M/S. VODAFONE ESSAR EAST LTD.,KOLKATA vs. JCIT, RANGE - 7, KOLKATA

आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- Out of eight appeals six are cross appeals by assessee as well as Revenue and remaining two appeals (ITA No. 673/Kol/2011 & 431/Kol/2012) filed by assessee are directed against the different orders of Commissioner of Income Tax (Appeals)-VIII, Kolkata of different dates i.e. 23.12.2009,

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 3 09.01.2009, 14.01.2009, 23.12.2010 & 27.02.2012. Assessments were framed by ACIT/DCIT-Circle-Range/7 Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide their orders dated 26.10.2006, 07.12.2007, 31.12.2008, 30.12.2009 & 30.12.2010 for assessment years 2004-05 to 2008-09 respectively. Shri Deepaka Chopra & Mrs. Manas Vini Bajpai, Ld. Authorized Representative appeared on behalf of assessee and Shri G.Hangshing, Ld. Departmental Representative appeared on behalf of Revenue. 2. All the appeals are disposed off by this common order for the sake of convenience. First we take up Revenue’s appeal in ITA No.343/Kol/2009 for A.Y. 04-05. 3. Revenue has raised the following grounds of appeal. “1. That the CIT(Appeal) erred on act and in law in allowing the assessee to adjust unabsorbed depreciation of Rs.6.67 crore in computing Book Profit u/s. 115J Beventhough the provisions are unambiguous in their ambit.” 4. Sole issue raised by the Revenue in this appeal is that ld. CIT(A) erred in adjusting the unabsorbed depreciation of Rs. 6.67 crores while computing the book profit under section 115JB of the Act.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 4 “As it is seen from the above, the assessee company has claimed set off of unabsorbed book depreciation of Rs.37,35,12,000/-. The calculation given by the assessee is as follows:- Sl. F.Y. Profit/(Loss) before Depreciation Book Unabsorbed No. depreciation profit/(Loss) depreciation 1 1994-95 (30) 0 (30) 0 2 1995-96 (17507) 3,340 (20,847) 3,340 3 1996-97 (243,968) 38,844 (282,812) 38,844 4 1997-98 (211,770) 66,230 (278,000) 66,230 5 1998-99 (393,286) 60,746 (454,032) 60,746 6 1999-00 (340,411) 64,801 (405,212) 64,801 7 2000-01 (514,294) 72,822 (587,116) 72,822 8 2001-02 27,909 94,638 (66,729) 66,729 9 2002-03 372,096 283,715 88,381 0 (1,721,267) 685,136 (2,006,398) 373,512 Less: Amount of deferred tax asset created for the 158,117 first time in the year crediting the profit & loss account Less: profit for the year 88,381 2003-04 Amount available for set (1,474,769) off 373,512 Amount available for set (964,897) off in future year

The AO during assessment proceedings observed certain facts from the details furnished by the assessee as detailed under:- “(a) in A.Y 2002-03, the profit before depreciation is of Rs2,79,09,000/- and depreciation is of Rs.9,46,38,000/-.That means there is no loss for the assessment year 2002-03. However, the assessee has claimed set off of unabsorbed depreciation of Rs 6,67,29,000 pertaining to AY 2002-03, with the book profit of A.Y 2004-05

Accordingly the AO sought clarification from the assessee regarding the facts as discussed above. In compliance thereto the assessee submitted that

“8. The assessee has submitted its explanation vide its letter dated 30/8/2006. In respect of the issue mentioned in paragraph 6(a) above, the assessee has stated that he provisions of section are not clear and therefore, a view favourable to the assessee must be accepted. It has relied on Circular No. 26 dated 7/7/1955 in support of its claim.”

However the AO disregarded the contention of the assessee for the claim made of the unabsorbed depreciation of Rs.6,67,29,000.00 by observing as under:

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 5 “the assessee will get the benefit of the “loss brought forward excluding depreciation” unabsorbed depreciation only when both of them are present. Even otherwise, there are several material differences between old section 115J and Section 115JB. 10(b) In view of the above it is held that the lower of “loss excluding depreciation “unabsorbed depreciation for AY 2002-03 will be nil. Therefore, the aggregate of lower of “loss excluding depreciation”/ unabsorbed depreciation upto AY 2002-03 will be Rs.30,67,83,000/- 10(c) Therefore, an amount of Rs.6,67,29,000/- is added to book profit.” 7. Aggrieved assessee preferred an appeal before ld. CIT(A). The assessee before the ld. CIT(A) submitted that as per the provisions of the Act the lower of unabsorbed depreciation and brought forward loss was to be worked out for each year as per books. There can be profit in any of the intervening year before/ after claiming the current year depreciation but the at the same time but there may be unabsorbed depreciation. In such a case, it is not justified to invoke explanation (b) to clause (iii) and ignore the unabsorbed depreciation for such year. The explanation to clause (iii) reads as under:- “the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil”. The assessee also submitted that the explanation (b) comes into force only to determine brought forward loss or unabsorbed depreciation on cumulative basis. For each independent year, comprising therein, the said explanation cannot be invoked. The assessee further before Ld. CIT(A) stated that without prejudice to above even if it is assumed (not accepted) that the adjustment made by the Assessing Officer on the basis of each year is correct then also in that case, it needs to be pointed out that the terms used in the explanation (b) is ‘loss brought forward or unabsorbed depreciation’, Therefore, even if any intervening year is to be ignored, then also, comparison should be made between carried forward losses and unabsorbed depreciation of that year. Therefore, in view of the foregoing, it should be appreciated that the AO grossly erred in invoking the provisions of explanation (b) to clause (iii) for ignoring the unabsorbed depreciation for the AY 2001-02 and hence, the

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 6 action of the AO may be deleted. The ld. CIT(A) after considering the submission of the assessee has deleted the disallowance made by the AO while determining the book profit under section 115JB of the Act by observing as under : “… There is nil profit/loss in A.Y 2002-03 and unabsorbed depreciation of Rs.6.67 crore. Therefore “NIL Loss” and “Rs.6.67 crore of unabsorbed depreciation” will be carried forward to subsequent year. The question of set off of past losses or unabsorbed depreciation from profit did not arise for AY 2002-03.However, for carry forward of unabsorbed depreciation of Assessment Year 2002-03, the clause (iii) of Explanation 1 of section 115JB(2) does not put restriction of any sort. It is only when profits are positive after providing for current year depreciation that the provision of clause (iii) of Explanation 1 of Section 115JB(2) of IT Act are invoked. Here again the cumulative brought forward losses and cumulative unabsorbed depreciation as per books are required to be compared before allowing the set off. Such cumulative unabsorbed depreciation will include the unabsorbed depreciation of Rs.6.67 crore of Assessment Year 2002-03 for the purpose of clause (iii) of Explanation 1 of section 115JB(2) for AY 2004-05. 6. In view of the above discussion, impugned order hold that the argument of appellant is correct. In AY 2002-03 there is positive profit before depreciation and the entire profit is set off by the depreciation of that year itself and there is still unabsorbed depreciation of Rs.6.67 core after such setting off. It is not justified on part of assessing officer to invoke explanation (b) to clause (iii) of Explantion1 of 115JB(2) for the purpose of restricting the quantum of unabsorbed depreciation of Assessment Year z2002-03 from Rs.6.67 crore to Nil when such unabsorbed depreciation was not used for setting off any further profit in that year under clause (iii) of Explanation 1 of section 115JB(2). The explanation (b) to clause (iii) of Explanation 1 of 115JB(2) comes into force to determine quantum of set off on the basis of comparison of brought forward loss or unabsorbed depreciation on cumulative basis and not for each independent year, comprising therein.” The Revenue, being aggrieved, is in appeal before us. 8. Ld DR before us vehemently supported the order of AO whereas the ld. AR reiterated the submissions as made before the ld. CIT(A) and filed a chart depicting the amount of unabsorbed depreciation and brought forward book losses of the earlier years. The ld. AR before us relied on the order of Ld. CIT(A). 9. We have heard the rival contentions of both the parties and perused the material available on record. The issue in the instant case relates to the unabsorbed depreciation for Rs.6,67,29,000/- pertaining to the assessment

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 7 year 2002-03 which was not allowed to set off while determining the book profit for the year under consideration. As per the AO there was no loss in the assessment year 2002-03 and therefore the amount of depreciation pertaining to that assessment year is not eligible for deduction in the subsequent year while determining the book profit u/s 115JB of the Act. Thus, the AO while determining the book profit for the year under consideration u/s 115JB of the Act has not allowed the deduction of the depreciation for Rs.6,67,29,000/- pertaining to the assessment year 2002-03. However, the Ld CIT(A) reversed the order of AO by observing that cumulative brought forward losses and cumulative unabsorbed depreciation as per books are required to be compared before allowing the set off while determining the book profit under section 115JB of the Act. 9.1 Now the issue before us arises for our adjudication so as to whether the unabsorbed depreciation for Rs.6,67,29,000/- pertaining to the assessment year 2002-03 is eligible for set off while determining the book profit for the year under consideration in the given facts & circumstances. At this juncture we find important to reproduce the provisions of section 115 JB of the Act which reads as under:- 66a[Special provision for payment of tax by certain companies.67 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2001, is less than seven and one-half per cent of its book profit, 68[such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent]. (2)------------ Explanation.—For the purposes of this section, “book profit” means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by— (a) -------- (b) (c) (d) (e) (f) if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by—

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 8 71[(i) ---- (ii) 72[(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.—For the purposes of this clause,— (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or] A plain look at the above statutory provision makes it clear that the assessee is entitled to claim the deduction of either brought forward losses or unabsorbed appreciation whichever is less as per the books of accounts. In the case on hand we find that the amounts of brought forward losses are greater than the amount of unabsorbed depreciation. Therefore, the assessee is entitled for unabsorbed depreciation amounting to ₹37,35,12,000/- only. Indeed, there was a profit in the assessment year 2002-03 for Rs.2,79,09,000/- before the claim of the depreciation pertaining to that AY 2002-03. However, in the year under consideration the assessee had shown brought forward business losses of Rs.1,60,85,45,000/- and unabsorbed depreciation of Rs. 37,35,12,000/-. As the unabsorbed depreciation is lower than the amount of brought forward losses therefore in our considered view the assessee is entitled to claim the deduction of unabsorbed depreciation while determining the profit u/s 115JB of the Act. The amount of unabsorbed depreciation is inclusive of the deprecation pertaining to the assessment year 2002-03 for Rs.6,67,29,000/-. Thus, in the given facts and circumstances it cannot be concluded that the amount of unabsorbed depreciation Rs.6,67,29,000/- is not eligible for deduction while that determining the book profit u/s 115JB of the Act. In view of above, we do not find any infirmity in the order of Ld CIT(A). Hence, the ground of appeal raised by the Revenue is dismissed. 9. In the result, Revenue’s appeal is dismissed. Coming to assessee’s appeal in ITA No.356/Kol/2009. 10. The grounds raised by the assessee read as under:- “1.On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-VIII, Kolkata (hereinafter referred to

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 9 as the ‘learned CIT(A)’) erred in confirming the action of the learned Additional Commissioner of Income Tax, Range 7, Kolkata (hereinafter referred to as the ‘Act’) in not allowing set-off of Rs.83,881,000 under clause (iii) of Explanation 1 to sub-section (2) of section 115JB of the Income Tax Act, 1961 (‘Act’), being the lower of figures of brought forward los and unabsorbed depreciation. 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in allowing depreciation at the rate of 25 per cent on computer, instead of 60 per cent as claimed by the Appellant. 3. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not allowing deduction of Rs.569,248, being contribution paid to Life Insurance Corporation of India in respect of gratuity fund. 4. As interest under section 234B of the Act is not leviable in case of computation of income under the provisions of Minimum Alternate Tax, the learned AO be directed to cancel interest charged under section 234B of the Act. All the above grounds are without prejudice to each other. The appellant craves leave to add, amend, vary omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case.” 11. First issue raised by assessee in this appeal is that ld. CIT(A) erred in confirming the order of AO by not adjusting the unabsorbed depreciation of Rs.8,38,81,000/- while computing the book profit u/s 115JB of the Act. 12. The AO during assessment proceedings observed that “(b) the assessee has already claimed set-off of unabsorbed depreciation of Rs.8,83,81,000/- in the AY 2003-04 out of total unabsorbed de of Rs.37,35,12,000/- available in AY 2003-04. Yet the whole amount of unabsorbed depreciation of Rs.37,35,12,000/- has been again claimed in AY 2004-05. Accordingly, the AO sought clarification from the assessee for the facts as discussed above. In compliance thereto the assessee submitted that “in respect of the issue mentioned in paragraph 6(b) above, it has stated that as on 31/03/2003, it had unabsorbed depreciation amounting to Rs.37,35,12,000/- and brought forward losses excluding depreciation of Rs.1,47,47,69,000/- aggregating to Rs.1,84,82,81,000/-. Therefore, lower of the two being unabsorbed depreciation of Rs.37,35,12,000/- has been claimed as deduction u/s.115JB2(iii), and that the claim made in the previous year does not affect the claim in the subsequent year as the position of

