ACIT, NEW DELHI vs. M/S BHARTI TELEMEDIA LTD., NEW DELHI

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ITA 5056/DEL/2016Status: DisposedITAT Delhi31 July 2019AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, agreeing that license fees paid on a revenue-sharing basis are a normal business expense and should be treated as revenue expenditure. The decision relied on the jurisdictional High Court's ruling in similar cases.

What were the facts?

The assessee, a DTH service provider, claimed amortization of license fees and spectrum charges as revenue expenditure. The AO disallowed a portion of this claim, treating it as capital expenditure. The CIT(A) deleted the addition, following a High Court ruling.

What were the issues?

Whether license fees and spectrum charges paid on a revenue-sharing basis are revenue expenditure or capital expenditure. The applicability of the High Court's decision in Bharti Hexacom Ltd. to the present case.

Which sections of the Income-tax Act were involved?

Section 35ABB

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI

Before: SMT BEENA A PILLAI & SHRI PRASHANT MAHARISHI

For Appellant: Shri Gaurav Wadhwa, CA, Shri Vinay Meena, CA
For Respondent: Shri S. N. Pandey, Sr. DR, Shri Gaurav Wadhwa, CA, Shri Vinay Meena, CA
Hearing: 15/05/2019Pronounced: 31/07/2019

PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the Asst Commissioner of income tax, circle – 4 (2), New Delhi (the learned AO) against the order of the Commissioner of income tax (appeals) – 2, New Delhi dated 24/06/2016 raising solitary grounds of the appeal that the learned CIT – A has erred in deleting the addition of INR 9 35712000/– on account of amortisation of license fee and spectrum charges u/s 35 ABB of the income tax act. 2. The brief facts of the case shows that assessee is a company engaged in the business of setting up, operating and maintaining direct to home (DTH) business services including digital and any other mode of interactive broadcasting services. The assessee filed its return of income at a loss of INR 3 207483769/– on 27/9/2012. The assessment u/s 143 (3) of the act was passed by the learned AO on 21/2/2015 wherein the addition of INR 9 35712000/– was made on account of variable license fees. The assessee preferred the appeal before the learned CIT – A who passed an order on 24/6/2016 deleting the above addition following the decision of the honourable Delhi High Court in ITA number 1328/2010, 1336/2010, 114/2012 and 996/2011 dated 19/12/2013 for assessment year 2003 – 04, 2004 – 05, 2006 – 07 and 2007 – 08 in case of Bharti Hexacom Ltd as well as in case of Bharti cellular Ltd stating that the license fee on revenue sharing basis after 31/07/1999 should be treated as revenue expenditure. Therefore, the revenue aggrieved with the order of the learned CIT – A has filed this appeal.

3.

The learned departmental representative supported the order of the learned assessing officer.

4.

The learned authorised representative submitted that the issue squarely covered in favour of the assessee by the decision of the honourable jurisdictional High Court.

5.

We have carefully considered the rival contention and perused the orders of the lower authorities. The facts of the case shows that the assessee company submitted its balance sheet and profit and loss account and computation of income tax to the learned assessing officer wherein it was found that the company has debited an amount of INR 1 299776306/– is payment towards license fee and spectrum charges. The above amount was claimed as amortization over the period of the license under section 35ABB of the act, while disallowing the same as revenue expenditure. Therefore, the learned assessing officer questioned the assessee company as to why addition of the above sum should not be made. The assessee explained that INR 1 299776306/– debited to the profit and loss account as a license fee paid to the Ministry of information and broadcasting as a percentage of revenue for each fiscal year. It was further stated that issue is squarely covered in favour of the assessee by the decision of the honourable Delhi High Court. However, the learned assessing officer made the identical addition holding that the decision was not accepted by the revenue in special leave petition was filed before the honourable Supreme Court, which is pending adjudication. Therefore he computed the disallowance considering the payment of INR 1 299776306/– and allowing amortization of only INR 216629384/– out of the variable fees paid. Accordingly he disallowed INR 9 35712000/–. The learned CIT – A has deleted the above

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