DCIT CIRCLE - 25(1), NEW DELHI vs. TATA TELESERVICES LTD.,, NEW DELHI

4. At the outset, the Ld. AR of the assessee submits that both the issues raised by the assessee in its appeal are covered in favour of the assessee by the decision of Co-ordinate Bench of Tribunal in its own case for Assessment Years 2009-10 and 2010-11. He, further submits that the disallowance made being identical in nature and made by AO by following the observations made in preceding years, therefore, the same deserves to be deleted in terms of the orders of the Co-ordinate Bench.

“6. We find that the case of assessee is that the pre-operative expenditure incurred in the subject matter pertains to expansion of the existing business of the Assessee, with intermingling of funds and common management and not in relation to set-up of new business. Ld. AR has contended that it is a well-established principal that the nomenclature of the expense does not determine the allowability of a claim. Now there is no dispute with regard to the fact that the expense pertains to subject year itself and same is revenue in nature and therefore, allowable to the Assessee. There is nothing on record by way of any enquiry or findings any new asset was created after incurring the said pre-operating expenditure. The details of the pre-operative expenses are provided in schedule "S" of the financial statements (page 21 of the paper book). The details of the expenses itself clearly shows that these expenses are revenue in nature and not incurred to create a capital asset. These expenses are revenue expenditure incurred by the Assessee to expand its existing business in three new circles viz. Northeast, Jammu & Kashmir and Assam & to introduce the new GSM technology in existing circles in order to provide the telecommunication services. Further, the new circles were launched in the subject year itself and the subject fact has been disclosed at para 1 of schedule "T" of the financial statements (page 22 of the paper book). Mere /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT nomenclature of the expense in the books cannot be the sole determinative factor of allowability of expense. It is trite law that mere nomenclature of entry in the books of accounts is not determinative of the true nature of transaction. Reliance can be placed on decision in Commissioner of Income Tax Vs. India Discount Co. Ltd. 75 ITR 191 (SC), Commissioner of Income Tax Vs. Provincial Farmers (P) Ltd. 108 ITR 219 (Cal) and KCP Ltd. Vs. CIT, 245 ITR 421, which have been considered by Hon'ble Delhi High court in the case of Commissioner of Income-tax v Arvind Kumar Jain {[2012] 18 taxmann.com 132 (Delhi HC)}. In the present case after going through the relevant evidence of so called pre-operating expenses at page 21 of PB it has been established that the payment made were on account of expansion of existing business to new geographical area before is commercial exploitation.”

9. Before us, Ld. AR of the assessee submits that for making disallowance AO has placed reliance on the assessment order passed for earlier Assessment Years however, the additions/ disallowance made in earlier years stood deleted by the Co-ordinate Bench in /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT assessee’s own case for Assessment Year 2009-10 and 2010-11 in and 28/Del/2017 respectively. He thus, submitted that when there is no change in circumstances and the nature of expenses claimed and the allegation made by AO, the ratio laid down by the coordinate bench of Tribunal while deleting the disallowance in earlier years is squarely applicable to the facts of the present year and therefore, the disallowance so upheld by ld. CIT(A) be deleted.

10. On the other hand, Ld. CIT-DR vehemently supported the orders of the AO wherein as per Ld. CIT-DR, the disallowance was made by AO by considering the true nature of the expenditure and, thus, she prayed for the confirmation of the order of the AO in this regard.

11. After carefully considering the arguments advanced by both the parties and on perusal of the materials available on record, it is seen that the Co-ordinate Bench in AY 2009-10 and 2010-11 held the customer acquisition expenses as Revenue expenditure. It is further seen that in the preceding assessment year, Ld. CIT(A) allowed 50% of the expenditure as revenue expenses, therefore, Co-ordinate Bench was of the opinion that once the part of the expenses is held as Revenue in nature, balance 50% should be allowed as revenue expenses. However, in the year under appeal, from the perusal of the order of Ld. CIT(A), we find that Ld. CIT(A) confirmed the disallowance by considering the nature of every individual expenses claimed under /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT the head of customer acquisition expenses and after appreciating the nature has upheld the part disallowance. The relevant observations of the Ld. CIT(A) as contained at pages 8 to 10 of his order are as under: “Details of Customer Acquisition Cost” GL Description Amount Nature of Expenses SUBSIDY 9811,10,203 Subsidy is given to distributors for selling handsets at a price lower than the cost price to make the handsets affordable for the customers for acquiring our services. FIRST 5543,66,986 When a customer acquires a new RECHARGE connection under prepaid mode, he COUPON is allowed a full discount on first DISCOUNT recharge coupon valued at Rs. 5 to CDMA 10 as talk time to enable him to activate his sim card through a pre- defined set of transactions which the customer had to undergo on the company portal. HANDSET 10,29,778 Company have outsourced the HANDLING handling of its warehouses at CHARGES locations across India to an agency named Drive India Enterprise Solutions Limited (Diesi). The handset handling charges fee are paid to them for handling the inward and the outward movement from these warehouses. FRC DIS- 10765,73,495 When customer goes CDMA-IN retailer/distributor for to first recharge, retailer/distributors gets some discount from the company on first recharge of customer as customer is then eligible to use the services. For Eg. On Rs.100 /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT recharge done by retailer/distributor, he pays Rs.90 to company and thus Rs.10 is the discount amount born by the company. MNP-PORT 105,09,755 When a customer intends to CHARGES port/transfer its number from one telecom network to another network, the regulatory body i.e TRAI have appointed government agencies to whom these charges are paid by Telecom operators for availing such services. These charges are paid at the rate of Rs. 19 per transaction of porting the number as per directions of TRAI. During the course of appellate proceedings, the appellant was asked to furnish the details of nature of expenses incurred towards customer acquisition cost. From the details submitted in respect of the nature of the expenditure it is seen that it includes MNP port charges paid in accordance with the TRAI directions amounting to Rs.1,05,09,755/- for number portability in respect of Its customers. It is further noted that the appellant has allowed full discount on first recharge coupon valued at Rs.5 to 10 as talk t me to enable the customer to activate their sim for which it has claimed Expenditure of Rs.55,43,66,986/- as first recharge coupon discount CDMA. In my opinion, these two expenses are of revenue in nature and meant for the purpose of business of the appellant and therefore the same needs to be allowed. It is however seen that the appellant has claimed expenditure of Fis.98,11,10,203/- being the subsidy given to distributors for selling handsets a price lower than the cost price. The appellant has not given any further details as to whether the buyers of handset have opted for the services provided by the appellant company as there are other CDNA operators also in the market. The appellant has also claimed handset handling charges of Is.10,29,778/- which are paid for handling the Inward and outward moment from the warehouses to a agency named Drive India Enterprise Solution Limited. It is informed that the handset are not owned by the company and he business as such is carried by Drive India Enterprise Solution Ltd. The appellant therefore has failed to give proper justification for the payments of the said amount to Drive India Enterprises Solution Ltd. The appellant has also claimed expenditure of Rs.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 1,07,95,73,495/- being the discount given on first recharge to retailer/distributors. The appellant has not given further party wise details and also if any TDS was effected therefrom in the absence of which the claim of the appellant cannot be allowed. In view of the above, is held that expenditure of Rs.55,43,66,986/- first recharge coupon discount and MNP port charges of Rs. 1,05,09,755/- needs to be allowed to the appellant and the expenses being subsidiary Rs.98,11,10,203/-, handset handling charges Rs.10,29,778/- and FRS Discount CDMA-in of Rs.1,07,95,73,495/- are thus confirmed.