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 10 unabsorbed depreciation and brought forward losses at year end has to be seen at the end of that particular year.” However the AO disregarded the contention of the assessee regarding the unabsorbed depreciation of Rs.8,83,81,000/- by observing as under:- “11(a) The assessee’s submission on the issue in paragraph 6(b) above, is now considered. 11(b) As mentioned previously, the assessee has claimed set off of unabsorbed depreciation of Rs.8,83,81,000/- in the A.Y 2003-04. However, the assessee has claimed the entire amount of unabsorbed depreciation once again in the AY 2004-05. IT is very clear that when a part of unabsorbed depreciation has already been absorbed with the book profit in AY 2003-04, the unabsorbed depreciation has to be accordingly less by the amount which has been absorbed in AY 2003- 04. Therefore, it is held that the assessee company cannot claim the benefit of unabsorbed depreciation, which it has already claimed in A.Y 2003-04. 11(c) The assessee’s Auditor, who has given certificate as required u/s.115JB(4) was M/s Price Water House in Assessment Year 2003-04. In their report dated 19/11/2003, they have clearly stated that the amount of set off available in future will be lesser by the amount of Rs.8,83,81,000/-. A copy of this report is enclosed which forms a part of this order as Annexure. Surprisingly, the assessee company has changed their Auditor in A.Y 2004-05 for giving report u/s 115JB. In AY 2004-05 one Saswati Ghosh & Company has given the said report, which is clearly in contravention of the provisions of sub-clause (iii) of explanation below section 115JB(2). 11(d) In view of the above, an amount of Rs.8,83,81,000/- is added to book profit.” 13. Aggrieved, assessee preferred an appeal before ld. CIT(A). The assessee before the ld. CIT(A) submitted that the provisions of the Section 115JB are to be applied at the end of a relevant year and accordingly, the book loss or unabsorbed depreciation as on that date needs to be classified to compute the ‘book profits’. Adjustment on account of earlier year’s reduction from the unabsorbed depreciation is not called for. The provision of Section 115JB envisages ‘the amount of loss brought forward or unabsorbed depreciation, which is less as per books of account’. If in any earlier year, reduction from book profits is made on account of unabsorbed depreciation, no adjustments are made in the books of account of the assessee.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 11 Accordingly, the loss carried forward and the unabsorbed depreciation remains unaltered in the books of account. For any subsequent years, what is required by section 115JB is loss brought forward or unabsorbed depreciation as per books of account. However, in view of the fact, that no adjustment is made in the books of account, while claiming the unabsorbed depreciation in earlier years, the position of unabsorbed depreciation and loss as per books of account remains the same. The Act does not provide for the adjustment, as envisaged by the AO. If it would have been so, then specific provisions would have been incorporated, as in the case of brought forward losses. Further, while interpreting the law, it is not permissible to add the words that are not in existence in, the Act. However, the Ld. CIT(A) after considering the submission of the assessee has confirmed the order of AO by disallowing the amount of unabsorbed depreciation of Rs.8,83,81,000/- while determining the book profit u/s 115JB of the Act by observing as under : “2. As mentioned above this issue has been discussed by me in my order dated 9/1/2009 in the appeal No.501/CIT(A)-VIII/KOL//RANGE-7/07-08 for A.Y 2005-06 in appellant’s own case under the changed name of M/S VODAFONE EASSAREAST LIMITED. It was held in para 5 of Ground 1 of the above mentioned order for AY 2005-06 that “as per proviso (b) of Section 205(1) of Company Act, appellant is bound to set off the lesser of brought forward loss or brought forward depreciation 2002-03 against the profits of FY 2002-03 and FY 2003-04. The lesser of brought forward loss (Rs.172.13 crore) or brought forward depreciation (Rs.37.35 crore) is obviously the brought forward depreciation of Rs.37.35 crore. Appellant had no option as per proviso (b) of section 205(1) of Company Act but to set off brought forward depreciation of Rs.37.35 crore against the profits of FY 2002-03 of Rs.8.84 and profit of FY 2003-04 of Rs.50.99 crore.” Finally, in the decision for ground no 1 of the appeal in appellant’s own case for A.Y 2005-06, I had relied upon the method of carry forward and set off of brought forward loss or unabsorbed depreciation as given in para 36.5 of circular 495 of CBDT dated 22/09/1987. Based on this circular a complete table of set off and carry forward of loss and unabsorbed depreciation was prepared in the said order where it was clearly shown that the “Profit” of FY 2002-03 of Rs.8.84 crore is required to be set off against the brought forward depreciation of Rs.37.35 crore and only the balance unabsorbed depreciation of Rs.37.35 crore – 8.84 crore = Rs.28.51 crore can be carried forward to FY 2003-04. In sum and substance this ground of appellant is same as Ground No.1 of appeal No.501/CIT(A)-VIII/KOL./RNGTE-7/07-08 for A.Y 2005-06 in appellant’s own case. This issue has been decided by me against the appellant in AY 2005-06 vide order dated 9/1/2009 for the said appeal. Following my own decision, I hold that claim made in respect of set off of profits of Rs.8.84 crore in

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 12 Assessment Year 2003-04 under clause (iii) of the explanation to section 115JB(2) cannot be ignored by the appellant in AY 2004-05, ie, the instant assessment year.” Aggrieved by this, the assessee has come up in appeal before us. 14. The ld. AR reiterated the submissions that were made before the ld. CIT(A). The ld. AR relied on the order of Hon’ble ITAT in the case of DCIT Vs. Binani Industries Limited reported in 178 TTJ 658. He stated that the issue may be decided on merit. On the other hand, Ld DR before us vehemently supported the order of lower authorities. 15. We have heard the rival contentions of both the parties and perused the material available on record and the case law relied upon by the assessee. In the instant case the assessee has shown profit of Rs.8,83,81,000/- for the AY 2003-04 after the depreciation. The assessee claimed to have adjusted the same i.e. Profit of Rs.8,83,81,000/- against brought forward losses. However, the AO adjusted the same against the unabsorbed depreciation while determining the book profit for the year under consideration. Consequently, the AO allowed less amount of deduction of the unabsorbed depreciation being lower than the brought forward loss by Rs.8,83,81,000/- while determining the book profit in pursuance to clause (iii) of explanation 1 to sub section (2) of section 115JB of the Act. The view taken by the AO was subsequently confirmed by the ld. CIT(A). 15.1 Now the issue before us arises for our adjudication so as to whether the unabsorbed depreciation for Rs.37,35,12,000/- should be reduced by the amount of profit of Rs.8,81,29,000/- pertaining to the assessment year 2003- 04 while determining the book profit for the year under consideration in the given facts & circumstances. At this juncture we find important to reproduce the provisions of section 115 JB of the Act which reads as under : 66a[Special provision for payment of tax by certain companies.67 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 13 the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2001, is less than seven and one-half per cent of its book profit, 68[such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent]. (2)------------ Explanation.—For the purposes of this section, “book profit” means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by— (a) -------- (b) (c) (d) (e) (f) if any amount referred to in clauses (a) to (f) is debited to the profit and loss account, and as reduced by— 71[(i) ---- (ii) 72[(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.—For the purposes of this clause,— (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or] As per the provisions of the above section we note that the assessee is entitled to claim the deduction of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. In the instant case before us the assessee has claimed that the profit earned during the assessment year 2003-04 for Rs.8,83,81,000/- was adjusted against the unabsorbed brought forward losses in the books of accounts. The Ld DR has not advanced any argument to controvert the arguments submitted by the Ld AR. Therefore, we are of the view that the assessee is very much entitled to claim the deduction of the unabsorbed depreciation of Rs.37,35,12,000/- without adjusting the amount of profit for Rs.8,83,81,000/-. In holding so, we find support and guidance from the order of this Hon’ble Tribunal in the case of Binani Industries Limited (supra) reported in 178 TTJ 658 which reads as under:- “We have heard the rival submissions and perused the materials available on record. We are in agreement with the arguments of the Learned AR that the

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 14 losses (both cash loss and depreciation loss) would continue to remain in the books of accounts till it is wiped off by earning profits by the assessee company and accordingly the same would be available for reduction from book profits u/s 115JB of the Act. We hold that the least of the cash loss or depreciation loss once adjusted / reduced from book profits in earlier assessment years, do not vanish out of the books until it is wiped out by profits in subsequent years. Till such time, the losses would only continue to remain in the books. We hold that for the purpose of computation of book profits u/s 115JB of the Act, every year the situation of least of cash loss and depreciation loss needs to be worked out and reviewed and accordingly the understanding of the Learned AO that such loss once adjusted in earlier year is no longer available for set off is misconceived. Hence we do not find any infirmity in the order of the Learned CIT(A) in this regard. The Ground No.2 raised by the revenue is dismissed.” In view of above, we have no hesitation to hold that the assessee can claim the deduction either of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. Consequently, the ground of appeal filed by the assessee is allowed. 16. Next issue raised by assessee in this appeal is that Ld CIT(A) erred in upholding the order of AO by allowing depreciation @ 25% on computers instead of 60% claimed by it. 17. The assessee in the immediate preceding Assessment Year claimed depreciation on computer for ₹39,11,254/- @ 60% on ₹65,18,756/-. However, the AO in that year in absence of any supporting evidence / sufficient details allowed depreciation @ 25% on ₹65,18,756/- i.e. ₹16,29,689/- only. Thus, AO disallowed the depreciation of ₹22,81,565/- (39,11,254 – 16,29,689) and added to the total income of assessee in the immediate preceding Assessment Year i.e. 2003-04. 17.1 Similarly in view of the above, AO observed that as per the assessee the opening written down value (WDV for short) would be at ₹26,07,502/- (65,18,756 – 39,11,254). Accordingly on the WDV of ₹26,07,502/- assessee would have claimed depreciation @ 60% i.e.₹15,64,501/- only. Whereas assessee is entitled for depreciation @ 25% of ₹26,07,502/- which comes out to ₹6,51,876/- only. Accordingly, the AO further observed that assessee has claimed excessive depreciation for ₹9,12,625/- (15,64,501 – 6,51,876). In view

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 15 of above, AO disallowed the excess depreciation for ₹9,12,625/- and added to the total income of assessee. 18. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the depreciation was claimed on computers as per the rates specified in the Appendix-1 of the Income Tax Rule, 1962. The assessee without prejudiced to the above also submitted that incase depreciation is allowed @ 25% only then the opening WDV should be accordingly modified as discussed above. However, Ld. CIT(A) allowed the appeal of assessee for statistical purpose by observing as under:- “2. Assessing Officer has followed theism order of A.Y 2003-04 and has allowed depreciation at a rate of 25% instead of 60%. The rate of depreciation was decided in AY 2003-04 on the basis of submission of insufficient details in respect of the nature of the asst under dispute. The appeal against the order of AY 2003-04 is lying before CIT(A)-VI-Kolkata ad the CIT has not yet decided this appeal. Therefore it is not possible to decide the Ground No. 3 of appellant on the basis of record of only AY 2004-05. However, the assessing officer is directed to apply the same rate of depreciation as may be decided by CIT(A)-VI-Kolkata for AY 2003-04. 3. The arithmetical calculation in respect of cost of asset n AY 2003-04 and the depreciation 2003-04 is mentioned in theism order for AY 2004-05. Cost of Asset was Rs.65,18,756. Depreciation @ 25% instead of 600% was allowed in AY 2003-04by assessing office which amounts to R.16,29,689/ The WDV of this asset for AY 2004-05 is obviously Rs.65,18,756 – Rs.16,29,689 = Rs.48,80,067. Therefore the claim of appellant in Ground No 4 is correct to a certain extent that till the appeal for AY 2003-04 is decided, the depreciation on this asset can be calculate only on WDV of Rs.48,80,067 and not on Rs.26,07,502/-. Therefore assessing officer is required to take WDV at Rs.48,80,067 at present and which shall be modified. If so required, after the decision in this regard is received from CIT(A)-VI-Kolkata for AY 2003-04. 4. These grounds of assessee are allowed for statistical purpose.” Further, aggrieved by this order of Ld. CIT(A) assessee came up in appeal before us. 19. Ld. AR for the assessee before us submitted that the computers and its accessories and peripheries such as printer(s) scanner(s) etc. is entitled for depreciation @ 60%. Ld. AR in support of assessee’s claim has relied on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Bses Yaumana Power Ltd. reported in 358 ITR 47 (Del). Ld. AR requested the Bench to decide the issue on merit.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 16 On the other hand, Ld. DR heavily relied on the order of Authorities Below.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 17 22. The assessee, during the year, has contributed a sum of ₹5,69,248/- towards gratuity fund maintained with LIC. However, the AO during the course of assessment proceedings observed that the gratuity fund has not been approved by the IT Department. Therefore, the same was disallowed and added to the total income of assessee. 23. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the approval of gratuity fund is pending before the Commissioner of Income-tax and once approved then it will be effective from the date of application. Therefore, the same is eligible for deduction. However, Ld. CIT(A) disregarded the contention of assessee by observing as under:- “3. This issue is same as Ground No.5 of appeal No.501/CIT(A)- VIII/KOL/RAGNGE-7/07-08 for AY 2005-06 in appellant’s own case. This issue has been decided by me against the appellant in AY 2005-06 vide order dated 9/1/2009 for the said appeal. Following my own decision, I hold that appellant cannot claim such deduction u/s. 36(1)(iv) of IT Act read with section 40A(7) of IT Act unless the gratuity fund is approved. It is an admitted fact that the grauit9y fund of appellant is not approved and therefore appellant cannot claimed in respect of contribution to this fund. A proper contribution can be made only after the approval.” Further, aggrieved by this order of Ld. CIT(A) assessee has come up in appeal before us. 24. Ld. AR before us submitted that the payment was made to the LIC in respect of gratuity fund which was pending for approval before the Commissioner of Income-tax. The purpose of not allowing the deduction in respect of unapproved gratuity fund was to ensure that the fund should go from the control of the assessee. In the instant case, the fund has already been paid to LIC and assessee has no control over it. Therefore it should be allowed as deduction. Ld. AR in support of assessee’s claim relied on the judgment of Hon'ble Supreme Court in the case of CIT vs. Taxtool reported in 216 taxman 327 (SC) Pr.CIT vs. Rajasthan State Seed Corporation 386 ITR 267 (Raj) and CIT vs. Continental Commercial Co. Ltd 192 ITR 66 (Cal).

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 18 On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 25. We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. At the outset, we find that the impugned issue is duly covered in favour of assessee and against the Revenue by the judgment of Hon'ble Supreme Court in the case of taxtool (supra), the relevant extract of the judgment is reproduced below:- “Having considered the matter in the light of the background facts, we are of the opinion that there is no merit in the appeal. True that a fiscal statute is to be construed strictly and nothing should be added or subtracted to the language employed in the Section, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act. (See : Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585/23 Taxman 37 (SC). From a bare reading of Sectin 36(1)(v) of the Act, it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. In the instant case, it is evident from the findings recorded by the Commissioner and affirmed by the Tribunal that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the Commissioner with effect from the following previous year. Thus, the conditions stipulated in Section 36(1)(v) of the Act were satisfied. Having regard to the facts found by the Commissioner and affirmed by the Tribunal, no fault can be found with the opinion expressed by the High Court, warranting our interference. 9. Resultantly, the appeal is dismissed with no order as to coasts.”

