax return has resulted in excess deduction, accordingly the A.O. passed rectification order u/s 154 r.w.
Section 143(3) of the Act on 31/03/2023 by making an addition of Rs. 156,80,57,260/- to the assessed losses. Aggrieved by the order dated 31/03/2023 passed u/s 154 r.w. Section 143(3) of the Act, the Assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 28/03/2024 by making reference to two separate appeals filed by the Assessee against two separate orders pertaining to Assessment Year 2016-17 without deciding the issue in dispute, declared as the Appeal of the Assessee is “Allowed”, wherein the Ld. CIT(A) has neither deleted nor upheld the addition which was the subject matter of the Appeal. Aggrieved by the order of the Ld. CIT(A), the Assessee preferred the present Appeal on the Grounds mentioned above.
The Ld. Counsel submitted that she has not pressing Ground No. 1 & 2 of the Grounds of appeal. The Ld. Counsel addressing on the Ground No. 3 of the Appeal submitted that both the Ld. A.O. as well as the Ld. CIT(A) failed to appreciate that the Assessee made two different claims which are not connected and the same in resulted in passing the rectification order by making addition of Rs. 156,80,67,260/- which has not been decided by the Ld. CIT(A) though, the Ld. CIT(A) has ‘Allowed’ the Appeal. The Ld. Counsel for the Assessee has also filed detailed written submission to substantiate her claims.
Per contra, the Ld. Departmental Representative though relied on the orders of the Lower Authorities, however did not dispute the claim /Argument made by the Assessee's Representative.
We have heard both the parties and perused the material available on record. The Assessee in the income tax return for Assessment Year 2016-17 made two separate claims i.e. amortization of telecom license u/s 35ABB of the Act of Rs. 156,80,67,260/- and depreciation on right to use telecoms spectrum u/s 32 of the Act of Rs. 423,19,13,876/-. The assessment order came to be passed u/s 143(3) of the Act on 26/12/2018, wherein the A.O. disallowed the amount of Rs. 423,19,13,876/- claimed by the Assessee on the right to use telecom spectrum u/s 32 of the Act on the ground that the Assessee is not entitled for depreciation on such capital expenditure.
However, the A.O. allowed the alternative claim of the Assessee of Rs. 2,77,04,74,906/- u/s 35ABB of the Act which is pertaining to right to use telecom spectrum as the A.O. was of the opinion that amortization is allowed on the said amount. Thus, the A.O. disallowed a net amount of Rs. 146,14,28,940/- and the A.O. has allowed the amortization of telecom license of Rs. 156,80,67,260/- u/s 35ABB of the Act. In the Appeal filed by the Assessee, the Ld. CIT(A) vide order dated 29/03/2020 allowed the issue of depreciation on telecom spectrum in favour of the Assessee and full depreciation of Rs. 4,23,19,13,876/- was allowed to the Assessee. However, while passing the order u/s 154 of the Act the A.O. was of the opinion that excess deduction of Rs. 156,80,67,260/- u/s 35ABB of the Act has been allowed to the Assessee. In our considered opinion, the A.O. failed to appreciate that the Assessee has made two different claims which were altogether different and the same are not connected to each other. Apart from the same, the Ld. CIT(A) vide order dated 11/07/2024 has given clear finding that an amount of Rs. 156,80,57,260/- has been rightly allowed to the Assessee in the assessment order passed u/s 143(3) of the Act and no addition is called for on the said ground. Thus, we are of the opinion that the A.O. committed error in passing the order u/s 154 of the Act by making the disallowance and on the other hand, the Ld. CIT(A) has also committed error in making reference two separate appeals filed by the Assessee and ended up with not deciding the issue involved in the appeal. Accordingly, we allow the Ground No. 3 of the Assessee and delete the addition of Rs. 1,56,80,57,260/- made by the A.O. u/s 154 of the Act r.w. Section 143(3) of the Act which has been confirmed by Ld. CIT(A).
The Ld. Assessee's Representative addressing on the additional grounds of Appeal submitted that the Ld. CIT(A) has exercised its jurisdiction beyond the scope of the Appeal by disallowing Rs. 2,77,04,74,906/- which is part of separate appeal proceedings altogether and not the part of the Appeal/lis pending before the Ld. CIT(A), therefore, prayed for allowing the Additional Grounds of appeal of the Assessee.
8. Per contra, though the Ld. Departmental Representative relied on the orders of the Lower Authorities, however, agreed to the proposition of the Ld. Assessee's Representative that the Ld. CIT(A) has travelled beyond the lis pending before him.
We have heard both the parties on Additional Grounds of Appeal and perused the material available on record. It is the fact on record that as against the order of the rectification passed u/s 154 of the Act the Assessee preferred an Appeal before the Ld. CIT(A). The grievance before the Ld. CIT(A) of the Assessee against the addition made u/s 154 of the Act of Rs. 156,80,67,260/- which was the disallowance made by the A.O. pertaining to amortization of telecom license on the right to use of telecom spectrum, however, the Ld. CIT(A) travel beyond the issue pending before him by making disallowance of Rs. 2,77,04,74,906/- which has already been allowed to the Assessee and which was not disturbed by the A.O. in the rectification order.
Thus, the action of the Ld. CIT(A) disallowing the amount of Rs. 2,77,04,74,906/- was beyond the scope of the Appeal pending before him and the same is not sustainable in the eyes of law. Accordingly, we allow the additional grounds of Appeal of the Assessee by deleting the addition of Rs. 2,77,04,74,906/- made by the Ld. CIT(A).
In the result, Appeal filed by the Assessee is allowed.