1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the order passed by the learned AO without appreciating the facts of the case and law relating thereto to the extent of additions confirmed by the learned CIT(A)

2. Disallowance u/s 40(a)(ia) of the Act on account of non-deduction of tax at source on the discount extended to prepaid distributors

2.1 On the facts and circumstances of the case and in law, the learned CIT(A)/AO has erred in making an addition under section 40(a)(ia) of the Act on account of alleged non-deduction of tax on the discount extended to prepaid distributors, amounting to INR 70,25,05,238 2.2. On the facts and circumstances of the case and in law, the learned CIT(A)/AO has erred in concluding that the relationship between the Appellant and its pre-paid distributors is that of a 'Principal and Agent. 2.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not following the order passed by Hon'ble Rajasthan and Karnataka High Court in the Appellant's own case, reported as Hindustan Coca Cola Beverages (P) Ltd v. CIT [2017] 402 ITR 539 and Bharti Airtel Ltd. v. DCIT [2015] 372 ITR 33 respectively. wherein it was categorically held that provisions of section 194H of the Act are not applicable on the discount extended to distributors. Further, learned CIT(A) has erred in relying on the decision passed by the Hon'ble Delhi High Court, reported as CIT vs. Idea Cellular Ltd. (2010) 325 ITR 148 without appreciating the fact that the said decision is not applicable in the Appellant's case 2.4 Without prejudice to Ground 2.1 to 2.3 above, on the facts and circumstances of the case and in law, the learned CIT(A)/AO has erred in not holding that no disallowance can be made under section 40(a)(ia) of the Act since the Appellant is of a bonafide belief that no tax was required to be deducted at source on discount extended to pre-paid distributors 2.5 Without prejudice to Ground 2.1 to 2.4 above, on the fact and in the circumstances of the case and in law, the learned AO be directed: 2.5.1 to allow deduction in respect of the disallowance made in the subject year under section 40(a)(ia) of the Act to the extent of demand paid under section 201(1) of the Act by the Appellant in the subsequent years in accordance with first proviso to section 40(a)(ia) of the Act 2.5.2 to allow deduction in the subject year in respect of similar disallowances made in the prior year/s to the extent of demand paid under section 201(1) of the Act during the subject year, in accordance with first proviso to section 40(a)(ia) of the Act 3. Disallowance of Customer Acquisition Cost /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the order of learned AO to the extent of disallowance of customer acquisition costs confirmed in its order, without appreciating the fact that the said expenditure incurred by the Appellant is revenue in nature and shall be allowed as a revenue expenditure in the subject year itself. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not treating the entire customer acquisition costs incurred by the Appellant as revenue expenditure and allowing only proportionate expense in the subject year having held that the said expense ought to have apportioned across the years. 3.3 On the facts and circumstances of the case and in law, the learned CIT(A) has grossly erred in not following the binding principle enunciated by the Hon'ble Apex Court in case of Madras Industrial Investment Corporation Ltd v CIT [225 ITR 802] and Taparia Tools Ltd v JCIT [372 ITR 606], wherein it was held that amortization of revenue expense is at the option of the Appellant and tax authorities cannot take a contrary view.

are mutually exclusive & without prejudice to each other. The Appellant prays for leave to add, alter, amend or modify any of the grounds of appeal at or before the erring of the appeal. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.”

17. The Revenue has raised the following grounds of appeal in Assessment Year 2012-13.

1. "On the facts and circumstances of the case, the Id. CIT(A) erred in deleting 50% of the disallowance of amortization of expenses amounting to Rs.1,12,40,31,374 made by the Assessing Officer. The cases on which Ld. CIT(A) relied upon are not found relevant for present adjudication 2. "On the facts and circumstances of the case, the Id. CIT(A) erred in deleting the disallowance on account of customer acquisition cost of Rs.1,97,95,00,000/- made by the Assessing Officer.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 3. "On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance of depreciation on 3G Spectrum of Rs.8,25,84,43,883/- made by the Assessing Officer 4. "On the facts and circumstances of the case the order of Ld. CIT(A) is perverse." 5. "The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."

20. Before us, the Ld. AR of the assessee submits that the issue of TDS on the discount to the pre-paid distributors by treating the same as brokerage has attained finality where the Hon’ble Supreme Court in the case of Bharti Cellular Limited vs. Assistant Commissioner of Income Tax [Civil Appeal No.7257 of 2011] (SC) has held that transaction between the mobile service provider company and prepaid distributors is in the nature of principal to principal and discount given to prepaid distributors is not commission/ brokerage but is the margin of such distributors and, therefore, provisions of /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT section 194H of the Act are not applicable. Accordingly, Ld. AR submits that in the present case, it is the allegation of the AO that discount given to prepaid distributors is in the nature of brokerage / commission on which no TDS u/s 194H of the Act was deducted, and, therefore, he invoked the provisions of section 40(a)(ia) of the Act and made the disallowance. Ld. AR submits that as this issue stood settled and it is held by the hon’ble Supreme Court that it is not the commission, therefore, discount to prepaid distributors is not commission / brokerage and thus no disallowance could be made by invoking the provisions of section 40(a)(ia) of the Act. He prayed accordingly.

21. On the other hand, Ld. CIT-DR vehemently supports the order of the Lower Authorities and requested for the confirmation of the disallowance made by the AO.

22. Heard both the parties and perused the material before us. It is seen that sole allegation of the Revenue was with regard to nature of discount given to prepaid distributor at the time of sale of prepaid Sim card and recharge vouchers as commission and since no TDS was deducted in terms of section 194H of the Act, therefore, the provisions of section 40(i)(ia) are applicable on such payments and disallowance was made. The Hon’ble Supreme Court in the case of Bharti Cellular Limited (supra) held that sale of prepaid sim card and recharge voucher is on principal-to-principal basis and the discount given is nothing but the profit of the distributor thus provisions of /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT section 194H of the Act are not attracted. The relevant observations of the Hon’ble Supreme Court as contained in para 39 to 42 of its order are as under: “39 Coming back to the legal position of a distributor, it is to be generally regarded as different form that of an agent. The distributor buys goods on his account and sells them in his territory. The profit made is the margin of difference between the purchase price and the sale price. The reason is, that the distributor in such cases is an independent contractor. Unlike an agent, he does not act as a communicator or creator of a relationship between the principal and a third party. The distributor has rights of distribution and is akin to a franchisee. Franchise agreements are normally considered as sui generis, though they have been in existence for some time. Franchise agreements provide a mechanism whereby goods and services may be distributed. In franchise agreements, the supplier or the manufacture, i.e. a franchisor, appoints an independent enterprise as a franchisee through whom the franchisor supplies certain goods or services. There is a close relationship between a franchisor and a franchisee because a franchisee's operations are closely regulated, and this possibly is a distinction between a franchise agreement and a distributorship agreement. Franchise agreements are extremely detailed and complex. They may relate to distribution franchises, service franchises and production franchises. Notwithstanding the strict restrictions placed on the franchisees which may require the franchisee to sell only the franchised goods, operate in a specific location, maintain premises which are required to comply with certain requirements, and even sell according to specified prices the relationship may in a given case be that of an independent contractor. Facts of each case and the authority given by 'principal' to the franchisees matter and are determinative.