In view of the aforesaid facts and respectfully following the judicial pronouncements relied upon hereinabove, we reverse the order of Authorities Below. Consequently, assessee’s ground is allowed. Accordingly, AO is directed to delete the same. 26. Last issue raised by assessee in this appeal is that the interest u/s 234B of the Act is not leviable if taxes paid under the provision of Minimum Alternate Tax (MAT) u/s. 115JB of the Act.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 19 At the time of hearing Ld. AR very fairly conceded the fact that the issue stand covered against the assessee and in favour of Revenue by the judgment Hon'ble Supreme Court in the case of JCIT vs. Rolta India Ltd. reported in 330 ITR 470. The relevant extract reads as under : “Sections 115J and 115JA are special provisions. Section 207 envisages that tax shall be payable in advance during any financial year on current income in accordance with the scheme provided in sections 208 to 219 (both inclusive) in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Section 215(5) defines what is 'assessed tax i.e. tax determined on the basis of regular assessment so far as such tax relates to income subject to advance tax. In the instant case, the evaluation of the current income and the determination of the assessed income had to be made in terms of the statutory scheme comprising section 115J/115JA. Hence, levying of interest was inescapable.” In view of the aforesaid facts and respectfully following the judicial pronouncements relied upon hereinabove, we do not find any infirmity in the order of Authorities Below. Consequently, assessee’s ground is dismissed. Therefore, the issue decided accordingly. 27. In the result, assessee’s appeal is partly allowed for statistical purpose. Coming to Cross-appeal in ITA 377/Kol/2009 by the Revenue and ITA 357/Kol/2009 by Assessee for the AY 2005-06 28. The Revenue has raised the following grounds of appeal:- “1. That the learned CIT(Appeal) erred on fact and in law in allowing the assessee to adjust unabsorbed depreciation of Rs.37,35,12,000/- in computing Book Profit u/s.115JB even though the provisions are unambiguous in their ambit. 2. That the learned CIT(Appeal) erred in holding that the assessee was liable to get the benefit of deduction u/s. 80IA to the extent of 100% CIT(Appeal) has also erred in holding that the assessee has the option to choose any continuous period of ten years out of the fifteen years. In the assessee’s case the initial assessment year 1996-97 and at the point in time, there was no such option to the assessee and the period of ten years automatically started from the initial assessment year. 3. That the learned CIT(Appeal) has erred in holding that the assessee was eligible to get deduction u/s. 80IA on the following receipts- a). Interest on margin money - Rs.4,74,875/- b). Provision / liabilities written back - Rs.26,73,408/- c). Bad Debt recovered - Rs.7,77,123/-

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 20 d). Bounce cheque charges - Rs.4,11,440/- e). Cellsite sharing revenue - Rs.2,85,000/- even though they had no intricate or proximate nexus to the eligible business”. The assessee has raised the following grounds of appeal:- “1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (appeals)-VIII, Kolkata (hereinafter referred to as the ‘learned CIT(A)’ erred in confirming the action of the learned Additional Commissioner of Income Tax, Range 7, Kolkata (hereinafter referred to as the ‘learned Assessing Officer') in not allowing set-off of Rs.373,512,000 under clause (iii) of Explanation 1 to sub-section (2) of Section 115JB of the Income Tax Act, 1961 (‘Act’), being the lower of figures of brought forward loss and unabsorbed depreciation. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in giving a finding that the Appellant is necessarily required to claim deduction for full ten consecutive years under section 80IA of the Act, beginning from the assessment year in which the Appellant stared providing telecommunication services, in complete disregard to the non-obstante provisions of section 80IA(2A) of the Act, which specifically provide for deduction for ten consecutive years commencing at any time during such fifteen years. 2.1 On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in excluding other receipts amounting to Rs.765,866 from the profits of the eligible business, while computing deduction under section 80IA of the Act. 3. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in excluding other receipts amounting to Rs.765,866 from the profits of the eligible business, while computing deduction under section 80IA of the Act. 4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in excluding interest income amounting to Rs.66,96,909 from the profits of the eligible business, while computing deduction under section 80IA of the Act. 5. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not allowing de of Rs.697,488, being contribution paid to Life Insurance Corporation of India in respect of gratuity fund.” First we take up Revenue’s appeal ITA 377/Kol/2009 29. The First issue raised by the Revenue in this appeal is that ld. CIT(A) erred in adjusting the unabsorbed depreciation of Rs. 37,35,12,000.00 while computing the book profit under section 115JB of the Act.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 21 30. At the outset it was observed that the impugned issue has already been decided in favour of assessee by this Hon’ble Tribunal in the case of Binani Industries Limited (supra) reported in 178 TTJ 658 which reads as under:- “We have heard the rival submissions and perused the materials available on record. We are in agreement with the arguments of the Learned AR that the losses (both cash loss and depreciation loss) would continue to remain in the books of accounts till it is wiped off by earning profits by the assessee company and accordingly the same would be available for reduction from book profits u/s 115JB of the Act. We hold that the least of the cash loss or depreciation loss once adjusted / reduced from book profits in earlier assessment years, do not vanish out of the books until it is wiped out by profits in subsequent years. Till such time, the losses would only continue to remain in the books. We hold that for the purpose of computation of book profits u/s 115JB of the Act, every year the situation of least of cash loss and depreciation loss needs to be worked out and reviewed and accordingly the understanding of the Learned AO that such loss once adjusted in earlier year is no longer available for set off is misconceived. Hence we do not find any infirmity in the order of the Learned CIT(A) in this regard. The Ground No.2 raised by the revenue is dismissed.” In view of above, we have no hesitation to hold that the assessee can claim the deduction either of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. Consequently, the ground of appeal filed by the Revenue is dismissed.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 22 services. The deduction u/s 80-IA of the Act was available in the following manner:- 1. First 5 years 100% 2. Next 5 years 30% However the Finance Act 1999 w.e.f. AY 2000-01 allowed the assessee to choose the ten years of tax holiday out of 15 year beginning from initial assessment year. However the assessee was covered under the old provision of the section 80IA of the Act wherein the deduction was available to it for 10 continuous years from the initial assessment year which is AY 1997-98. Thus, the assessee was eligible to claim the deduction u/s 80-IA of the Act as detailed under : S.No. Particulars % of deduction 1. AYs 1997-98 to 2001-02 100% 2. AYs 2002-03 to 2006-07 30% But the assessee claimed the deduction under section 80-IA of the Act for the AY 2005-06 for Rs. 132,70,62,114.00 @ 100%. Accordingly the AO called upon the assessee to seek clarification as to why the deduction should not be allowed @ 30% as discussed above. In compliance thereto the assessee submitted that the amended provisions of section 80IA of the Act provides that the profits of an undertaking providing telecommunication services after 1st day of April, 1995, but before the 31st day of March, 2005 shall be eligible for 100% deduction for first five years in respect of profits derived from such business out of the ten years and 30% for subsequent five years. Section 80IA was originally inserted by the Finance (No.2) Act, 1991 w.e.f. April, 1 1991 which was subsequently divided into section 80IA and 80IB by the Finance Act, 1999 w.e.f. 1, 2000. Clause (ii) of sub—section (4) of amended section 80IA which reads as under:- “Any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domes satellite service, network of trunking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 21`st day of March, 2005.”

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 23

Further Clause 2(A) of amended section 80IA reads as under:- “Notwithstanding anything contained in sub-section (1) or sub-section (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub- section (4), shall be hundred per cent of the profits of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, thirty per cent of such profits and gains for further assessment years.” From the above quoted provisions, the assessee submitted that though amended section has been introduced w.e.f. assessment year 2000-01, but the operative paragraph still refers to undertaking engaged in business of telecom which starts its operation on or after April 1, 1995. Thus, the amended section also contemplates granting of deduction to undertakings providing telecom services after April, 1995 and not April 1, 2000. If the intension of the Legislature was to extend the benefits only to those undertaking which begins to provide telecom services after April, 2000, it would have provided for the same. Further, if the interpretation of the old section 80IA would automatically apply to the assessee is upheld then it would render the language of the amended section i.e. on or after April, 1 1995 redundant. In this regard, we also invite your attention to the language used is clause (ii) i.e. any undertaking which has stared or starts. Thus even a assessee who has already started the telecom operations can claim the deduction. Sub-section (2A) read with sub-section (2) clearly provide that deduction shall be available for ten consecutive years out of a period of fifteen years from the year in which such undertaking starts to provide the telecom services. In the present case the assessee had started the telecom operation in September 1995 i.e. assessment year 1996-97. But in view of carried forward losses, it had not claimed any deduction u/s 80IA upto A.Y 2003-04. In view of specific provisions of section (2) to Section 80IA, it would be eligible to claim deduction for any ten consecutive years out of fifteen year. Accordingly, the assessee has started claiming deduction for the first time from assessment year 2004-

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 24 05. Thus, it would be entitled to claim 100% deduction upto AY 2008-09 and subsequently it would claim 30% deduction only for AY 09-10 and 10-11. This is further supported by the language used in sub-section (2A) i.e. at any time during the periods as specified in sub-section (2). Thus, an assessee has the liberty to opt for a consecutive ten years exemption out of the period of 15 years. 32.1 It is settled law that the law to be applied is that enforce in the relevant assessment year. For this proposition reliance is placed on the following decisions: Maharajah of Pithapuram vs. CIT (13 ITR 221) (PC); Karim Tharuvi Tea Estate Ltd vs. State of Kerala (60 ITR 262) (SC) Reliance vs. CIT (120 ITR 921) (SC) Goslino Mario vs. CIT (241 ITR 314) (SC) The Hon'ble Supreme Court in Bajai Tempo’s case (196 ITR 188) held that the provision granting deduction, exemption or relief should be construed liberally and in favour of the assessee. The above test has also been laid down in the following case: CIT vs. South Arcot Soc. (176 ITR 117, 119) (SC) Ct vs. UO Co-op Fed. (176 ITR 435, 441)(SC) Broach Soc. vs. CIT (177 ITR 418,422)(SC) In view of the foregoing discussion the assessee humbly submitted that hundred per cent deduction be allowed for A.Y 2005-06. However the AO during the assessment proceedings made certain observations as detailed under:- “16(a) As stated above the assessee-company is claiming deduction us. 80IA on mobile/cellular services provided by it. This services started from A.Y.1997-98. As per the provisions of law applicable for A.Y 1997-98, the assessee was eligible for deduction u/s.80IA @ 100 percent for initial five am years (from AY 1997-98 to 2001-02) and @ 30 percent for the next five assessment years (from Assessment Year 2002-03 to 06-07). There was no option in choosing period of deduction u/s. 80Iain Assessment Year 1997-98. As the provisions stood at that point in time, “initial assessment year” was defined in Section 80IA(12)(c)(4) which meant the assessment year relevant to the previous year in which the undertaking starts to provide the telecommunication services whether basic or cellular, including radio paging

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 25 and domestic services, it is undisputed that the assessee company started providing cellular services from FY 1996-97. Therefore, the initial assessment year in this case will be AY 1997-98. In the absence of any provision in the Act to choose option, the first year of claim of deduction for the assessee was AY 1997-98. 16(b) Whether the assessee actually claimed the deduction in the AY 1997- 98, is not material. There may be a huge depreciation of business loss or both, due to which there may not be any business profit to claim deduction u/s 80IA cannot change as it has been specifically defined in the act and in the case of the assessee that year is AY 1997-98. 16(c) The assessee ha stated that the Section 80IA. As it stands today, is of material importance and that as per the provisions as they stand today, the assessee will be eligible for 100 percent deduction for first five years and @ 30 percent for the next five year within the period of ten years chosen by it, out of the fifteen years commencing from the start of the business. For such an interpretation the assessee submits that even though the concept of option was introduced w.e.f Assessment Year 2000-01, the operative paragraph still refers to the business of telecom which starts its operation on or before April, 1995 and therefore, contemplates granting of deduction to undertaking providing telecom services after 01.04.1995 and not after 01.04.2000. For this purpose the assessee also relies upon clause (ii) of section 80IA(4) (as it stands presently) which uses the phase “any undertaking which has started or starts.” 16(d) At this point in time, it must be remembered that by Finance Act, 1999, w.e.f. 1st April, 2000, old Section 80IIA has been completely replaced by new section 80IA. The use of the phase “any undertaking which has started or starts providing telecommunication services. In clause (ii) of Section 80IA(4), in respect of those services which started from 01.04.1995. if this was not done then the telecommunication services which started in1995 would have lost deduction totally. 16(e) It must be once again remembered that the facility of option to chose a period of ten assessment years out of fifteen assessment years has not been granted with retrospective effect. In fact the new section 80IA puts telecom services on a rather lower pedestal as compared to other infrastructure services. As per the provisions of Section 80IA as they stand w.e.f. 01.04.2000, all the infrastructure services such as roads, highway projects, railway system, irrigation projects, ports, air ports, undertaking in EZs etc are eligible for 100 percent deduction for a period of ten years out of fifteen assessment years. However, section 80IA(2A) restricts deduction to the undertakings providing telecommunication services @ 100 percent for only first five year and thereafter @ 30% percent only for the remaining five assessment years. Therefore, it cannot be assumed that the facility for exercising option has been granted with retrospective effect. 16(f) It is important to not here that with regard to deduction u/s. 80I “initial assessment years” is extremely important. The commencement of the assessee’s business is in AY 1997-98 and there was no option to choose the period of deduction at that point in time. Therefore, the AY 1997-98 becomes the ‘initial assessment years’ for the assessee. The fact that the assessee had business losses or huge depreciation and therefore it could not avail benefit of Section 80IA is immaterial. Let us take a case that the assessee had profit in

