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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI DUVVURU RL REDDY
आदेश / O R D E R
PER BENCH:
These are departmental appeals directed against orders dated 22.12.2017 of Commissioner of Income Tax (A)-1, Chennai. The appeals are filed with a delay of five days. Condonation petition is on record. & 756/Chny/2018 :- 2 -:
Reasons shown are acceptable. Delay is condoned and appeals are admitted.
Grounds taken by the Department are common for both the years, and these are re-produced hereunder:
1. The order of the learned CIT(A) is contrary to law, facts and circumstances of the case
2. The learned CIT(A) has erred in deleting the disallowance made in respect of the excess expenditure of Rs.54.99 lakhs claimed in respect of licence fee payment
2.1 The learned CIT(A) erred in deleting the disallowance not considering the fact that the entire expenditure was capital in nature falling within the terms of Sec.35ABB and the assessee was eligible for deduction as per the conditions under Sec.35ABB and not the entire expenditure claimed.
2.2 The learned CIT(A) failed to appreciate that the AO had treated the expenditure as capital in nature falling within the ambit of Sec.35ABB on the ground that the nature of fee/expenditure had not undergone any change consequent to the change in the new telecom policy effective from 01.08.1999
2.3 The learned CIT(A) failed to appreciate that mere payment of an amount in installments does not convert or change the capital payment to revenue in nature.
2.4 The learned CIT(A) failed to appreciate that the term of the licence was/is 10 or 20 years from the date of commencement and therefore, the expenditure was capital in nature.
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the A.O. restored.
A reading of the above grounds show that the Revenue is aggrieved on the deletion of a disallowance made by Ld.AO on licence fee paid by the assessee. & 756/Chny/2018 :- 3 -:
Assessee engaged in the business of providing Cellular Mobile Services, had paid two types of licence fee, one for DOT Licence from Department of Telecommunications and other for WPC Licence from Wireless Planning and Coordination Wing of the Ministry of Communications. These licenses were for utilization of appropriate radio frequency spectrum. WPC licence is co-terminus with DOT Licence. For the impugned Assessment Year, Ld.AO held that such expenses incurred by the assessee were capital in nature. According to him, the assessee could claim only what was allowed under Sec.35ABB of the Income Tax Act, 1961 (in short “the Act”). In other words, the AO allowed only the fee which was actually paid in accordance with Sec.35ABB of the Act.
Aggrieved assessee moved in appeal before the Ld.CIT(A).
Assessee pointed out that Hon’ble Delhi High Court in the case of CIT v.
Bharti Hexacom Ltd. [2014] 97 DTR 0294, had after considering the government telecom policy ruled that expenditure incurred towards licence fee up to 31.07.1999 alone could be treated as capital out go and licence fee which has based on Revenue sharing after the said date had to be considered as Revenue expenditure. Ld.CIT(A) accepted this contention of the assessee. According to him, Hon’ble Delhi High Court, in the above case, had also held that even capital expenditure qualified for deduction u/s.35ABB of the Act. Thus, he deleted the disallowance made by the AO. & 756/Chny/2018 :- 4 -:
Now before us, the Ld.DR, though he admitted that the issue stood covered in favour of the assessee through the above mentioned judgment of Hon’ble Delhi High Court in the case of Bharti Hexacom Ltd., submitted that mere payment of the amount in installments would not change the nature of the payment and there could be no difference in the nature of the licence fee payment, even after the new telecom policy came into effect on 01.08.1999.
Per contra, the Ld.AR supporting the orders of the Ld.CIT(A) pointed out that the case Bharti Hexacom Ltd. (supra), decided by the Hon’ble Delhi High Court, included an appeal of the Revenue in the assessee’s case for the AY 2001-02 also. Thus, according to him, the judgment squarely covered the issues in favour of the assessee.
We have heard the rival contentions and perused the material placed on record carefully. Judgment of the Hon’ble Delhi High Court in the case of Bharti Hexacom Ltd.(supra) does mention that it was a common one disposing of various appeals filed by the Ld.CIT(A) on identical questions of law. The cases considered were as under:
1328/2010 - 2003-04 2. 1336/2010 - 2004-05 3. 114/2012 Bharti Hexacom 2006-07 4. 996/2011 - 2007-08 5. 893/2010 - 2000-01 6. 1680/2010 Bharti Cellular 2001-02 7. 1679/2010 - 2002-03 8. 177/2010 Bharti Airtel Ltd. 2005-06 9. 1333/2010 Bharti Telenet Ltd. 2000-01 10. 417/2013 Hutchinson Essar Pvt. Ltd. 1999-2000 & 756/Chny/2018 :- 5 -:
It is clear that the judgment covered the question raised before us in assessee’s case itself, for the AY 2001-02. impugned AYs before us are AY 2000-01 and AY 2002-03. In such circumstances, we are of the opinion that the Ld.CIT(A) was justified in relying on the judgment of the Hon’ble Delhi High Court in the case of Bharti Hexacom Ltd.(supra), and holding it in favour of the assessee. The issue in our opinion stands fully covered in favour of the assessee by the above judgment of the Hon’ble Delhi High Court. In these circumstances, we do not find any reasons to interfere with the orders of the Ld.CIT(A).
In the result, the appeals filed by the Revenue are dismissed.