40. An independent contractor is free from control on the part of his employer, and is only subject to the terms of his contract. But an agent is not completely free from control, and the relationship to the extent of tasks entrusted by the principal to the agent are fiduciary. As contract with an independent agent depends upon the terms of the contract, sometimes an independent contractor looks like an agent from the point of view of the control exercisable over him, but on an overview of the entire relationship the tests specified in clauses (a) to (d) in paragraph 8 may not be satisfied.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT The distinction is that independent contractors work for themselves, even when they are employed for the purpose of creating contractual relations with the third persons. An independent contractor is not required to render accounts of the business, as it belongs to him and not his employer.

41. Thus, the term 'agent denotes a relationship that is very different from that existing between a master and his servant, or between a principal and principal, or between an employer and his Independent contractor. Although servants and independent contractors are parties to relationships in which one person acts for another, and thereby possesses the capacity to involve them in liability, yet the nature of the relationship and the kind of acts in question are sufficiently different to justify the exclusion of servants and independent contractors from the law relating to agency. In other words, the term 'agent' should be restricted to one who has the power of affecting the legal position of his principal by the making of contracts, or the disposition of the principal's property: viz. an independent contractor who may, incidentally, also affect the legal position of his principal in other ways. This can be ascertained by referring to and examining the indicia mentioned in clauses (a) to (d) in paragraph 8 of this judgment. It is in the restricted sense in which the term agent is used in Explanation (i) to Section 194-H of the Act.

42. In view of the aforesaid discussion, we hold that the assessees would not be under a legal obligation to deduct tax at source on the income/profit component in the payments received by the distributors/franchisees from the third parties/customers, or while selling/transferring the pre-paid coupons or starter-kits to the distributors. Section 194-H of the Act is not applicable to the facts and circumstances of this case. Accordingly, the appeals filed by the assessee cellular mobile service providers, challenging the judgments of the High Courts of Delhi and Calcutta are allowed and these judgments are set aside. The appeals filed by the Revenue challenging the judgments of High Courts of Rajasthan, Karnataka and Bombay are dismissed. There would be no orders as to cost. Pending applications, if any, shall stand disposed of.”

24. Grounds No.3 to 3.3 are with respect to the disallowance of customers acquisition costs of Rs. 395.90 Cr. made by Assessing Officer by holding the same as capital in nature.

25. In first appeal, the Ld. CIT(A) in terms of para 6.2 of his order by following the appellate order for Assessment Year 2009-10 passed by his predecessor in the case of assessee itself, confirmed 50% of the disallowance made following the principle of consistency.

26. Before us, Ld. AR of the assessee submits that AO made the disallowance by following the observations made in assessment order for AY 2009-10 and 2010-11 and Ld. CIT(A) allowed 50% expenses by following the appellate order of CIT(A) for AY 2009-10. He submits that order of CIT(A) in AY 2009-10 was challenged by the assessee /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT before the Tribunal wherein Co-ordinate Bench of Tribunal in vide its order dt. 18.06.2025 deleted the disallowance so confirmed by the Ld. CIT(A) by holding the same as revenue expenditure. He, therefore, prayed for the deletion of the disallowance made in the instant case as facts and circumstances under which disallowance is made are identical.

27. On the other hand, the Ld. CIT-DR vehemently supported the orders of the lower authorities and requests for the confirmation of the same.

28. Heard both the parties and perused the materials available on record. At the outset, it is seen that Ld. CIT(A) followed the order of his predecessor for AY 2009-10 to confirm the 50% disallowance made by AO however, the Co-ordinate Bench of Tribunal in assessee’s own case vide its order in & 28/Del/2017 allowed the balance disallowance of 50% as confirmed by ld. CIT(A) and in para-07, the coordinate bench has observed as under:

“7. In regard to second issue involved we find force in the contention of Id. AR that if Assessee does not opt to amortize any revenue expense, benefit of which is extending to future years, the tax department cannot make any contrary tax treatment. Further, by allowing 50% of the expenditure, CIT(A) has itself appreciated that subject customer acquisition expenditure is revenue in nature. Further, Hon'ble Supreme court in the case of CIT v Excel Industries Ltd. [(2013) 38 taxmann.com 100 (SC)/ has held that where the tax rate in a given AY and its subsequent AY is same, then the department should not continue with the litigation as it may not add anything to the public coffers. Hence, in the present case also the expenditure incurred in relation to customer acquisition cost should be allowed to the Assessee in current AY and should not be deferred i.e. 50% of expense allowed by learned CIT(A). The corresponding ground deserves to be sustained.

33. The disallowance was made by the AO by holding the same as capital in nature. The Ld. CIT(A) has allowed the same by following the order of Ld. CIT(A) for Assessment Year 2009-10.

34. Before us, Ld. AR of the assessee submits that the AO has made the disallowances by holding these expenses as capital in nature, /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT however, the Ld. CIT(A) has deleted the same by following the order of his predecessors where the CIT(A) has placed reliance on the judgment of Hon’ble Supreme Court in the case of Taparia Tools Ltd. vs. Jt. CIT [2015] 55 taxmann.com 361 (SC). The Ld. AR further submits that this said order of Ld. CIT(A) was not challenged further by the Revenue which is evident from the order of Co-ordinate Bench for AY 2009-10 in wherein this issue has not been challenged by the Revenue before the Tribunal. He thus, submits that this issue has attained finality and, since there is no change in the facts from preceding year, therefore, order of ld. CIT(A) deleting the disallowance deserves to be upheld as principle of consistency.

35. On the other hand, Ld. CIT-DR vehemently supported the orders of the lower authorities and submits that every year is a separate year and submits that though in AY 2009-10 and 2010-11 this issue has not been challenged by the Revenue, however, in the year under appeal, it is challenged, therefore, deletion made by Ld. CIT(A) by following the observations of earlier order deserves to be held as bad in law. He further submits that looking to the nature of expenses, it is evident that they are capital expenditure in nature, therefore, he requested for the confirmation of the order of AO.

36. Heard both the parties and perused the materials available on record. At the outset, it is seen that disallowance on account of amortization of expenses was allowed in favor of the assessee by /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT following the order of CIT(A) for Asst. Year 2009-10. It is further seen that in AY 2009-10, Ld. CIT(A) followed the judgment of Hon’ble Supreme Court in the case of Taparia Tools Ltd. (supra) and further reliance was placed on the judgement of Hon’ble Supreme Court in the case of Madras Industrial Investment Corp. vs. CIT [1997] 225 ITR 802 (SC) wherein the hon’ble court has categorically held that discount on debentures which has been amortized qualify as revenue expenditure. The relevant observations of the ld. CIT(A) while deleting the disallowance are reproduced as under: “5.2 I have examined the facts at hand. Similar issue had arisen in the earlier year also and was matter of adjudication. My predecessor ld. CIT(A)-14 in appeal No.194/15-16/IT/DEL/2015-16 date of order 17.10.2016 had held in para 2 on pages 3,4,5 and 6 of that order as follows: Amortization of Expenses 2. The Assessing Officer has disallowed the expenditure of Rs. 58,52,00,000/-treating amortisation expenses as being outside revenue expenditure. The Appellant has claimed deduction of Rs.4.39 crores in respect of amortisation of discount on issue of debentures and Rs. 54.12 crores as amortisation of finance set up costs. The Appellant had submitted as under in its letter dated 20.12.2011 *Discount on issue of debenture represents the difference between face value and issue price on non-convertible debenture. This cost has been deferred and amortised on straight line basis over the redemption period of debenture commencing from date of issue." loan or five years, whichever is lower, commencing from the date of first draw down of "The company amortises the cost of arranging long term loan over the period of loan, on a straight-line basis." It is submitted that the Assessing Officer has completely erred in wallowing the deductions on the basis that amortised expenditure does not fall under de ambit of revenue expenditure. It is submitted that the basis adopted by the Assessing Officer is contrary to the law stated by the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs. CIT. 1997 (225) ITR 802 (SC) wherein it has been held as under:

"Section 37 of the Income-tax Act, 1961, enjoins that any expendzure not being expenditure of the nature described in sections 30 to 36 laid out of expanded wholly and exclusively for the purpose of the business or profession should be allowed in computing the income chargeable under the head "Profits and gains of business or profession". The expression "Profits or gainst has to be understood in its commercial sense: and there could be no computation of such profits and gains until the expenditure which is necessary for the purpose of earning the receipt is deducted therefrom, whether the expenditure is actually incurred or the liability in respect thereof has accrued even though it may have to be discharged at some future date. Thus, "expenditure" is not necessarily confined to the money which has been actually paid out. It covers a liability which has accrued or which has been incurred although it may have to be discharged at a future date. However, a contingent liability which may have to be discharged in future cannot be considered as expenditure, When a company issues debentures at a discount, it incurs a liability to pay a larger amount than what it has borrowed. The liability to pay the discounted amount over and above the amount received for the debentures, is a liability which has been incurred by the company for the purposes of its business in order to generate funds for its business activities. The amounts so obtained by issue of debentures are used by the company for the purposes of its business. This would, therefore, be expenditure. Section 37(1) further requires that the expenditure should not be of a capital nature. The question whether a particular expenditure is revenue expenditure Incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading meation must be viewed in the larger context of business necessity of expediency outgoing or expenditure is so related to the carrying on, or conduct of the business, that acquisition of an asset or a right of a permanent character, the possession of which is it may be regarded as an integral part of the profit-making process not for revenue expenditure. Any liability incurred for the business of obtaining a loan would be revenue expenditure. Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which incurred. It books, over a period of years. However, the facts may justify an assessee who has cannot be spread over a number of years even if the assessee has written off in his incurred /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year, Issuing debentures is an instance where. although the assessee has incurred the liability to pay the discount in the rear of issue of debentures, the payment is to secure a benefit over a number of years There is a continuing benefit to the business of the company over the entire period The liability should, therefore, be spread over the period of the debentures. The appellant, therefore, had, in its return, correctly claimed a deduction only in respect of the proportionate part of discount of Rs. 12,500 over the relevant accounting period in question. In this connection, we agree with the reasoning and conclusion of the Madhya Pradesh High Court in the case of M. P. Financial Corporation v. CIT (1987) 165 ITR 765. The view that we have taken is also in conformity with the accounting practice of showing the discount in the "discount on debentures account which is written off over the period of the debentures." The Hon'ble Supreme Court has categorically held that discount on debenture which has been amortised qualify as revenue expenditure. Similarly, expenses incurred for obtaining loans which are amortised would qualify as revenue expenditure, it may be noted that the Hon'ble Supreme Court recently in the case of Taparia Tools Ltd, vs. Jt. CIT, 2015 (372) ITR 605 (SC) has stated that entire revenue expenditure ought to be allowed in the year in which it is incurred and the amortised revenue expenditure could be allowed over a period if the principle of (matching concept) is satisfied. Therefore, in the present case, the deductions as claimed by the Appellant ought to be allowed and the addition reversed.

I have considered the submissions of the appellant as well as the findings of the Ld. AO and judicial pronouncements of higher appellate authorities and the Hon'ble Courts relied upon by the Ld. AR & I incline to agree with the contention of the Ld. AR that the Ld. AO is not justified in disallowing the expenditure of Rs. 58.52,00,000/- treating the amortization expenses fall outside the ambit of revenue expenditure in view of the Hon'ble Supreme Court's judicial pronouncements supra relied on by the Ld. AR. The Hon'ble Supreme Court has categorically held that discount on debenture which has been amortised qualify as revenue expenditure. Similarly, expenses incurred for obtaining loans which are amortised would qualify as revenue expenditure. It may be noted that the Hon'ble Supreme Court recently in the case of Taparia Tools Ltd. vs. Jt. CIT, 2015 (372) ITR 605 (SC) has stated that entire revenue expenditure ought to be allowed in the year in which it is incurred and the amortised revenue expenditure could be allowed over a period if the principle of (matching concept) is satisfied. Accordingly, respectfully following the said decisions as the facts of the appellant's case are identical I order to delete the disallowance of Rs. 58,52,00,000/-. Hence, the ground of appeal is allowed. Since the issue, before me, is fully covered by the order of my predecessor as detailed above, based on principle of consistency and based on principle of precedence, I hereby adjudicate ground No.

2. (a) and (b) in favour of the appellant. Accordingly, the appellant succeeds with regard to ground Nos.

2. (a) & (b).”

37. The assessee has claimed deduction of Rs. 4.39 crores towards amortization of discount on issue of debentures and Rs. 54.12 as amortization of finance set up cost as the Revenue expenditure in the year under appeal. It is a matter of fact that appellate order of CIT(A) in AY 2009-10 on this issue was accepted by the Revenue and no further appeal was preferred. Further before us, revenue has failed to controvert the findings of ld. CIT(A) which were given by following the judgments of hon’ble Supreme court in the cases as referred above. Thus, by following these judgements and as per principle of consistency and also looking to the facts that there is no change in /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT the circumstances, we uphold the order of Ld. CIT(A) in this regard. Accordingly, ground of appeal No.1 of Revenue is dismissed.

40. The next ground of Appeal of Revenue is with respect to the deletion of disallowance of deprecation on 3G Spectrum of Rs.8,25,84,43,883/- claimed by the assessee.

41. The AO while making disallowance observed that assessee acquired 3G Spectrum license for Rs.48,93,89,26,715/- and since the period of 3G Spectrum license is of 20 years, therefore, assessee is eligible for amortization of the costs of the same u/s 35ABA of the Act for a period of 20 years and disallowed depreciation claimed by the assessee at Rs.10,17,53,90,219/-. Accordingly, the AO allowed /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT the amortization u/s 35ABB at Rs. 2,44,69,46,336 (being 1/20 of Rs, 48,93,89,26,715/-) and disallowed the balance amount of Rs. 8,25,84,43,883/- and added back to the income of the assessee.

42. In first appeal, Ld. CIT(A) has discussed this issue in para 8.2 of the order and by placing reliance on the judgment of Co-ordinate Bench of Tribunal in assessee’s group company’s case of Tata Teleservices Maharastra Ltd. (TTML) for Assessment Year 2013-14, wherein the Co-ordinate Bench of ITAT, Mumbai in and allowed the deprecation by placing reliance on the judgement of the Co-ordinate Bench of ITAT in the case of Idea Cellular Ltd. vs. PCIT in ITA No. 360/Mum/2016, allowed the depreciation as claimed.