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 26 AY 1997-98. Would assessee not claim deduction u/s. 80IA in such sit9uaton? Since the provisions of law allow claim of deduction, the assessee would surely have claimed it. 16(g) In view of the above, it is held that in respect of the AY 2005-06, the assessee is not eligible for deduction u/s. 80IA of the IT Act, 1961 @100 percent. It is eligible for deduction u/s. 80IA @ 30 percent. Penalty proceedings u/s. 271(1)(c) of the Income-tax Act, 1961 read with explanations there under, are initiated separately, for furnishing inaccurate particulars of its income.” 33. Aggrieved assessee preferred an appeal to ld. CIT(A). The assessee before ld. CIT(A) submitted that the amended provisions of section 80IA of the Act provides that the profits of an undertaking providing telecommunication services after 1st day of April, 1995, but before the 31st day of March, 2005 shall be eligible for 100% deduction for first five years in respect of profits derived from such business out of the ten years and 30% for subsequent five years. It is well settled law that the law to be applied is that which is enforce in the assessment year unless otherwise provided expressly or by necessary implication. The assessee in support of his claim relied on the following judgments : i. Maharaja of pithapuram Vs. CIT reported in 13 ITR 221 ii. Karim Tharuvi Tea Estate Ltd vs. State of Kerala 60 ITR 262 (SC) iii. Reliance vs. CIT 120 ITR 921 (SC) Thus, since the law as in the captioned assessment year provides for the deduction to be claimed in any 10 years out of the initial 15 years, the Appellant would be entitled to claim 100% deduction in the AY 2005-06 and therefore, the restriction of the deduction to 30% should be lifted. Thus, if the view taken by the AO that since the Appellant has started its operation in AY 97-98, the old section 80IA has to be applied, it would render the aforesaid Supreme Court decisions redundant. Section 80-IA was originally inserted by the Finance (No.2) Act, 1991 w.e.f. April 1, 1991, which was subsequently divided into section 80IA and 80IB by the Finance Act, 1999 w.e.f. April 1, 2000. Clause (ii) of sub-section (4) of amended section 80IA reads as under:

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 27 ‘Any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1std day of April, 1995, but on or before the 21st day of March, 2005’ Further Clause 2(A) of amended section 80IA reads as under:- Notwithstanding anything contained in sub-section (1) or sub-section (2), the deduction in counting the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub- section(4), shall be hundred per cent of the profits of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, thirty per cent of such profits and gains for further assessment years.” The clause 2 of section 80IA states that the Appellant may at his option claim deduction for any ten consecutive assessment years out of fifteen years beginning the year in which the undertaking starts providing telecommunication services i.e. the assessee has an option to claim for any ten consecutive year out of fifteen years

33.1 Now, in order to further substantiate the Appellant claims, attention is invited to the language of amended section 80IA(4)(ii), “… … Any undertaking which has started or starts providing telecommunication services … … on or after the 1st day of April, 1995, but on or before the 31st day of March, 2005.”

Thus, section uses the expression ‘has started or starts’ and ‘on or after April, 1, 1995 which would infer the benefit is available even to an existing undertaking which has started telecommunication services on or after April, 1, 1995. Now, had the intention of the legislature was to confine the benefit of the amended Section 80IA only to a new undertaking, they would have specified that it should be new undertaking which begins operation only after April 1,1999 i.e. relevant to Assessment Year 2000-01’. Thus, considering the plain language there can be no doubt that the Appellant is entitled for deduction as per the amended section 80IA of the Act, which confers option of 10 out of 15 assessment year.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 28 Now, attention is also invited to the Explanatory Memorandum, explaining the amendments made by the Finance Act, 1999. It would be observed that it states that “….. as these undertakings are capital intensive and get delayed returns on investments, it is proposed to similarly allow then to avail of the benefits in any ten consecutive years. 33.2 Thus, clearly the intention was to enable even an existing undertaking that has commenced operations but is incurring losses to select its claim of deduction of ten consecutive assessment years out of 15 years from the date of commencement of operations. In the Appellant’s case, it had started the telecom operations in September 1995 i.e. Asst Year 1996-97. In view of carried forward losses, the Appellant had not claimed any deduction u/s.80IA upto AY 2003-04. In view of specific provisions of section (2) to section 80IA,the Appellant would be eligible to claim deduction for ‘any ten consecutive years’ out of ‘initial fifteen years’. Accordingly, the Appellant had started claiming deduction for the first time from AY 2004-05. Thus, the Appellant would be entitled to claim 100% deduction upto AY 08-09 and thereby would claim 30% deduction only for AY 09-10 and 10-11. Moreover, the assessee also relied on the decision of Mohan Breweries and Distilleris Ltd. vs. ACIT (24 SOT 170) wherein the Tribunal in the context of section amended 80IA (2) has held that ‘section 80IA as enacted by the Finance Act, 1999 w.e.f. 1std April, 2000 gives as option to the assessee w.e.f. 1st April 2000 to claim relief under this section for any 10 consecutive assessment years out of 15 years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility etc. It is left to the assessee at its will to claim this relief from the first assessment year, or from the second or from, the third or so as it might think, fit. Once the assessee has opted for the first year of relief then it continues for further 9 consecutive years. To claim the relief the undertaking is to be set up during the period 1std April 1993 to 31st March 2006. This is as per s. 80IA(4)(iv). Section 80IA(2) clearly stated that assessee can opt for year of deduction for any 10 consecutive year out of 15 years taken from the first year in which the undertaking or enterprise develops and begins to operate any infrastructure activity. It can be seen that 80IA(2) does not mandate that first year of 10 consecutive assessment years should be always the first year of set up of enterprise. If the intention of the legislature is that first year of set up is the initial assessment year to claim

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 29 deduction u/s. 80IA, then there is no meaning of giving option to the assessee to claim deduction for 10 consecutive assessment years out of 15 years.’ The AO has also alleged that whether the Appellant has actually been allowed deduction u/s. 80IA for earlier years from AY 1997-98 is irrelevant. In this regard, may we submit that the expression used in section 80IA(1) is ‘….. Allowed, in computing ….’. The Supreme Court in context of depreciation in case of Mahendra Mills (243 ITR 56) has interpreted the said term to mean actually allowed’. Thus, in the present case, since no ‘deduction’ has actually been allowed to the Appellant u/s 80IA of the Act in past until AY 2004-05, the Appellant is free to choose 10 out of 15 years for claiming deduction u/s.80IA of the Act in past until AY 3004-05, the Appellant is free to choose 10 out of 15 years for claiming deduction u/s. 80IA of the Act as per amended section 80IA of the Act. The Appellant would further drew our attention towards section 10A and 10AA of the Act, which specifically provide for transition of deduction to an eligible undertaking from secion10A to 10AA and specifically provides that Assessee shall be entitled to claim deduction u/s.10A for the balance unexpired years. Now, had the intention of the legislature been to provide that even in case of undertaking who have been allowed deduction under erstwhile section 80IA, such undertaking would be entitled to balance unexpired period under the new provision, it would have made similar amendments. 33.3 Further, the Appellant would most humbly submit that the Supreme Court in Bajaj Tempo’s case (196 ITR 188), has held that the provision granting deduction, exemption or relief should be construed liberally and in favour of the assessee. The above test has also been laid down in the following cases: � CIT v. South Arcot Soc (176 ITR 117, 119) (SC); � CIT v. UO Co-op. Fed. (176 ITR 435, 441)(SC); � Broach Soc. V. CIT (177 ITR 418, 422) (SC);

In view of the foregoing, the Appellant humbly summarizes as under:

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 30 • Following the ratio laid down by the Supreme Court in 120 ITR 921, the AO cannot go to the old section 80IA of the Act and accordingly, cannot rely upon the definition of the ‘initial assessment year’ in erstwhile section 80IA of the Act; • Considering the language of the amended act, the legislative intent as can be gathered from the Explanatory Memorandum and settled legal position in Bajaj Tempo’s case; • The definition of the term “initial assessment year” has no applicability since that provision was deleted much before the Appellant started its claim for the deduction u/s. 80-IA

In view of above the assessee prayed to allow deduction u/s. 80IA of the Act @ 100% as claimed by it.

However the ld. CIT(A) after considering the submission of the assessee has allowed the deduction u/s 80-IA of the Act by observing as under : “4. The facts of the case suggest that appellant had claimed deduction u/s. 80IA for the first time only in Assessment Year 2004-05 because this was the first year since Assessment Year 1996-97 when appellant made the profits. The main contention of assessing officer is that even if appellant had not claimed deduction u/s. 80IA in Assessment Year 1996-97 due to losses in that year it will be deemed to be the first year for which deduction u/s. 80IA was allowed as per the law which existed in Assessment Year 1996-97. Accordingly the assessing officer, it is immaterial whether appellant could claim 80IA deduction in Assessment Year 1996-97 or not. The period of ten years was fixed from Assessment Year 1996-97 to Assessment Year 2005-06 as per the provisions of section 80IA which existed in Assessment Year 1996- 97 and this period cannot be changed by the subsequent amendment from Assessment Year 2000-01. The main issue is to verify whether appellant had an option in or after Assessment Year 2000-01 to choose the period of 10 years for claim of deduction u/s. 80IA if it has not claimed any deduction u/s. 80IA till Assessment Year 1999-00. There is no doubt that as per old provisions of sec 80I appellant was entitled for a fixed period of claim of deduction u/s. 80IA from Assessment Year 1996-97 to Assessment Year 2005-06. However, this is also a fact that by not claiming deduction u/s.80IA till Assessment Year 2003-04, appellant had not exercised its option of choosing ten years which was available from Assessment Year 2000-01. Moreover, if there was any intention of the legislature to exclude such undertakings which had begun options before 1.4.1999, from exercising the choice of 10 years out of 15 year, it would have expressed it in the

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 31 amendment itself. The industries which were given exemption u/s. 80IA form Assessment Year 1996-97 as per the provision of Section 80IA which existed till Assessment Year 1999-00 were capital intensive industries and were not able to make any profits in the first few years. Therefore the provisions were amended by legislature and a choice of 10 years out of first 15 years instead of fixed first 10 years was given to all such undertakings which had begun operation form 1.4.1995. The intention of legislature was clearly to extend the benefit of deduction u/s 80IA for full 10 years out of initial 15 years to all such industry which had begun operations on or after 1.4.1995 and due to substantial capital investment were not able to make profits in the initial few years of operation. The instant case of appellant squarely falls within the intention of legislature and therefore if in Assessment Year 2004-05 appellant has claimed the deduction u/s. 80IA for the first time then for all practical purposes it has expressed its option of choosing the period of 10 years out of 15 years for the first time in Assessment Year 2004-05. Appellant has to take a choice of the period of 10 years out the six options available to it as under:- (i) Assessment Year 1996-97 to Assessment Year 2005-06 (ii) Assessment Year 1997-98 to Assessment Year 2006-07 (iii) Assessment Year 1998-99 to Assessment Year 2007-08 (iv) Assessment Year 1999-00 to Assessment Year 2008-09 (v) Assessment Year 2000-01 to Assessment Year 2009-10 (vi) Assessment Year 2001-02 to Assessment Year 2010-11 In the written submission the appellant has clearly stated that it would be claiming the deduction u/s. 80IA till Assessment Year 2010-11. Therefore app has clearly made a choice of 10 years as per provisions of section 80IA(2) of IT Act and this choice is shown above at sl. No. (vi), i.e. Assessment Year 5. In the written submission appellant has submitted that it would be claiming 100% deduction of profits till Assessment Year 2008-09 and 30% deduction of profits for Assessment Year 2009-10 ad 2010-11. This contention of appellant is incorrect as per the provisions of law. The provisions of section 80IA(2) give the permission to appellant to chose the period of 10 consecutive year out of first 15 years. The provisions of section 80IA(2) do not allow the appellant to choose only 7 years instead of 10 years out of initial 15 years the submissions of appellant that it would be claiming deduction u/s 80IA till 2010-11 is correct as per the provisions of section 80IA(2A) are applicable in case of appellant and therefore for first five Assessment Years, i.e. Assessment Year 2001-02 to Assessment Year 2005-06, appellant is entitled to claim 100% deduction of profits and for remaining five Assessment Years, i.e., Assessment Year 2006- 07 to Assessment Year 2010-11 appellant is entitled to 30% deduction of profits. The instant Assessment Year is Assessment Year 2005-06 therefore appellant is entitled to 100% deduction u/s.80IA of IT Act. 6.The Ground No 3 of appeal of assessee is allowed.” Being aggrieved by the order of ld. CIT(A), Both Revenue & assessee are in appeal before us.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 32 34. The grievance of the Revenue is that ld. CIT(A) erred in allowing deduction @ 100% of the profit as against 30% of the profit allowed by the AO.

34.1 The grievance of the assessee is that ld. CIT(A) erred in giving finding that the assessee has to necessarily claim the deduction u/s 80-IA of the Act for 10 consecutive years. The assessee also assailed the order of ld. CIT(A) by submitting that the impugned issue for 10 consecutive years deduction is not arising from the order of AO.

The ld. DR before us submitted that the assessee was entitled for the deduction under section 80-IA of the Act for 10 consecutive years commencing from the AY 1997-98 as per the old provision of section 80-IA of the Act. The ld. DR relied on the order of AO. However in case of assessee appeal ITA 357/Kol/2009 the ld. DR submitted that the assessee has to choose the block of ten years for claiming the deduction under section 80-IA of the Act. The ld. DR vehemently supported the order of authorities below. On the other hand the ld. AR reiterated the submissions as made before the ld. CIT(A) The ld. AR relied on the order of ld. CIT(A) for allowing the deduction under section 80-IA of the Act @ 100%.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 33 held that it is at the discretion of the assessee to choose the initial year for the purpose of claiming the deduction under section 80-IA of the Act in the case of Mohan Breweries and Distilleris Ltd. vs. ACIT (24 SOT 170) wherein the Tribunal in the context of section amended 80IA (2) has held that ‘section 80IA as enacted by the Finance Act, 1999 w.e.f. 1std April, 2000 gives as option to the assessee w.e.f. 1st April 2000 to claim relief under this section for any 10 consecutive assessment years out of 15 years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility etc. It is left to the assessee at its will to claim this relief from the first assessment year, or from the second or from, the third or so as it might think, fit. Once the assessee has opted for the first year of relief then it continues for further 9 consecutive years. To claim the relief the undertaking is to be set up during the period 1std April 1993 to 31st March 2006. This is as per s. 80IA(4)(iv). Section 80IA(2) clearly stated that assessee can opt for year of deduction for any 10 consecutive year out of 15 years taken from the first year in which the undertaking or enterprise develops and begins to operate any infrastructure activity. It can be seen that 80IA(2) does not mandate that first year of 10 consecutive assessment years should be always the first year of set up of enterprise. If the intention of the legislature is that first year of set up is the initial assessment year to claim deduction u/s. 80IA, then there is no meaning of giving option to the assessee to claim deduction for 10 consecutive assessment years out of 15 years.’ We also find support & guidance from the judgment of the Hon’ble Supreme Court in the case of Bajaj Tempo’s case (196 ITR 188), wherein it was held as under : “A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. Since a provision intended for promoting economic growth has to be interpreted liberally the restriction on it too has to be construed so as to advance the objective of the section and not to frustrate it. Under clause (i) of sub-section (2) of section 15C formation of the undertaking by splitting up or reconstruction of an existing business by transfer to the undertaking of building, raw material or plant used in any previous business results in denial of the benefit contemplated under sub- section ( 1).” The amended provisions of section 80IA of the Act are clear and unambiguous and the purpose of the amendment has already been explained in the memorandum as explained in the preceding paragraph. In this regard we also find that the CBDT has clarified the term ‘Initial Assessment Year’ in relation to section 80IA of the Act which reads as under:

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 34 “The matter has been examined by the Board. It is abundantly clear from sub- section (2) that an assessee who is eligible to claim deduction u/s 80-IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen ( or twenty) years, as prescribed under that sub-section.” Similarly for the issue raised by the assessee we hold that the assessee has the discretion to choose the initial year out of the block of 15 years. Thereafter the assessee would claim the deduction as per the provision of section 80-IA of the Act for the remaining year but subject to the block of 15 years. In view of the ground of appeal filed by the Revenue is dismissed and the ground of appeal filed by the assessee is allowed.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 35 hence, it should be considered as income from telecom business and eligible for deduction u/s.80IA of the Act. As regards provision/ liabilities written back, The assessee has stated that these amounts represent previous claim and allowed as business expenditure in the earlier year and they should be taxed as business income u/s 41(1) and deduction u/s. 80IA of the Act should not be denied. As regards bad debt recovery, The assessee has submitted that bad debt was claimed as business expenses in the earlier years and therefore any recovery of the same is a receipt from business and hence, eligible for deduction u/s. 80IA of the Act. In respect of bounce cheque charges It was submitted that the amount has been recovered from subscribers on bouncing of cheques received from them. The charges were received in the course of the business and therefore eligible for deduction under section 80-IA of the Act. The assessee in support of his claim has also relied on the judgment of Madras High Court in the case of CIT Vs Madras Motors Ltd. reported in 257 ITR 60 (Mad). As regards the cell site sharing revenue, It was submitted that the activity of cell site sharing reduces the cost and the amount is received from other telecom operators in the course of business. Therefore the same is eligible for deduction u/s 80IA of the Act. In respect of other receipts It was claimed that they are inextricably linked to the business and therefore the same is eligible for deduction u/s. 80IA of the Act. However the AO observed that the term used in Section 80IA is “derived” and not “attributed to” or “referable to” and, therefore, only those receipts which have direct and immediate nexus with the industrial undertaking will be eligible for deduction u/s. 80IA. In fact same is the case in respect of other sections granting deduction such as, Section 80HH, Section 80HHC etc.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 36 37.1 The AO also observed that the assessee has claimed deduction u/s 80IA on interest receipt in the year under consideration whereas in the immediately preceding assessment year i.e. AY 2004-05, the assessee had considered that interest income as income from other sources and had not claimed deduction u/s. 80IA. The assessee itself has stated that this interest has been earned on the surplus fund kept in the bank. The interest earned has no immediate nexus with the industrial undertaking whose activity is providing telecom services. The AO also observed in respect of provisions for liabilities written back and bad debt recovery, these expenses were claimed in the earlier years and since they have been recovered in the current year, it has become the income of the current year. The total income under the Income-tax Act is to be computed on year to year basis. This income has not been derived from the industrial undertaking having eligible business in the current assessment year and therefore deduction u/s. 80IA is not allowed. As regards bounced cheque charges, again the immediate source of this receipt is not the industrial undertaking but the activity of collection resulting in the event of return of the cheque due to inadequate balance in the customer’s accounts. Since there is no immediate and proximate nexus with the industrial undertaking, deduction u/s. 80IA is not allowed on these receipts. In respect of other receipts the assessee has not specified the nature of the receipt. Therefore, it is again held that the receipt has not immediate and proximate nexus with the industrial undertaking and, therefore, deduction u/s. 80IA is not allowed. In respect of cell site sharing revenue, it is pertinent to note that he assessee has included this income under the head “other income” and not under the head “business income”. Therefore, deduction u/s. 80IA is not allowed on this income.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 37 “I. As regards Interest Income: During the captioned year, the Appellant earned certain interest income which has been treated by the Appellant as income chargeable to tax under the head “Business”. It being the income derived from the business by the telecom undertaking, the Appellant claimed deduction u/s. 80IA in respect of such interest income as well. The AO ha disallowed the claim for such deduction. The AO has relied upon the decision of the Supreme Court in the case of Pandian Chemicals Ltd. V. CIT (262ITR 278) to hold that interest income is not eligible for the tax holiday. In this behalf, the Appellant most humbly submits that the decision of the Supreme Court in the case of Pandian Chemicals was rendered in the context of provisions of Sec. 80HH whereas the present case is concerned with provisions of Sec. 80-IA. The Appellant submits that under sec. 80HH(1) the tax holiday is available where the gross total income of an assessee includes any profits and gains “derived from an industrial undertaking”. As against the foregoing, deduction under Sec 80-IA is available when the gross total income of an assessee includes any profits and gains.” derived by an undertaking or an enterprise from any business referred to sub-section (4) … …”. Thus, it can be observed that while deduction under Sec. 80HH requires the income to be derived from industrial undertaking, the provision of Sec. 80- IA requires the income to be derived from any “business” by the undertaking. Having regard to the clear shift in language of the provision, the intention of the legislature is clear that all income derived from the business of the undertaking should be eligible for deduction. The AO himself has taxed interest income as income under the head “business” and not under the head “other sources”. It is submitted that the decision of the Supreme Court in Pandian Chemical’s case, which relates to section 800HH, cannot be applied to the provision of sec. 80-I which is differently worded. In fact, attention is drawn to a recent decision of the Delhi High Court in CIT v. Eltel SGDS P. Ltd. 300 ITR 6 (Del), where it has been held as under: ‘A perusal of the above would show that there is a material difference between the language used in Section 80-HH of the Act and Section 80-IB of the Act. While Section 80-HH requires that the profits and gains should be derived from the industrial undertaking, Section 80-IB of the Act requires that the profits and gains should be derived from any business of the industrial undertaking. In other words, there need not necessarily be a direct nexus between the activity of an industrial undertaking and the profits and gains.’ The Appellant relies upon the following decisions in which the Tribunal benches as well as High Courts have drawn distinction between the provisions of section 80HH and section 80IA / 80IB and have held various receipts (including interest income in some cases) as eligible for deduction under the new sections: • ACIT v. Maxcare Laboratories Ltd. 92 ITD 11 (Cuttack) (II – Page Nos 136-143); • ITC Hotels v. DCIT 107 TTJ 955 (Bang) (PB II –page Nos 144-154);

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 38 • ITO v. Kiran Enterprises 92 TTJ 1-4 (Chd) (PB II – page Nos 155-159); • CIT v. Eltek SGS P. Ltd 300 itr6 (Del) (PB II – page Nos 126-130); • CIT v. Eastern Tar P. Ld 301 ITR 427 (Jarkhand) (PB II – pages Nos. 131-135) The Hon'ble Cuttack Tribunal in the case of Maxcare (supra) after considering the difference in the language of section 80HH and 80IA held that “all sorts of income which are inextricably related to carrying on the business of industrial undertaking are to be considered for deduction u/s. 80IA of the Act, and accordingly, interest income and miscellaneous income were eligible for deduction u/s. 80IA of the Act. It is true that some of the above decisions were rendered in the context of section 80IA as it stood prior to its bifurcation into two, i.e. section 80IA and 80IB. However, that cannot make any difference since the splitted section also talks of the profits derived from the business by the undertaking, In fact the CBDT, while explaining the rationale behind the splitting of the section has categorically stated, in para 39.1 of its circular no. 779 dated September 14, 1999 that: ‘The erstwhile provision of section 80IA in the Income tax Act has been restructured and incorporated as two new distinct sections = section 80IA and 80IB. the restructured section seek to retain the benefits hitherto provided in section 80IA.however the amended provisions extend the benefits to certain sectors…’ The above paragraph clearly articulates the intention of the legislature that the benefits available under the pre-splitted sections would be retained. Now, if the Courts and Tribunals have held in the context of the pre-splitted section that interest and certain other receipt can be regarded as income derived from the business and hence eligible for the deduction, the same would equally hold good also for the post-splitted sections. The old benefits are not intended to be taken away but are retained. Further, had the intension of the legislature was to exclude such interest receipts, it would have inserted an explanation, similar to explanation (baa) to section 80HHC(3) of the Act. Having regard to the above, the Appellant most humbly submits that interest income beheld as income derived from the business by the telecom undertaking and hence eligible for deduction u/s. 80IA Without prejudice, the Appellant prays that if at all the action of the AO is confirmed, then in that case, the interest income ought to be adjusted against interest expenses, as also the expenses incurred for earning such interest income, and the disallowance be restricted to net interest income only, if any, following the principle laid down by the Delhi High Court in Shree Ram Honda (289 ITR 475) 2 & 3, Provisions/Liabilities written back – others and Bad debts Recovery The Appellant is in the sole business of the providing cellular mobile phone services. There is no business of the Appellant except that of providing cellular mobile phone services. The Provisions/Liabilities made and Bad Debts were allowed as deduction from the business income in previous assessment years. The said provisions/Liabilities were in the relevant

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 39 previous year were written back as offered and assessed as business income and so is the bad debts recovered. The Appellant submits that once a write back is taxed u/s 41(1), it is deemed to be the bu9 profits of the current year, it automatically would qualify for deduction u/s 80IA of the Act. In the following decisions, in the context of section 80HHC, the Courts have held that deduction u/s. 80-HHC of the Act is available in respect of amount taxes u/s. section 41(1) of the Act: o Alfa Laval India Limited (266 ITR 418) (Bom) affirmed by the Supreme Court in 295 ITR 451 o Extrusion Process (P) Ltd. V. ITO (106 ITD 336) (TBom) (PB II – page Nos. 160-163) o CIT v. Abdul Rahaman Industries 293 ITR 475 (Mad) (PB I – page Nos. 164-166) Thus, once the write back are taxed u/s. 41(1) of the Act, following the Delhi High Court decision in Eltek (supra), it would undisputedly be considered as receipt directly connected with the business of the telecommunication carried on by the Appellant and thus eligible for deduction u/s. 80IA of the Act. The Appellant therefore prays that AO be directed to allow deduction u/s. 80IA on the provisions written back and bad debts recovered. 4. Amount received as bounce charges: The Appellant recovers a fixed amount of bounce charges from the customers who makes default in making payment and whose cheques get bounced. The receipt is in the nature of penal charges recovered from the customer who fails to pay on time. The Appellant relies on the following cases were it is held that the interest received on delayed payment from debtors is eligible for deduction u/s. 80-IA of the Act: o Nirma Industries Ltd. v. DCIT (283 ITR 402) (Guj) o CIT v. Sidheswari paper Udyog Ltd. (94 ITD 187)(TM) (Del) :The Gujarat High Court decision in the case of Nirma Industries Ltd. v. DCIT 92006) (283 ITR 402) (supra) held that ‘IT is an incorrect proposition to state that interest paid by the debtors for late payment of the sale proceeds would not form part of the eligible income for the purpose of computing relief under section 80-I of the Act. the reliance on the general meaning of the term interest as well as raising distinction between the source of sale proceeds and the source of interest is erroneous in law.’ 6. Cell Site sharing Revenue: For rendering services to various subscribers, availing/subscribing for cellular services of the Ape, the Appellant has to develop the sites. At these sites, the Appellant constructs infrastructure facilities in the form of civil work, setting up of towers, installation of batteries, air conditioners and D.G sets and such other assets which are used for providing network connection to the Appellant’s subscribers. These are regarded as passive/supporting assets in the business of telecommunication services. At these sites, additionally the

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 40 Appellant is required to install antenna and BTS so that network connection becomes functional and would carry verbal date from one subscriber to other subscriber and vice-versa, through such antennas. These are regarded as active / functional assets. The Appellant has developed various sites in the circles allotted to it in the state of West Bengal. The other operators have approached the Appellant to make use of its sites vis-a-vis the use of various supporting assets, referred to above, which were installed at these sites. These other operators have entered into agreements with the Appellant whereby they are liable to pay certain charges for using various supporting assets at these sites, from having access to a network of their own, by setting up their own antennas, BTS at such sites; whereby they can render telecommunication services to the subscriber of their networks. The income is treated as income from “business” both by the assessee and by the AO. The Appellant claimed deduction u/s.80IA in respect of the said income but the Assessing Officer has disallowed the same. The Appellant relies on the decisions and the submissions made in regards interest income eligibility for the deduction u/s. 80-IA of the Act as stated at para 1 above. There can be no dispute on the proposition that a businessman may exploit his commercial assets, either by using the same on his own account or allowing others to use the same. So far as the same is used for rendering telecommunication services in either case, the income generated would be regarded as income from providing telecommunication services. Section 80-IA(4) is a provision which is enacted to confer tax relief for socio- economic objectives. It is a settled rule of interpretation that a provision like section 80-IA (tax holiday) should, therefore, receive an interpretation that accords with the objective behind the tax holiday. This has, indeed, been settled by the Supreme Court’s decision in Bajaj Tempos case (196 ITR 188) (PB II 0-Page Nos. 167-174) Without prejudice to above If at all the income from site sharing is not to be treated a eligible for 80-IA, the Appellant prays that the expenses to that effect on account of site sharing also ought to be excluded.” However the ld. CIT(A) after considering the submission of the assessee has partly allowed the relief to the assessee by observing as under:- “4. The language of section 80IA has been analyzed by various courts and it has been distinguished from the language of section 80HH where the term “profits and Gains derived from Industrial undertaking” has been used. Hon’ble Delhi High Court has held in case of Eltel SGS P. Ltd. 300 ITR 6 (Del) that the “profits and gains derived from any business of the industrial undertaking” is not as broad as the expression “profits and gains attributable