43. Heard both the parties and perused the material available on record. From the perusal of order of Ld. CIT(A), it is seen that the Ld. CIT(A) allowed the depreciation on 3G Spectrum license fee by relying upon the judgment of Hon’ble Co-ordinate Bench of Mumbai Tribunal in the case of Idea Cellular Ltd. vs. PCIT (supra) which order is followed by the Co-ordinate Bench of Mumbai ITAT in assessee’s group company case of TTML (supra). Admittedly there is no change in the facts and circumstances and the allegation of the AO while making disallowance of deprecation claimed by the assessee. The Ld. CIT while allowing the deprecation has made the following observations in para 8.2 of its order: “8.2 I have examined the facts at hand. The appellant has pointed out to the plethora of jurisprudence whereby (prior to insertion of section 35ABA vide /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT Finance Act, 2016, with effect from 01.04.2017), spectrum was to be treated as intangible asset as it was not a license. According to the appellant, the expenditure for right to use spectrum is eligible for prescribed deduction as per provisions of section 35ABA only with effect from 01.04.2017. According to the appellant, prior to 01.04.2017 the amount paid towards right to use the spectrum was eligible for depreciation. To this effect, the appellant has vide submission dated 19.03.2019, place reliance upon order of Hon'ble ITAT, Mumbai Bench in the case of group company of Tata Teleservices Ltd., order dated 27.02.2019, the relevant portion of that order is as follows:- “8. Upon careful consideration, we note that the submission of the Id. DR that no response from the Pr. CIT has been received on this issue, has no relevance for the adjudication before us. We find that the ITAT in the case of Idea Cellular Limited (supra) on same issue has concluded that the assessee was entitled to depreciation. We may gainfully refer to the concluding part of the said judgment which reads as under.

20. From the above judgment of Hon'ble Supreme Court in the case of Smifs Securities Ltd. (supra) and the facts of the present case, it is clear that the assessee has rightly claimed depreciation under section 32 of the Act on 3G spectrum. It means that the expenditure towards 3G Spectrum is not expenditure for acquiring any right to operate telecommunications services. Out of the service areas in which 3G spectrum was won by the assessee, it had acquired the rights to operate telecommunication services in the year 1995-1997 for Maharashtra, Gujarat, Uttar Pradesh West, Madhya Pradesh, Haryana. Andhra Pradesh, Kerala, Punjab telecom circles. In year 2001-02 it acquired rights for Himachal Pradesh, Uttar Pradesh East and thereafter in the year 2007-08 for Jammu & Kashmir. Even if 3G Spectrum was not applied or allotted, assessee could have still continued providing telecommunication services under existing license. The license to operate telecom services is issued u/s. 4 of the Indian Telegraph Act, 1885 which provide rights to establish and operate telecom services. As stated above, without such license one is not ever eligible to bid for 3G Spectrum. 3G Spectrum fees are merely for right to use a particular frequency/spectrum while providing telecommunication services. In view of the above, even the provisions of section 35ABB of the act are not applicable to such payment. In view of these facts, we are of the view that the assessee is entitled for claim of depreciation on merits also and AO has rightly allowed the claim while framing assessment under section 143(3) of the Act and the revision order of CIT Under section 263 of the Act is bad in law. Accordingly, we quash the revision order.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 9. We further note that in assessee's own case for A.Y. 2013-14, the Id. CIT(A) has allowed the assessee's plea of deprecation by holding as under. 4.3 So far as third ground of appeal disallowing depreciation claim of Rs. 176.88 crores under section 32 of the IT Act on amount paid DOT for purchase of 3G spectrum and restricting the allowance to Rs. 62.89 crores being proportionate amount as applicable for the year as per provisions of section 35ABB of the Act is concerned, it is seen from the submission of the appellant that the issue is covered in favour of the appellant by the decision of the jurisdictional Tribunal in the case of Idea Cellular Limited (in ITA 360/Mum/2016) wherein the Hon'ble Tribunal has held that the assessee has rightly claimed depreciation on the fees paid for acquisition of 3G spectrum. Relevant extract of the judgment is reproduced as below:

20. From the above judgment of Hon'ble Supreme Court in the case of Smifs Securities Ltd. (supra) and 4 the facts of the present case, it is clear that the assessee has rightly claimed depreciation under section 32 of the Act on 3G spectrum. It means that the expenditure towards 3G Spectrum is not expenditure for acquiring any right to operate telecommunications services. Out of the service areas in which 3G spectrum was won by the assessee, it had acquired the rights to operate telecommunication services in the year 1995-1997 for Maharashtra, Gujarat, Uttar Pradesh West, Madhya Pradesh, Haryana, Andhra Pradesh, Kerala, Punjab telecom circles. In year 2001-02 it acquired rights for Himachal Pradesh, Uttar Pradesh East and thereafter in the year 2007-08 for Jammu & Kashmir. Even if 3G Spectrum was not applied or allotted, assessee could have still continued providing telecommunication services under existing license. The license to operate telecom services is issued u/s. 4 of the Indian Telegraph Act, 1885 which provide rights to establish and operate telecom services. As stated above, without such license one is not ever eligible to bid for 3G Spectrum. 3G Spectrum fees are merely for right to use a particular frequency/spectrum while providing telecommunication services. In view of the above, even the provisions of section 3SABB of the act are not applicable to such payment In view of these facts, we are of the view that the assessee is entitled for claim of depreciation on merits also and AO has rightly allowed the claim while framing assessment under section 143(3) of the Act and the revision order of CIT Under section 263 of the Act is bad in law. Accordingly, we quash the revision order." Respectfully following the same, the AO is directed to allow the depreciation claim of the appellant amounting to Rs. 176.88 Cr in /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT respect of amount paid to DoT for purchase of 3G spectrum. Accordingly, this ground of appeal is allowed.

10. Since the issue involved in squarely covered in favour of the assessee and no contrary decision has been shown to us, respectfully following the precedent, we quash the order passed u/s. 263 of the Act by the Id. CIT.

11. In the result, these appeals by the assessee stands allowed." In view of judicial precedence as available, I hold that depreciation is allowable to the appellant with regard to amount paid to DOT for purchase of 3G spectrum. Accordingly, ground No. 5 is adjudicated in favour of the appellant.”

44. Before us, Revenue has miserably failed to bring any material to convert the findings of Ld. CIT(A) who followed the order of Co- ordinate Mumbai Bench of ITAT in case of Idea Cellular (supra). Thus, by following the said order, we hereby upheld the order of Ld. CIT(A) in allowing the deprecation of 3G Spectrum license cost incurred by the assessee. Accordingly, ground of appeal No. 3 of the revenue is dismissed. Other grounds of appeal of Revenue are general in nature needs no adjudication.

Sr. No. Appeal Asst. Years Appeal by 1. 5666/Del/2019 2013-14 Assessee /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 2. 5667/Del/2019 2014-15 Assessee 3. 5668/Del/2019 2015-16 Assessee 4. 5925/Del/2019 2013-14 Revenue 5. 5926/Del/2019 2014-15 Revenue 6. 5927/Del/2019 2015-16 Revenue 7. 337/Del/2021 2016-17 Assessee 8. 17/Del/2022 2016-17 Revenue 47. First issue raised by the assessee in grounds of appeal No. 2 in the appeals for all assessment years is with respect to disallowance of discount to prepaid distributors by invoking the provisions of section 40(a)(ia) of the Act for non-compliance to the provisions of section 194H of the Act as the AO held such payment as commission. The year wise amounts disallowed is tabulated as under: Sr. No. Appeal No. Asst. Years Amount of disallowance disputed 1. 5666/Del/2019 2013-14 2,59,26,57,395/- 2. 5667/Del/2019 2014-15 3,06,41,09,921/- 3. 5668/Del/2019 2015-16 97,36,20,366/- 4. 337/Del/2021 2016-17 3,32,24,78,727/-

No. 2 of the assessee, following observations are made herein above:

22. Heard both the parties and perused the material before us. It is seen that sole allegation of the Revenue was with regard to nature of discount given to prepaid distributor at the time of sale of prepaid Sim card and recharge vouchers as commission and since no TDS was deducted in terms of section 194H of the Act, therefore, the provisions of section 40(i)(ia) are applicable on such payments and disallowance was made. The Hon’ble Supreme Court in the case of Bharti Cellular Limited (supra) held that sale of prepaid sim card and recharge voucher is on principal-to-principal basis and the discount given is /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT nothing but the profit of the distributor thus provisions of section 194H of the Act are not attracted. The relevant observations of the Hon’ble Supreme Court as contained in para 39 to 42 of its order are as under: “39 Coming back to the legal position of a distributor, it is to be generally regarded as different form that of an agent. The distributor buys goods on his account and sells them in his territory. The profit made is the margin of difference between the purchase price and the sale price. The reason is, that the dis tributor in such cases is an independent contractor. Unlike an agent, he does not act as a communicator or creator of a relationship between the principal and a third party. The distributor has rights of distribution and is akin to a franchisee. Franchise agreements are normally considered as sui generis, though they have been in existence for some time. Franchise agreements provide a mechanism whereby goods and services may be distributed. In franchise agreements, the supplier or the manufacture, i.e. a franchisor, appoints an independent enterprise as a franchisee through whom the franchisor supplies certain goods or services. There is a close relationship between a franchisor and a franchisee because a franchisee's operations are closely regulated, and this possibly is a distinction between a franchise agreement and a distributorship agreement. Franchise agreements are extremely detailed and complex. They may relate to distribution franchises, service franchises and production franchises. Notwithstanding the strict restrictions placed on the franchisees which may require the franchisee to sell only the franchised goods, operate in a specific location, maintain premises which are required to comply with certain requirements, and even sell according to specified prices the relationship may in a given case be that of an independent contractor. Facts of each case and the authority given by 'principal' to the franchisees matter and are determinative.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 23. In the instant case, disallowance was made by the AO by holding discount to prepaid distributors as commission and no TDS was deducted. The hon’ble supreme court in the case of Bharti Cellular Limited (supra) held that there is no obligation to deduct any tax on such discount since it does not partake the character of commission. The ratio laid down by hon’ble supreme court is squarely applicable to the facts of the present case, therefore, by respectfully following the judgment of Hon’ble Supreme Court in the case of Bharti Celluar (supra), we hold that sales made to the distributors on prepaid sim card and recharge vouchers is on principal to principal basis and, therefore, assessee is under any obligation to deduct tax on discount allowed to them u/s 194H of the Act. Accordingly, disallowance of Rs.70,25,05,238/- made by AO is hereby deleted. Grounds of appeal

No. 2 to 2.5 are allowed.

49. Admittedly there is no change in the circumstances and the allegations made by the AO for making disallowance is the same, thus following the above observations, we hereby direct the AO to delete the disallowance made u/s 40(a)(ia) for all the assessment years. Accordingly, ground of appeal No. 2 of the assessee for all the assessment years is allowed.

50. Next issue is with respect to disallowance of customer Acquisition cost made by AO out of which 50% was allowed by CIT(A). The assessee is in appeal against the confirmation of the 50% of disallowance and revenue is in appeal for deletion of the remaining 50% of the disallowance. The yearwise amounts disallowed by the AO is tabulated as under: Sr. No. Appeal No. Asst. Years Amount of disallowance disputed 1. 5666/Del/2019 2013-14 2,06,48,00,000/- 2. 5667/Del/2019 2014-15 1,45,72,50,000/- 3. 5668/Del/2019 2015-16 1,15,44,45,718/- 4. 5925/Del/2019 2013-14 2,06,48,00,000/- 5. 5926/Del/2019 2014-15 1,45,72,50,000/- /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 6. 5927/Del/2019 2015-16 1,15,44,45,718/- 7. 337/Del/2021 2016-17 1,15,32,72,425/- 8. 17/Del/2022 2016-17 1,15,32,72,425/-

No. 3 of the assessee, following observations are made by us herein above: “28. Heard both the parties and perused the materials available on record. At the outset, it is seen that Ld. CIT(A) followed the order of his predecessor for AY 2009-10 to confirm the 50% disallowance made by AO however, the Co-ordinate Bench of Tribunal in assessee’s own case vide its order in & 28/Del/2017 allowed the balance disallowance of 50% as confirmed by ld. CIT(A) and in para-07, the coordinate bench has observed as under: “7. In regard to second issue involved we find force in the contention of Id. AR that if Assessee does not opt to amortize any revenue expense, benefit of which is extending to future years, the tax department cannot make any contrary tax treatment. Further, by allowing 50% of the expenditure, CIT(A) has itself appreciated that subject customer acquisition expenditure is revenue in nature. Further, Hon'ble Supreme court in the case of CIT v Excel Industries Ltd. [(2013) 38 taxmann.com 100 (SC)/ has held that where the tax rate in a given AY and its subsequent AY is same, then the department should not continue with the litigation as it may not add anything to the public coffers. Hence, in the present case also the expenditure incurred in relation to customer acquisition cost should be allowed to the Assessee in current AY and should not be deferred i.e. 50% of expense allowed by learned CIT(A). The corresponding ground deserves to be sustained.

29. Admittedly there is no change in the facts and circumstances of the case as the disallowance was made by following the observation made in the assessment orders for earlier assessment years. Therefore, by following the observations of the Co-ordinate Bench in assessee’s own case for Assessment Year 2009-10 and 2010-11, as /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT reproduced above, and further by following the principle of consistency, disallowance confirmed by Ld. CIT(A) of Rs.197.95 Cr. being 50% of the total expenses claimed is hereby deleted. Grounds of appeal

No.3 to 3.3 of the assessee are thus allowed.”

52. Admittedly, there is no change in the circumstances and the allegations made by AO for making disallowance was same and ld. CIT(A) by following the earlier orders had deleted 50% of the disallowance, thus following the above observations, we hereby direct the AO to delete the remaining 50% disallowance for all the assessment years. Accordingly, ground of appeal No. 2 of the assessee for all the assessment years is allowed and ground of appeal No. 2 of the revenue for all the assessment years is dismissed.

No.1 of the revenue, following observations are made by us herein above:

36. Heard both the parties and perused the materials available on record. At the outset, it is seen that disallowance on account of amortization of expenses was allowed in favor of the assessee by following the order of CIT(A) for Asst. Year 2009-10. It is further seen that in AY 2009-10, Ld. CIT(A) followed the judgment of Hon’ble Supreme Court in the case of Taparia Tools Ltd. (supra) and further reliance was placed on the judgement of Hon’ble Supreme Court in the case of Madras Industrial Investment Corp. vs. CIT [1997] 225 ITR 802 (SC) wherein the hon’ble court has categorically held that discount on debentures which has been amortized qualify as revenue expenditure. The relevant observations of the ld. CIT(A) while deleting the disallowance are reproduced as under: “5.2 I have examined the facts at hand. Similar issue had arisen in the earlier year also and was matter of adjudication. My predecessor ld. CIT(A)-14 in appeal No.194/15- 16/IT/DEL/2015-16 date of order 17.10.2016 had held in para 2 on pages 3,4,5 and 6 of that order as follows: Amortisation of Expenses

2. The Assessing Officer has disallowed the expenditure of Rs. 58,52,00,000/-treating amortisation expenses as being outside revenue expenditure. The Appellant has claimed deduction of Rs.4.39 crores in respect of amortisation of discount on issue of debentures and Rs. 54.12 crores as amortisation of finance set up costs. The Appellant had submitted as under in its letter dated 20.12.2011 *Discount on issue of debenture represents the difference between face value and issue price on non-convertible debenture. This cost has been deferred and amortised on straight line basis over the redemption period of debenture commencing from date of issue." loan or five years, whichever is lower, commencing from the date of first draw down of "The company amortises the cost of arranging long term loan over the period of loan, on a straight- line basis." It is submitted that the Assessing Officer has completely erred in wallowing the deductions on the basis that amortised /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT expenditure does not fall under de ambit of revenue expenditure. It is submitted that the basis adopted by the Assessing Officer is contrary to the law stated by the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. vs. CIT. 1997 (225) ITR 802 (SC) wherein it has been held as under: "Section 37 of the Income-tax Act, 1961, enjoins that any expendzure not being expenditure of the nature described in sections 30 to 36 laid out of expanded wholly and exclusively for the purpose of the business or profession should be allowed in computing the income chargeable under the head "Profits and gains of business or profession". The expression "Profits or gainst has to be understood in its commercial sense: and there could be no computation of such profits and gains until the expenditure which is necessary for the purpose of earning the receipt is deducted therefrom, whether the expenditure is actually incurred or the liability in respect thereof has accrued even though it may have to be discharged at some future date. Thus, "expenditure" is not necessarily confined to the money which has been actually paid out. It covers a liability which has accrued or which has been incurred although it may have to be discharged at a future date. However, a contingent liability which may have to be discharged in future cannot be considered as expenditure, When a company issues debentures at a discount, it incurs a liability to pay a larger amount than what it has borrowed. The liability to pay the discounted amount over and above the amount received for the debentures, is a liability which has been incurred by the company for the purposes of its business in order to generate funds for its business activities. The amounts so obtained by issue of debentures are used by the company for the purposes of its business. This would, therefore, be expenditure. Section 37(1) further requires that the expenditure should not be of a capital nature. The question whether a particular expenditure is revenue expenditure Incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading meation must be viewed in the larger context of business necessity of expediency outgoing or expenditure is so related to the carrying on, or conduct of the business, that acquisition of an asset or a right of a permanent /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT character, the possession of which is it may be regarded as an integral part of the profit-making process not for revenue expenditure. Any liability incurred for the business of obtaining a loan would be revenue expenditure. Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which incurred. It books, over a period of years. However, the facts may justify an assessee who has cannot be spread over a number of years even if the assessee has written off in his incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year, Issuing debentures is an instance where. although the assessee has incurred the liability to pay the discount in the rear of issue of debentures, the payment is to secure a benefit over a number of years There is a continuing benefit to the business of the company over the entire period The liability should, therefore, be spread over the period of the debentures. The appellant, therefore, had, in its return, correctly claimed a deduction only in respect of the proportionate part of discount of Rs. 12,500 over the relevant accounting period in question. In this connection, we agree with the reasoning and conclusion of the Madhya Pradesh High Court in the case of M. P. Financial Corporation v. CIT (1987) 165 ITR 765. The view that we have taken is also in conformity with the accounting practice of showing the discount in the "discount on debentures account which is written off over the period of the debentures." The Hon'ble Supreme Court has categorically held that discount on debenture which has been amortised qualify as revenue expenditure. Similarly, expenses incurred for obtaining loans which are amortised would qualify as revenue expenditure, it may be noted that the Hon'ble Supreme Court recently in the case of Taparia Tools Ltd, vs. Jt. CIT, 2015 (372) ITR 605 (SC) has stated that entire revenue expenditure ought to be allowed in the year in which it is incurred and the amortised revenue expenditure could be allowed over a period if the principle of (matching concept) is satisfied. Therefore, in the present case, the deductions as claimed by the Appellant ought to be allowed and the addition reversed.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 3. It may be noted that the contention of the Assessing Officer that amortisation of intangible assets and of expenditure for funding TTML acquisition were not claimed as deduction, which is contradictory is without any basis inasmuch as the said expenditure is clearly on capital account. Further, the Appellant was never required by the Assessing Officer to produce details of the expenditure or explain how it is related to the current year's expenditure. The Assessment Order is therefore, clearly in breach of principles of natural justice. As stated above, the said expenditure pertains to the number of years as stated in the audited Balance Sheet, which has been prepared as per generally accepted accounting principles. It is, thus, submitted that there is no valid basis in law to deny the deduction and the addition ought to be reversed." I have considered the submissions of the appellant as well as the findings of the Ld. AO and judicial pronouncements of higher appellate authorities and the Hon'ble Courts relied upon by the Ld. AR & I incline to agree with the contention of the Ld. AR that the Ld. AO is not justified in disallowing the expenditure of Rs. 58.52,00,000/-treating the amortization expenses fall outside the ambit of revenue expenditure in view of the Hon'ble Supreme Court's judicial pronouncements supra relied on by the Ld. AR. The Hon'ble Supreme Court has categorically held that discount on debenture which has been amortised qualify as revenue expenditure. Similarly, expenses incurred for obtaining loans which are amortised would qualify as revenue expenditure. It may be noted that the Hon'ble Supreme Court recently in the case of Taparia Tools Ltd. vs. Jt. CIT, 2015 (372) ITR 605 (SC) has stated that entire revenue expenditure ought to be allowed in the year in which it is incurred and the amortised revenue expenditure could be allowed over a period if the principle of (matching concept) is satisfied. Accordingly, respectfully following the said decisions as the facts of the appellant's case are identical I order to delete the disallowance of Rs. 58,52,00,000/-. Hence, the ground of appeal is allowed. Since the issue, before me, is fully covered by the order of my predecessor as detailed above, based on principle of consistency and based on principle of precedence, I hereby adjudicate ground No.

2. (a) and (b) in favour of the appellant. Accordingly, the appellant succeeds with regard to ground Nos.

2. (a) & (b).”

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 37. The assessee has claimed deduction of Rs. 4.39 crores towards amortization of discount on issue of debentures and Rs. 54.12 as amortization of finance set up cost as the Revenue expenditure in the year under appeal. It is a matter of fact that appellate order of CIT(A) in AY 2009-10 on this issue was accepted by the Revenue and no further appeal was preferred. Further before us, revenue has failed to controvert the findings of ld. CIT(A) which were given by following the judgments of hon’ble Supreme court in the cases as referred above. Thus, by following these judgements and as per principle of consistency and also looking to the facts that there is no change in he circumstances, we uphold the order of Ld. CIT(A) in this regard. Accordingly, ground of appeal No.1 of Revenue is dismissed.