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 41 to industrial undertaking nor is it as narrow as the expression: profits and gains derived from industrial undertaking” it is somewhere in between. Therefore each receipt is analyzed on this principle as under:- Fact that the interest income has been earned out of surplus funds Out of total sources of fund of Rs.550.4 core, appellant had Rs.273.30 crore of surplus funds. The detail of interest income was called for during the appellate proceedings and the appellant has submitted the details as under:- Nature of interest income Amount (in Rs) Interest on fixed deposits with banks on temporary investment out of surplus 66,96,909 funds arising out of normal course of business. Interest earned on margin money of Rs.53,85,000 against guarantee given 4,74,875 to customs under EPCG Scheme TOTAL 71,71,784 Appellant has submitted that the interest income is earned mostly out of the fixed deposits in bank made out of surplus funds. Therefore there is apparently no cost for earning such interest. A surplus fund may be earned out of an eligible business. However, if it is subsequently invested in a bank for the purpose of earning interest, it cannot form part of “profit and gains derived from business of Cellular services”. However the interest earned on Margin Money against guarantee given to Customs sunder EPCG Scheme will fall in the category of “profits and gains derived from business of Cellular services”. Therefore I hold that assessing officer has rightly excluded interest income of Rs.66,96,909 from the “profits and gains derived from business of Cellular services”. As stated above, the investment to earn interest income has been made out of free reserve or surplus funds which have not cost, therefore no expenditure can be allowed to appellant to earn such income. Provisions/Liabilities written back – others and bad debts recovery: The Appellant is in the sole business of the providing cellular mobile phone services. Once a write back is taxed u/s. 41(1), it is deemed to be the business profits of the current year. Therefore the argument of Assessing Officer that this income is related to a liability or debt which was created in an earlier year has no force. The details of such liabilities written off were submitted by appellant during the appellate proceedings. The entire liability was written off against “Siemens AG”. The liability was against the purchases made from “Siemens AG” in respect of various Fast File Transfer, Implementation of SMS, Hardware/software, Switches, up gradation etc. The nature of such deemed income on account of writing off the liability falls under the category of “profits and gains derived from business of Cellular services”. Therefore assessing office is directed to include Rs.26,73,408 of

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 42 provisions/Liabilities written back and Rs.7,77,123 of Bad debt recovery in “profit and gains derived from business of Cellular services”. Amount received as bounce charges: The appellant recovered a fixed amount of bounce charge from the customers and the receipt is in the nature of penal charges. The arrangement of charging on bounced cheques is an arrangement to ensure proper payment from customers for sales or services. This receipt is inextricably related to carrying on the business of cellular services. Therefore assessing officer is directed to include Rs.4,11,440 in “profits and gains derived from business of Cellular services.” Cell Site sharing Revenue: The appellant has developed various sites in the circles allotted to it in the state of West Bengal. The other operators make use of its sites and various supporting assets which are installed at these sites. These other operators pay certain charges for using various supporting assets at these sites, for having access to a network of their own, by setting up their own antennas, BTS at such sites; whereby they can render telecommunication services to the subscriber of their networks. In short, the Cell Site haring income is an income from subletting of the business asset to other operators and is a necessary requirement in this kind of business. Appellant has submitted that in income tax return this income has been considered as “business income”. Therefore assessing officer is directed to include Rs.2,85,000 of Cell Site Sharing income in “profits and gains derived from bus of Cellular services”. Other Receipts: Appellant has not submitted any argument in respect of these receipts even during the appellate proceedings. Therefore I approve the view of assessing officer to exclude other receipts of Rs.7,65,866 from “profits and gains derived from business of Cellular services”. 5. In view of the above discussion the amount which is required to be excluded from eligible profit derived from bu9 of Cellular services u//s 80IA of IT Act is Rs.66,96,909 + Rs.7,65,866 = Rs.74,62,775 and assessing officer is directed to include the remaining amount of Rs.1,20,84,621 – Rs.74,62,775 = Rs.46,21,846 in the eligible profit derived from business of Cellular services u/s. 80IA of IT Act.” Aggrieved by the order of ld. CIT(A), both Revenue & assessee are in appeal before us. 39. The grievance of the Revenue is that ld. CIT(A) erred in allowing deduction u/s 80-IA of the Act in respect of the following receipts : i) Interest on Margin Money Rs. 4,74,875.00 ii) Provision/liabilities written back others Rs. 26,73,408.00

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 43 iii) Bad debt recovery Rs. 7,77,123.00 iv) Bounce cheque charges Rs. 4,11,440.00 v) Cellsite sharing revenue Rs. 2,85,000.00

The grievance raised by the assessee in its appeal ITA No. 357/Kol/2009 in ground no. 3 & 4 is that ld. CIT(A) erred in not allowing deduction under section 80-IA of the Act in respect of interest income and other receipts amounting to Rs. 66,96,909.00 and 7,65,866.00 only.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 44 undertaking. However, the Ld. CIT(A) granted relief in part to the assessee by allowing the deduction u/s 80-IA of the Act. 41.1 We find that similar issues were raised by the Revenue in the case of BSNL Vs. DCIT reported in 156 ITD 847 as detailed under:- 1. "The ld. CIT(A) has erred in law and on facts in holding that receipts amounting to Rs. 76,71,90,000/- on account of liquidated damages are entitled for deduction u/s 80-IA of the I.T. Act ignoring the fact that it is necessary to prove that the receipt generated should be of first degree source of special activity, but not of ancillary and incidental activity of the undertaking. 2. The ld. CIT(A) has erred in law and on facts in holding that receipts amounting to Rs. 16,86,63,72,000/- on account of excess provision written back are entitled for deduction u/s 80-IA of the I.T. Act ignoring the fact that write back of provision pertaining to earlier years which is no longer required is not an income derived from the business operations of the undertaking for the year under consideration. 3. The ld. CIT(A) has erred in law and on facts in holding that other receipts amounting to Rs. 1,42,90,32,000/- on account of sale of directories, publications, forms, waste paper, etc. are entitled for deduction u/s 80-IA of the I.T. Act, ignoring that these receipts are on account of income connected with the business and cannot be termed to be explicitly derived from the principal business of the undertaking. The Hon’ble ITAT was pleased to allow the deduction u/s 80-IA of the Act in respect of the above receipts/ income by observing as under:- “13.8 A plain reading of sub-section (2A), it is seen shows that it starts by giving effect to the legislative intent by inserting the well understood word "Notwithstanding". The meaning and the consequent legislative intent can clearly be understood by the subsequent words used "anything contained in .........". Thus as literally as it can be read the legislative intent of "Notwithstanding" "anything contained in sub-section (1) or sub-section (2)" is plain and clear. The clear meaning of this non-obstante clause, which is reflected upto this stage is that whatever may have been contained in sub- section (1) or sub-section (2) of section 80-IA is to be excluded. This position is fortified by the conscious inclusion of the word "anything contained in" which qualifies "notwithstanding". The meaning and import of the term "notwithstanding" is well-settled and understood and by itself cannot be said to be leading to any ambiguity. The said term by itself would have been sufficient and complete to convey the legislative intent that whatever may have been said in sub-sections (1) and (2) but the legislature has not rested there and has taken care to qualify the word with the all encompassing, all inclusive, well understood word "anything" contained in sub-section (1) or (2). The meaning, use and import of the said word does not lead to any confusion or ambiguity. Thus prima-facie to our understanding when considering the para phrasing used by the legislature in its plain and literal meaning there

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 45 cannot be any doubt about what the intention of the legislature is as it is loud and clear in stating that while considering and deciding the intent of sub- section (2A) the mandate of sub-sections (1) and sub-section (2) are not required to be imported in respect of the referent undertaking or enterprises providing telecommunication services. 13.9 A further reading of the said sub-section makes it clear that the deduction in computing the total income is available only to an undertaking which is providing telecommunication services and that too which have been specified in clause (ii) of sub-section (4). Thus by virtue of this sub-section, a specified class of undertakings have been identified and the fact that the assessee falls under this category is an accepted fact and thus not an issue in the present proceedings. Reverting back to the said sub-section it is seen that the legislature sets out that the deduction is to be allowed at hundred per cent of the profits and gains "of the eligible business" for a period of five years as opposed to the enterprise/undertakings in sub-sections (1) and (2) wherein hundred per cent of deduction is available for ten consecutive yeaRs. The deduction after five years in the case of an assessee in section (2A) is to be for the remaining five years upto 30 per cent of the amount available for deduction. Having over-ridden the requirements of sub-sections (1) and (2) by use of the words "profits and gains of eligible business" in sub-section (2A) and not "profit and gains derived by an undertaking or an enterprise from" as used in unequivocal terms in sub-sections (1) and (2) the legislature makes its intention known loud and clear. The fact that after specifying the period and apportionment of the profits available for deduction as hundred per cent in the first five assessment years and thereafter thirty per cent for the next five assessment years it is seen that the legislature also alive to the nature and extent of deductions wanted to give to specified enterprise or undertaking therefore makes a conscious reference to the ousted sub-section (2) in the opening lines for the purposes of bringing into play the extended timeline of 15 years for exercising the option contained in sub-section (2) by making a specific reference to it. Thus conscious of the fact that sub-sections (1) and (2) had completely been over-ridden for an assessee falling in section (2A), reference to sub-section (2) is made only for the purposes of increasing the timeline from which the assessee could opt for selecting ten consecutive years out of the total 15 years. 13.10 Thus the dispute of bringing sub-section (1) into play for a tax payer falling in sub-section (2A) of section 80-IA to our minds cannot arise. According to the assessee sub-section (2A) does not put the restriction contemplated in sub-section (1) of section 80-IA in the face of the non- obstante clause coupled with the specific omission to use the well understood term "derived from". This argument is notwithstanding the argument that considering the assessee's nature of business the direct nexus presumed by sub-section (1) of section 80-IA is also fulfilled. On a careful reading of the above provisions, we find that the legislature has left no ambiguity in the wording of the sub-section (2A). Having started with the non-obstante clause in sub-section (2A) which over-rides the mandate of sub-sections (1) and (2), the legislature is well aware that the phrase "derived from" has been used only in sub-section (1). The meaning of the said terms is judicially well- accepted and understood and it is not the case of that Revenue that the

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 46 legislature was not conscious of the said term. It is seen that the import of this term continues to exist for an assessee covered under sub-section (2) of section 80-IA. The legislature has consciously retained it for enterprise/undertaking falling in sub-section (2) and the proviso thereto only keeping in mind the nature of the enterprises/undertakings contemplated under sub-section (2) the option of claiming deduction in any ten consecutive years is given to be claimed from the first fifteen years of beginning operation is given. 13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, wherever it wanted to curtail the timeline during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose needs and priorities differ has taken care to expand the time-line for claiming deductions. It has consciously enabled those undertakings/enterprise who fall under sub-section (2A) to claim 100% deduction of profits and gains of eligible business for the first five years and upto 30% for the remaining five years in the ten consecutive assessment years out of the fifteen years starting from the time the enterprise started its operation. The legislature having ousted applicability of sub- sections (1) and (2) in the opening sentence brought in for the purposes of time-line sub-sections (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be "derived from". The requirements of the first degree nexus of the profits from the eligible business has not been brought into play. 13.12 The cardinal Rule of Interpretation is that the statute must be construed according to its plain language. Neither should anything be added nor anything be subtracted therefrom unless there are adequate grounds to justify the inference that the Legislature clearly so intended. It is also well settled that in a taxing statute one has to look merely at what is clearly stated. The meaning and extent of the statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be considered to be just or expedient. To put in the words of Rowlatt J. as held in Cape Brandy Syndicate v. Commissioners of Inland Revenue [(1921) 1 KB 64, 71]. "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." 13.13 Interpretation postulates the search for the true meaning of the words used in the statutes as a medium of expression to communicate a particular thought. The task is not easy as the language used even in ordinary conversation or correspondence is capable of being mis-understood, however in such cases the person using the language can be approached for a clarification. The language used in a statute till it is amended, repealed or modified remains static as the Legislature cannot be approached for clarification. After having enacted a law or an act, the legislature becomes functus officio as far as the particular Act is concerned and it cannot itself thereafter interpret it. Though the Legislature retains the power to amend or

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 47 repeal the law so made and can also declare its meaning but this can be done only by making another law or statute after undertaking the whole process of law making once again. Accordingly statutory interpretation requires the Courts to seek, ascertain the meaning of the words used by the legislature through the medium of authoritative forms in which it is expressed. Interpretation differs from construction, whereas interpretation is finding out the true sense of any form, construction would mean drawing of a conclusion in respect of subjects that lie beyond the direct expression of the text. 13.14. It is well understood that the Court only interprets the law and cannot legislate. Even if a provision of law is presumed to be misused and subjected to the abuse of the process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary as held in Padmasundara Rao (supra) at pages 154 to 155 (SC); Prakash Nath Khanna v. CIT [2004] 266 ITR 1/135 Taxman 327 (SC); Union of Indiav. Rajeev Kumar AIR 2003 SC 2917. Courts cannot reframe the words used by the legislature as they have no powers to legislate. A matter which, for the sake of an argument, should have been provided for in a statute cannot be supplied by the Courts as to do so will be an act of legislation and not of interpretation. Reliance may be placed on Smt. Kanta Devi v. Union of India [2003] 4 SCC 753. 13.15 A legal fiction treating something not done as done, requires legislative authority and without it, it can neither be indulged in by Courts nor it can be created by an administrative order. No doubt, it is the bounden duty and obligation of the Court to interpret the statute but the duty is to interpret the statute as it is and not by adding or supplying words to it. It is contrary to all rules of construction to read words into statute which the legislature in its wisdom has deliberately not incorporated as held in CIT v. Tara Agencies [2007] 292 ITR 444/162 Taxman 337 (SC). 13.16 The true function of the Court is to interpret the law not to make it. It is well-settled that even if the legislature falls short of the mark, the Court can do nothing more than declare it be thus, giving its reasons, so that the Legislature may take notice and promptly remedy the situation. Reliance can be placed on Standard Chartered Bank v. Directorate of Enforcement [2005] 275 ITR 81/145 Taxman 154 (SC). 13.17 The settled principles of interpretation are that the Court must proceed on the assumption that the legislature did not make a mistake and that it did what it intended to do. The Court must, as far as possible, adopt a construction which will carry out the obvious intention of the Legislature. Undoubtedly, if there is a defect or an omission in the words used by the Legislature, the Court would not go to its aid to correct or make up the deficiency. The Court could not add words to statutes or read words into it which are not there, especially when the literal reading produces intelligible results. Reference may be made to Dadi Jagannadham v. Jamulu Ramulu AIR 2001 SC 2699. Any presumption to the contrary in the absence of any ambiguity would be contrary to the settled legal position as the legislature as far as possible is presumed to know what it intends to stay. 13.18 Thus reverting again to considering the words used in sub-section (2) the proviso thereto and sub-section (2A) it is seen that whereas in sub-section

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 48 (2) and the proviso thereto the restrictions on the profits as set out in sub- section (1) is retained and intended businesses are given to option of any ten years from fifteen years the proviso introduced to sub-section (2) of section 80-IA, it is seen that for an assessee who is developing or operating and maintaining infrastructure referred to in clause (a) or clause (b) or clause (c) of Explanation to clause (i) of sub-section (4) is given a further leeway of exercising its option in any of the ten consecutive years from the first twenty years instead of fifteen years as contemplated under sub-section (2) of section 80-IA from the beginning developing or operation and maintaining the infrastructure facility. Thus the legislature in its wisdom giving due consideration to still longer gestation periods which may be required by such high investment infrastructure related enterprises which may need more time for generating profits. However, the requirements of "derived from" as set out in sub-section (1) has not been done away with. When juxta-posed with this the language used in sub-section (2A) is considered the legislature has been very clear in its mandate and has consciously used not only the well-accepted and judicially well-settled phrase of "Notwithstanding" but has also underlined the import and extent of the over-ride provided by adding the word "anything contained in sub-section (1) or sub-section (2)" in its opening lines. Thereby removing all doubts. There was nothing stopping the legislature to use the term "notwithstanding sub-section (1) or sub-section (2)" and proceeded to lay down the period and apportion the per centages to the extent of which deduction was to be allowed. The use of the term "anything contained in" pre- fixed by notwithstanding by the legislature makes the meaning and intention of the legislature crystal clear. The arguments to the contrary advanced by the Revenue relying on case laws based on different sets of provisions is of no help as the clear meaning of the words used by the legislature leads to only one conclusion namely that sub-sections (1) and (2) of section 80-IA for the purposes of an undertaking providing telecommunication services which are covered under clause (ii) of sub-section (4) have to be ignored and have no play. There is no doubt that the assessee falls under clause (ii) of sub-section (4) and is such an enterprise providing telecommunication services. After having over-ridden the requirements of sub-sections (1) and (2) completely the legislature in its wisdom has directed that hundred per cent "of the profits and gains of the eligible business" and not "the profits and gains derived from" can be claimed as a deduction in the first five assessment years by such an enterprise commencing at any time during the periods as specified in sub- section (2) and thereafter thirty per cent of "such profits" for further five assessment year. Thus giving due recognition for the peculiarities of the telecommunication services where heavy investment costs in the initial years are a necessity they have been allowed to be recovered by way of profits to the extent of hundred per cent from that activity in the first five years and thereafter the allowable deduction is substantially reduced to thirty per cent in the next five years presuming that by then the heavy infrastructural costs would have been recovered and/or the objectives of the governmental policy would have been attained. Keeping in mind the services and functions performed by such an assessee towards the aims of the government policy wherein gestation period necessarily looking at the nature of the undertaking is very long. Thus, for the purposes of the timeframe the legislature has given the timeline of fifteen years from which ten consecutive years could be opted.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 49 The fact remains that the legislature aware of the differences in the use of terms used consciously ensures that "profits and gains derived from" used in sub-section (1) is not used in sub-section (2A). Instead in sub-section (2A) the term used is "profits and gains of eligible business" juxta posed with the glaring fact that the sub-section (2A) starts with a non-obstante clause namely "Notwithstanding" qualified further by the use of the words "anything contained in". In the face of the clear and unambiguous statutory provisions we find ourselves unable to agree with the arguments advanced by the Ld. CIT DR however valiantly as what the law is has very clearly been enunciated and set out in the relevant provision giving cause to no debate whatsoever. 13.19 We find that in the course of the arguments both the sides have advanced their case duly supported by case laws, relying on principles of interpretation as settled by the Magnum Opus of Justice G.P. Singh's "Principles of Statutory Interpretation" and Kanga Palkivala & Vyas "The Law and Practice of Income Tax" and various decisions of the Courts wherein applying those yardsticks the decisions have been rendered. Reference to the specific principles invoked and the proposition of law and the ratio laid in the decisions relied upon are not being separately addressed as in the facts of the present case, we find that the meaning of the statute does not lay itself open to any other meaning. Thus though reference is not being made to the decisions, we have given our careful consideration to the ratios of the decisions relied upon by the parties and the principles laid down in the two texts cited before us. We are indebted to the erudite and well-prepared effective representation made by both the sides. By way of greater caution, we have required the parties to address their respective stands by written submission and synopsis being conscious of the fact that the preliminary argument if allowed would address the issues raised in both the appeals and more so since these arguments admittedly on the legal issue were not so argued before the tax authorities. We record our appreciation for the confident and effective representation of Ld. CIT DR, Ms. A. Mishra. We also put on record our appreciation for the well-seasoned and tempered arguments advanced by Sr. Advocate, Mr. P. Pardiwala supported by the synopsis and updated synopsis prepared and filed by his team of lawyers. However having minutely gone through the case laws and the proposition relied upon which we have brought out in the earlier part of this order, we find that in the face of the clear mandate of law addressing the case laws which are on entirely different facts and considering different set of provisions reference thereto would be out of context as it would be of no help to decide the issue which we find is clear from the very language used by the Legislature in the statutory provisions under consideration. The meaning which the Revenue would want us to read into the said provision would be in violation of the basic fundamental principles of interpretation of statutes namely that the Courts cannot write the laws as legislation is the domain of the Legislature, the Courts can only interpret the law; any Interpretation which negates the very purpose of introducing the sub-section cannot be given as the Courts while interpreting cannot supply the words which the Legislature in its wisdom has chosen to exclude etc. on which we have deliberated upon in passing in the earlier paras.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 50 14. In view of the detailed discussion hereinabove, we find that the assessee succeeds in its preliminary argument raised in Ground No. 4. Thus the issues raised in the departmental appeal and the additions sustained in the assessee's appeal become academic. Accordingly the departmental appeal is dismissed, Grounds No. 1 to 3 raised in assessee's appeal also in view of our detailed finding in Ground No. 4 become academic as the assessee succeeds in its preliminary arguments canvassed under Ground No. 4. 15. In the result, assessee's appeal is allowed to the extent as mentioned above on the preliminary issue and the departmental appeal is dismissed.”

41.1 We also note that the order of Hon’ble Tribunal in the case of BSNL Vs. DCIT reported in 156 ITD 847 was subsequently affirmed by the Hon’ble Delhi High Court reported in 388 ITR 371. The relevant extract of the order is reproduced below:- “10. The assessee filed appeals and the revenue filed cross-appeals before the ITAT. The ITAT in the impugned orders concluded that with sub-section (2A) beginning with a non-obstante clause, the legislative intention of making available to an undertaking, providing telecommunication services, the benefit of deduction of 100% of the profits and gains "of the eligible business" was explicit. Indeed, the legislature appears to have made a conscious departure in adopting for sub-section (2A) a wording different from that appearing in sub-section (1). Under section 80-IA(1), what is available for deduction are profits and gains "derived by an undertaking or an enterprise from any business referred to in sub-section (4)" whereas in section 80-IA(2A) what is available for deduction is "hundred percent of the profits and gains of the eligible business". The following conclusion reached by the ITAT in para 13.11 of the impugned order correctly encapsulates the legal position as far as the interpretation of section 80-IA(2A) is concerned. "13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, it wanted to curtail the time line during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/enterprise who fall under sub-section (2A) to claim 100% deduction of profits and gains of eligible business for the first five years and upto 30% for the remaining five years in the ten consecutive assessment years out of the fifteen years starting from the time the enterprise started its operation. The legislature having ousted applicability of sub-section (1) and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 51 "derived from". The requirements of the first degree nexus of the profits from the eligible business has not been brought into play." 11. As a result, the orders of both the AO and the CIT(A) to the extent they deny the assessee, which in this case is in the business of providing telecommunication services, deduction in respect of the above items in terms of section 80-IA(2A) are unsustainable in law and have rightly been reversed by the ITAT. 12. Learned counsel for the revenue sought to urge that while the assessee in this case is engaged only in the business of telecommunication services, there could be an enterprise which has more than one undertaking and one such undertaking could be in the telecommunication services. According to him, in such an event, a question might arise whether such an enterprise would be able to seek deduction both under section 80-IA(2A) as far as the telecommunication business is concerned, and under section 80-IA(1) as far as any other eligible business is concerned. 13. In the first place as far as the present appeals are concerned, the above issue as posed by learned counsel for the revenue is purely hypothetical. In any event, section 80-IA(2A) treats an undertaking providing telecommunication services as a separate species warranting a separate treatment as is evident from the non-obstante clause with which it begins. The Court sees no reason why such an undertaking would not be able to take the benefit of deduction in terms of section 80-IA(2A) notwithstanding that the enterprise of which it forms part may have other eligible businesses for which the deduction would have to be calculated in terms of section 80-IA(1) of the Act. 14. The Court finds no reason to differ from the view expressed by the ITAT in the impugned orders as far as the interpretation of section 80-IA(2A) of the Act is concerned. 15. No substantial question of law arises for consideration. The appeals are dismissed.” The facts of the present case are identical to the case BSNL (supra) which was decided in favour of assessee. In the case on hand the AO made the disallowance of the deduction claimed by the assessee under section 80-IA of the Act in respect of certain receipts/ income i.e. Interest on Money deposited, Provision/liabilities written back, Bad debt recovery, Bounce cheque charges, Cell site sharing revenue and other income. Thus respectfully following the judgment of Hon’ble Delhi High Court in the case of BSNL (Supra) we direct the AO to allow the deduction under section 80-IA of the Act in respect of its receipts as discussed above. Thus the ground of

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 52 appeals raised by the Revenue is dismissed and the grounds of appeals raised by the assessee is allowed. Now coming to ITA No. 357/Kol/2009 appeal by the assessee 42. The First issue raised by the assessee in this appeal is that ld. CIT(A) erred in not allowing setoff of the unabsorbed depreciation of Rs. 37,35,12,000.00 while computing the book profit under section 115JB of the Act being lower of the brought forward loss. 43. We have already dealt this issue elaborately while adjudicating the ground of appeal of assessee in ITA No.356/Kol/2009 and allowed the issue in favour of assessee. 43.1 Besides the above we also observed that the impugned issue has already been decided in favour of assessee by this Hon’ble Tribunal in the case of Binani Industries Limited (supra) reported in 178 TTJ 658 which reads as under:- “We have heard the rival submissions and perused the materials available on record. We are in agreement with the arguments of the Learned AR that the losses (both cash loss and depreciation loss) would continue to remain in the books of accounts till it is wiped off by earning profits by the assessee company and accordingly the same would be available for reduction from book profits u/s 115JB of the Act. We hold that the least of the cash loss or depreciation loss once adjusted / reduced from book profits in earlier assessment years, do not vanish out of the books until it is wiped out by profits in subsequent years. Till such time, the losses would only continue to remain in the books. We hold that for the purpose of computation of book profits u/s 115JB of the Act, every year the situation of least of cash loss and depreciation loss needs to be worked out and reviewed and accordingly the understanding of the Learned AO that such loss once adjusted in earlier year is no longer available for set off is misconceived. Hence we do not find any infirmity in the order of the Learned CIT(A) in this regard. The Ground No.2 raised by the revenue is dismissed.” In view of above, we have no hesitation to hold that the assessee can claim the deduction either of brought forward losses or unabsorbed depreciation whichever is less as per the books of accounts. Consequently, the ground of appeal filed by the assessee is allowed.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 53 44. The second issue of the assessee is that ld. CIT(A) erred in giving finding that the assessee has to necessarily claim the deduction u/s 80-IA of the Act for 10 consecutive years. The assessee also assailed the order of ld. CIT(A) by submitting that the impugned issue for 10 consecutive years deduction is not arising from the order of AO.