57. Next issue in revenue’s appeal is with respect to deletion of disallowance of depreciation claimed by the assessee on the cost incurred on 3G spectrum license. The AO while making disallowance observed that assessee acquired 3G Spectrum license for Rs. 48,93,89,26,715/- and since the period of 3G Spectrum license is of 20 years, therefore, the assessee is eligible for amortization of the cost u/s 35ABA of the Act for a period of 20 years and not allowed the depreciation claimed by the assessee. Accordingly, the AO allowed the amortization and disallowed the difference between depreciation claimed and amortization allowed u/s 35ABB and added back the same to the income of the assessee. The yearwise breakup

Sr. No. Appeal No. Asst. Years Amount of disallowance disputed 1. 5925/Del/2019 2013-14 5,58,20,96,328/- 2. 5926/Del/2019 2014-15 3,57,48,35,662/- 3. 5927/Del/2019 2015-16 2,06,93,90,163/- 4. 17/Del/2022 2016-17 1,46,14,28,970/-

No.3 of the revenue, following observations are made by us herein above:

43. Heard both the parties and perused the material available on record. From the perusal of order of Ld. CIT(A), it is seen that the Ld. CIT(A) allowed the depreciation on 3G Spectrum license fee by relying upon the judgment of Hon’ble Co-ordinate Bench of Mumbai Tribunal in the case of Idea Cellular Ltd. vs. PCIT (supra) which order is followed by the Co-ordinate Bench of Mumbai ITAT in assessee’s group company case of TTML (supra). Admittedly there is no change in the facts and circumstances and the allegation of the AO while making disallowance of deprecation claimed by the assessee. The Ld. CIT while allowing the deprecation has made the following observations in para 8.2 of its order: “8.2 I have examined the facts at hand. The appellant has pointed out to the plethora of jurisprudence whereby (prior to insertion of section 35ABA vide Finance Act, 2016, with effect from 01.04.2017), spectrum was to be treated as intangible asset as it was not a license. According to the appellant, the expenditure for right to use spectrum is eligible for prescribed deduction as per provisions of section 35ABA only with effect from 01.04.2017. According to the appellant, prior to 01.04.2017 the amount paid towards right to use the spectrum was eligible for depreciation.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT To this effect, the appellant has vide submission dated 19.03.2019, place reliance upon order of Hon'ble ITAT, Mumbai Bench in the case of group company of Tata Teleservices Ltd., order dated 27.02.2019, the relevant portion of that order is as follows:- “8. Upon careful consideration, we note that the submission of the Id. DR that no response from the Pr. CIT has been received on this issue, has no relevance for the adjudication before us. We find that the ITAT in the case of Idea Cellular Limited (supra) on same issue has concluded that the assessee was entitled to depreciation. We may gainfully refer to the concluding part of the said judgment which reads as under.

/Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT 9. We further note that in assessee's own case for A.Y. 2013-14, the Id. CIT(A) has allowed the assessee's plea of deprecation by holding as under. 4.3 So far as third ground of appeal disallowing depreciation claim of Rs. 176.88 crores under section 32 of the IT Act on amount paid DOT for purchase of 3G spectrum and restricting the allowance to Rs. 62.89 crores being proportionate amount as applicable for the year as per provisions of section 35ABB of the Act is concerned, it is seen from the submission of the appellant that the issue is covered in favour of the appellant by the decision of the jurisdictional Tribunal in the case of Idea Cellular Limited (in ITA 360/Mum/2016) wherein the Hon'ble Tribunal has held that the assessee has rightly claimed depreciation on the fees paid for acquisition of 3G spectrum. Relevant extract of the judgment is reproduced as below:

20. From the above judgment of Hon'ble Supreme Court in the case of Smifs Securities Ltd. (supra) and 4 the facts of the present case, it is clear that the assessee has rightly claimed depreciation under section 32 of the Act on 3G spectrum. It means that the expenditure towards 3G Spectrum is not expenditure for acquiring any right to operate telecommunications services. Out of the service areas in which 3G spectrum was won by the assessee, it had acquired the rights to operate telecommunication services in the year 1995-1997 for Maharashtra, Gujarat, Uttar Pradesh West, Madhya Pradesh, Haryana, Andhra Pradesh, Kerala, Punjab telecom circles. In year 2001-02 it acquired rights for Himachal Pradesh, Uttar Pradesh East and thereafter in the year 2007-08 for Jammu & Kashmir. Even if 3G Spectrum was not applied or allotted, assessee could have still continued providing telecommunication services under existing license. The license to operate telecom services is issued u/s. 4 of the Indian Telegraph Act, 1885 which provide rights to establish and operate telecom services. As stated above, without such license one is not ever eligible to bid for 3G Spectrum. 3G Spectrum fees are merely for right to use a particular frequency/spectrum while providing telecommunication services. In view of the above, even the provisions of section 3SABB of the act are not applicable to such payment In view of these facts, we are of the view that the assessee is entitled for claim of depreciation on merits also and AO has rightly allowed the /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT claim while framing assessment under section 143(3) of the Act and the revision order of CIT Under section 263 of the Act is bad in law. Accordingly, we quash the revision order." Respectfully following the same, the AO is directed to allow the depreciation claim of the appellant amounting to Rs. 176.88 Cr in respect of amount paid to DoT for purchase of 3G spectrum. Accordingly, this ground of appeal is allowed.

10. Since the issue involved in squarely covered in favour of the assessee and no contrary decision has been shown to us, respectfully following the precedent, we quash the order passed u/s. 263 of the Act by the Id. CIT.

11. In the result, these appeals by the assessee stands allowed." In view of judicial precedence as available, I hold that depreciation is allowable to the appellant with regard to amount paid to DOT for purchase of 3G spectrum. Accordingly, ground No. 5 is adjudicated in favour of the appellant.”

44. Before us, Revenue has miserably failed to bring any material to convert the findings of Ld. CIT(A) who followed the order of Co- ordinate Mumbai Bench of ITAT in case of Idea Cellular (supra). Thus, by following the said order, we hereby upheld the order of Ld. CIT(A) in allowing the deprecation of 3G Spectrum license cost incurred by the assessee. Accordingly, ground of appeal No. 3 of the revenue is dismissed.

59. Admittedly there is no change in the circumstances and the allegations made by the AO for making disallowance are the same, thus following the above observations, we find no reason to interfere in the order of ld. CIT(A) on this issue and the same is hereby upheld. Accordingly, ground of appeal No. 3 of the revenue assessee for all the assessment years is dismissed.

60. Next issued in Departmental Appeal for Assessment Years 2014-15. 2015-16 and 2016-17 is with respect to the disallowance of penalty on account of non-compliance of the contractual obligation of Rs.1,43,35,500/- in Assessment Year 2014-15, Rs.95,36,790/- in /Del/2017 & Ors. Tata Teleservices Ltd. vs. ACIT Assessment Year 2015-16 and Rs.2,00,04,157/- in Assessment Year 2016-17 deleted by the Ld. CIT(A). Before us, the Ld. CIT-DR submits that the AO made the disallowance by holding the same as penalty for violation of the Government Rules and Regulations. Therefore, it is not allowable, however, the Ld. CIT(A) after considering the submissions of the assessee has observed that it is not statutory violation and penalties levied for violation in the normal cause of business and, therefore, it is financial penalty and the same was allowed. He submits that the same being penal in nature thus the order of the AO should be uphold.

No.4 of the Revenue in all these years is dismissed.

62. In the combined results: Appeal of the assessee for AY 2011-12 in is partly allowed. Appeals of the assessee for AY 2012-13 in ITA No. 5665/Del/2019, for AY 2013-14 in ITA No. 5666/Del/2019, for AY 2014-15 in ITA No. 5667/Del/2019, in AY 2015-16 in ITA No. 5668/Del/2019 and for AY 2016-17 in 337/Del/2021 are allowed. Appeals of the revenue for AY 2012-13 in for AY 2014-15 in ITA No. 5926/Del/2019, in AY 2015-16 in ITA No. 5927/Del/2019 and for AY 2016-17 in 17/Del/2022 are dismissed. Order is pronounced in open court on 26/08/2025. Sd/- Sd/- (VIKAS AWASTHY) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26/08/2025 PK/Ps