The 3rd issue raised by the assessee is that ld. CIT(A) erred in not 46. allowing deduction u/s 80-IA of the Act in respect of other receipts amounting to Rs. 7,65,866.00 only.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 54 51. We have already dealt this issue elaborately while adjudicating the ground of appeal of assessee in ITA No.356/Kol/2009 and since we have allowed this ground of appeal of assessee following the same analogy we also allow this ground of appeal of assessee. 52. In the result, assessee’s appeal is allowed. Coming to ITA 482/Kol/2010 appeal by the Revenue and ITA 485/Kol/2010 appeal by Assessee for the AY 2006-07 53. The grounds of appeal raised by the Revenue, are reproduced as under:- “That the Ld. CIT(Appeals) has erred in holding that the assessee was eligible to get deduction u/s. 80IA on the following receipts:- 1. Cellsite sharing revenue Rs.3,77,60,000/- 2. Bounce cheque charges Rs.8,70,000/- 3. Interest from CESE Rs.50,62,780/- 4. Interest from BSNL Rs.47,59,955/- Even though they had no intricate or proximate nexus to the eligible business. The grounds of appeal raised by assessee are reproduced as under:- “The Appellant respectfully submits that: 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-VIII, Kolkata [hereinafter referred to as the ‘learned CIT(A)’] erred in following the order issued by his predecessor for Assessment Year (‘AY') 2005-06 and giving a finding that the Appellant is necessarily required to claim deduction for full ten consecutive years in block of 15 years, thereby holding that the Appellant necessarily needs to start claiming tax holiday from Assessment Year 2001-02, in complete disregard to the non-obstante provisions of section 80IA(2A) of the Act, which specifically provide for deduction for ten consecutive years commencing at any time during such fifteen years. 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in exceeding his jurisdiction by giving a finding (referred to in Ground No. 2 above) on an issue which was not a subject matter of appeal before the learned CIT(A). 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in excluding the following income / receipts from the profits of the eligible business, while computing deduction under section 80IA of the Act: (i) interest income amounting to Rs.2,327,265 (ii) other receipts amounting to Rs.710,000; and (iii) provision/liabilities no longer required written back amounting to Rs.22,140,000 (comprising of Rs.8,470,000 booked under the head

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 55 ‘other income’ and Rs.13,670,000 booked under the head ‘miscellaneous receipts’) 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not allowing set-off of Rs.72,148,000 under clause (iii) of Explanation 1 to sub-section (2) of section 115JB of the Act, being the lower of figures of brought forward loss and unabsorbed depreciation. All the above grounds are without prejudice to each other. The appellant craves leave to add, amend, vary, omit or substitute Assessment Year of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.” First we take up Revenue appeal ITA 482/kol/2010 54. The inter-related issue raised by the Revenue in this appeal is that ld. CIT(A) erred in allowing the deduction u/s 80-IA of the Act in respect of certain receipts not eligible for deduction. 55. We have already dealt this issue elaborately while adjudicating the ground of appeal of Revenue in ITA No.377/Kol/2009 and since we have dismissed this ground of appeal of Revenue following the same analogy we also dismissed the inter-related issue of appeal of Revenue. Accordingly, AO is directed. 56. In the result, Revenue’s appeal is dismissed. Now coming assessee’s appeal ITA 485/Kol/2010. 57. The assessee vide letter dated 06.07.2015 has revised the ground no. 1 which reads as under:- “The Appellant respectfully submits that: 1.On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in following the order issued by his predecessor for Assessment Year (‘AY') 2005-06 and giving a finding that the Appellant is necessarily required to claim deduction for full ten consecutive years under section 80-IA of the Act, during the block of fifteen years thereby directing that for AYs 22006-07 to 2010-11 deduction under section 80-IA would be available to the Appellant @30% of the eligible profits. In doing so, he has also disregarded the non-obstante provisions of section 80-IA(2A) of the Act, which specifically provide for deduction for ten consecutive years commencing at any time during such fifteen years. 1.1 The learned CIT(A) ought to have held that the deduction under section 80IA in respect of profits and gains of the business of providing cellular

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 56 services should be available @100% for AYs 2004-05 to 2008-09 and @ 30% thereafter for next five years. 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in exceeding his jurisdiction by giving a finding (referred to in Ground No. 1 above) on an issue which was not a subject matter of appeal before the learned CIT(A) and had no relevance for the assessment year under consideration.” Other grounds of appeal filed by the assessee are as under:- “2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in excluding the following income/receipts from the profits of the eligible business, while computing deduction under section 80IA of the Act: (i) interest income amounting to Rs.2,327,265; (ii) other receipts amounting to Rs.710,000; and (iii) provision/liabilities no longer required written back amounting to Rs.22,140,000 (comprising of Rs.8,470,000 booked under the head ‘other income’ and Rs.13,670,000 booked under the head ‘miscellaneous receipts’) 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not allowing set-off of Rs 72,148,000 under clause (iii) of Explanation 1 to sub-section (2) of section 115JB of the Act, being the lower of figures of brought forward loss and unabsorbed depreciation. All the above grounds are without prejudice to each other. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.” 58. The first issue raised by the assessee in its revised ground of appeal is that ld. CIT(A) erred in giving finding that the assessee has to necessarily claim the deduction u/s 80-IA of the Act for 10 consecutive years. The assessee also assailed the order of ld. CIT(A) by submitting that the impugned issue for 10 consecutive years deduction is not arising from the order of AO.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 57 The 2nd issue raised by the assessee is that ld. CIT(A) erred in not 60. allowing deduction under section 80-IA of the Act in respect of certain income.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 58 matter of appeal before the learned CIT(A) and had no relevance for the assessment year under consideration.” 66. The first issue raised by the assessee in its revised ground of appeal is that ld. CIT(A) erred in giving finding that the assessee has to necessarily claim the deduction u/s 80-IA of the Act for 10 consecutive years. The assessee also assailed the order of ld. CIT(A) by submitting that the impugned issue for 10 consecutive years deduction is not arising from the order of AO. 67. We have already dealt this issue elaborately while adjudicating the ground of appeal No. 2 of Revenue in ITA No.377/Kol/2009 and since we have dismissed this ground of appeal of Revenue following the same analogy we also allow this ground of appeal of assessee. AO is directed accordingly. 68. In the result, assessee’s appeal is Coming to assessee’s appeal in ITA 431/Kol/2012 for the AY 2008-09 The assessee vide letter dated 8th July 2015 has filed the additional 69. ground no. 2.2 in its appeal which reads as under:- • Ground No.2.2 – On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the allegation of the learned Deputy Commissioner of the Income-tax, Circle 7, Kolkata (‘learned Assessing Officer') that interest income amounting to INR 66 laksh is assessable to tax as ‘income from other sources’ and not as ‘profits and gains from business and profession’. Other grounds of appeal are as under:- “1. Ground No. – The Appellant is eligible for deduction @ 100% of eligible business profits under section 80IA of the IC Tax Act, 1961(‘ Act’) On the facts and I the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals)-VIII, Kolkata [hereinafter referred to as the ‘learned CIT(A)’] erred in upholding the order of the Assistant Commissioner of Income Tax, Circle 7, Kolkata (‘learned AO') that the Appellant is necessarily required to claimed for full ten consecutive years under section 80-IA of the Act during the block of fifteen years thereby directing that for AYs 2006-07to 2010-11 deduction under section 80-IA would be available to the Appellant @ 30% of the eligible profits. In doing so, he has also disregarded the non-obstante provisions of section 80-IA(2A) of the Act, which specifically provide for deduction for ten consecutive year commencing at any time during such fifteen years. 1.1 The learned CIT(A) ought to have held that the deduction under section 80IA in respect of profits and gains of the business of providing cellular services should be available @ 100% from AYs 2004-05 to 2008-09 and @ 30% thereafter for next five years.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 59 1.2 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in observing that the Appellant stared providing telecom services in the Assessment Year 1996-97, whereas the Appellant started rendering cellular services in Assessment Year 1997-98, and accordingly Assessment Year 1997-98 needs to be considered as the initial assessment year of the Appellant for the purpose of deduction under section 80IA of the Act. 2. Ground No. 2 – The appellant is liable to deduction under section 80IA on interest income. 2.1 On the facts and in the circumstances of the case and in law, the leaned CIT(A) has erred in upholding that interest income of INR 66 lakhs is required to be reduced from the profits of the eligible business while computing the deduction under section 80IA of the Act. 3. Ground No. 3 – The Appellant is not liable to deduct tax on roaming charges. 3.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition on account of domestic roaming charges of INR 443, 105, 283 paid to other telecom operators during the financial year relevant to the subject assessment year, under section 40(a)(ia) of the Act. 3.2 On the facts and in the circumstances of the case and in law, the learned CIT(A) has misplaced reliance on the Supreme Court’s judgment in the case of Bharti Cellular Ltd (2011) (330 ITR 239) since the same was pronounced in the context of interconnect charges and not roaming charges. 4. Ground No. 4- Interest under section234B and 234D Without prejudice and in addition, on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the levy of interest under section234B and 234D of the Act. 5. Ground No. 5- Levy of penalty under section 271(1)(c)On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not adjudicating on the ground raised by the Appellant against the intimation of penalty proceedings under section 271(1)(c) of the Act. The CIT(A) ought to have held that the proceedings under section 271(1)(c) of the Act are not justified in the instant case. All the above grounds are without prejudice to each other. The Appellant craves leave to add, amend, vary omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case.” 70. The first issue raised by the assessee in its ground of appeal is that ld. CIT(A) erred in giving finding that the assessee has to necessarily claim the deduction u/s 80-IA of the Act for 10 consecutive years. The assessee also assailed the order of ld. CIT(A) by submitting that the impugned issue for 10 consecutive years deduction is not arising from the order of AO.

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 60 71. We have already dealt this issue elaborately while adjudicating the ground of appeal No. 2 of Revenue in ITA No.377/Kol/2009 and since we have dismiss this ground of appeal of Revenue following the same analogy we also allow this ground of appeal of assessee. AO is directed accordingly. 72. The second issue raised by the assessee is that ld. CIT(A) erred in not allowing deduction u/s 80-IA of the Act in respect of interest income amounting to Rs. 66 lacs only. 73. We have already dealt this issue elaborately while adjudicating the ground of appeal No. 3 of Revenue in ITA No.377/Kol/2009 and since we have dismissed this ground of appeal of Revenue following the same analogy we also allow this ground of appeal of assessee. AO is directed accordingly. 74. The last issue raised by the assessee is that ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance for Rs.44,31,05,283.00 on account of non-deduction of TDS on domestic roaming charges under section 40(a)(ia) of the Act. 75. At the outset, it was observed that the impugned issue has already been decided in favour of assessee in its own case by this Hon’ble jurisdictional Tribunal in ITA No. 1864/Kol/2012 wherein it was held as under:- “We hold that 194C is applicable only where any sum is paid for carrying out any work including supply of labour for carrying out any work. Thus, 'carrying out any work' is the substance for making the payment relating to such work, liable for deduction of tax at source u/s 194Cof the Act For carrying out any work, manpower is sine qua non and without manpower, it cannot be said that work has been carried out. Under section 194C each and every work/service is not covered, hence the nature of work done or service performed is required to be seen. Moreover, the term 'work' is defined in section 194C of the Act. The word 'work' in section 194C referred to and comprehends only the activities of workman. It is the physical force which has comprehended in the word 'work'. We have already held that the payment of roaming charges does not require any human intervention. Hence in the absence of human intervention, the services rendered in the context of the impugned issue does not fall under the definition of 'work' as defined in section 194C and hence the provisions of section 194C are not applicable to the impugned issue. 4.19. Let us now get into the applicability of provisions of section 1941 of the Act to the facts of the impugned issue. The term 'rent' is defined in section 194 as below:- "For the purposes of this section, "rent" means any payment, by whatever name called, under any lease, sublease, tenancy or any

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 61 other agreement or arrangement for the use of (either separately or together) any,- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings whether or not any or all of the above are owned by the payee." The real test to be considered is whether it is possible to say that it is the assessee who has used the equipment and has paid the roaming charges to the other service provider with whom it has entered into a national roaming agreement. We hold that it is not possible to say so because if at all anyone can be said to have used the equipment it can only be the subscriber of the assessee but not the asses see. If anything the assessee is placed in a position of a mere faciiitator between its subscriber and the other service provider, facilitating a roaming call to be made by the subscriber. The assessee cannot be said to have used the equipment which is involved in providing the roaming facility. The assessee collects the roaming charges from its subscriber and passes it on to the other service provider. It is relevant at this juncture to get into the judgement of the apex court in the case of BSNL and Another vs Union of India and Others (2006) 282 ITR 273 (Se). One of the questions which arose for consideration was whether there was any transfer of a right to use any goods by providing access or telephone connection by the telephone service provider to a subscriber. Referring to section 4 of the Telegraph Act, 1885, which respect of exclusive privilege gives in telecommunication and the power to grant licences to the Central Government, it was contended by the service providers that they provided only a service by the utilization of telegraph licensed to them for the benefit of the subscribers. The Supreme Court proceeded on the assumption that incorporeal rights may be goods for the purpose of levying sales tax and posed to itself the question whether the electromagnetic waves through which the signals are transmitted can fulfill the criteria for being described as "goods". The court held that the electromagnetic waves cannot be called goods. They were held to be merely the medium of communication; the waves are neither abstracted nor consumed, they are not delivered, stored or possessed, nor are they marketable. What was transmitted is not an electromagnetic wave but the signal through such means. The Supreme Court thereafter gave a more basic reason to hold that the electromagnetic waves cannot be considered as goods and it is this reason which is relevant for our purpose. It was held that a subscriber to a telephone service could not reasonably be taken to have intended to purchase or obtain any right to use electromagnetic waves or radio frequencies when a telephone connection is given. Nor does the subscriber intend to use any portion of the wiring, the cable, the satellite, the telephone exchange, etc. As far as the subscriber is concerned, no right to the use of any other goods, incorporeal or corporeal, is given to him or her with

ITA No.356, 343, 357, 377/Kol/2009, 485, 482/Kol/2010, 673/K/11 & 431/K/12 Hutchison Telcom East Ltd. Vs. ACIT/DCIT/Cir/Rng-07Kol. AYs 04-05 to 08-09 Page 62 the telephone connection. In view of the above, we hold that the payment of roaming charges by the assessee to other service provider cannot be considered as rent within the meaning of section 194I of the Act. 4.20. Accordingly, we hold that the payment of roaming charges of Rs.55,41,01,320/- does not fall under the ambit of TDS provisions either u/s.194C/194I or 194J of the Act and hence we have no hesitation in directing the Learned Assessing Officer to delete the addition made u/s. 40(a)(ia) on this account.” Respectfully following the above order, we reverse the order of lower authorities. Thus the ground of appeal of the assessee was allowed. 77. To summarise:- ITA No. A.Y. Appeal by Result 343/K/2009 04-05 Revenue dismissed 356/K/2009 04-05 assessee part allowed for statistical purpose 377/K/2009 05-06 Revenue dismissed 357/K/20009 05-09 assessee allowed 482/K/2010 06-07 Revenue dismissed 485/K/2010 06-07 assessee allowed 673/K/011 07-08 assessee allowed 431/K/2012 08-09 assessee allowed Order pronounced in the open court 15/12/2017 Sd/- Sd/- (Aby. T. Varkey) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp &दनांकः- 15/12/2017 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-M/s Vodafohe Essar East Ltd., 11. Dr. U.N. Brahmchari Road, Kolkata-17 2. राज�व/Revenue-ACIT/JCIT Cir/Range-7,Aaykar Bhawan, P-7, Chowringhee Square, 5th Floor, Kolkata-69 3. संबं1धत आयकर आयु2त / Concerned CIT Kolkata 4. आयकर आयु2त- अपील / CIT (A) Kolkata 5. 5वभागीय �8त8न1ध, आयकर अपील�य अ1धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड; फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ1धकरण, कोलकाता ।