TMI Blog2010 (2) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... /2009; - - - Dated:- 26-2-2010 - K.G. Bansal, George Mathan, JJ. Kanchun Kaushal and Ravi Sharma for the Assessee D.N. Kar for the Revenue ORDER George Mathan, Judicial Member:- 1. This appeal by the assessee has been preferred against the order of learned CIT(A) XIX, New Delhi in appeal No. 198 of 2008-09, dt. 19th Aug., 2009 for the asst. yr. 2006-07. Shri Kanchun Kaushal and Shri Ravi Sharma, chartered accountants represented the assessee and Shri D.N. Kar, CIT-Departmental Representative represented the Revenue. 2. It was the submission by the learned Authorised Representative that the issue in the appeal was against the action of learned CIT(A) in confirming the action of the AO in denying the assessee the benefit of deduction under s. 80-IA(4)(ii) of the Act. It was the submission that the assessee is a company which was incorporated under the name C.G. Graphnet (P) Ltd. on 15th Nov., 1994. The name of the company was changed to C.G. Fax Mail Ltd. on 15th Nov., 1996. The company was converted into a public limited company on 23rd Sept., 1997. The company was acquired by Direct Internet Ltd. in August, 2000 and the name of the company was cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of deduction under s. 80-IA(4) for the asst. yrs. 2004-05 and 2005-06 but the submission of the assessee was rejected on the ground that each assessment year was separate and the issue can be considered in each year separately. It was the further submission that in appeal before the learned CIT(A), the learned CIT(A) had confirmed the finding of the AO. It was the submission that the provisions of s. 80-IA(3) which were invoked by the AO did not apply to the assessee's case as it falls within the provisions of s. 80-IA(4)(ii) of the Act. It was the submission that the provisions of s. 80-IA(3) had been amended w.e.f 1st April, 2005 by the Finance (No. 2) Act of 2004 wherein cl. (ii) of sub-s. (4) had been brought within the purview of s. 80-IA(3) of the Act. Thus, it was the submission that till 1st April, 2005 the provisions of s. 80-IA(3) of the Act did not apply to the provisions of s. 80-IA(4)(ii) of the Act. It was the further submission that even as per the circular issued by the CBDT in Circular No. 5 of 2005, dt. 15th July, 2005 [(2005) 197 CTR (St) 1] which was binding on the IT authorities, it was clearly mentioned that if an undertaking is formed by transfer of old p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentary evidence the claim of deduction under s. 80-IA and the reply of the assessee dt. 5th Nov., 2007 (sic) wherein this issue has been clarified. It was thus a submission that the assessee was entitled to the deduction under s. 80-IA insofar as the provisions of s. 80-IA(3) of the Act did not apply to the facts of the assessee's case, the agreement dt. 19th April, 2002 did not result in new business being started and also on account of the principle of consistency. 3. In reply, the learned Departmental Representative submitted that though the internet services were started from October, 2000, the company was incorporated in 1994 and the assessee had itself in the case of assessment for the asst. yr. 2003-04, confirmed that the business of the assessee was stated in 1997. It was the submission that the assessee had been originally in the business of fax mail services and in October, 2000 the assessee had ventured into a new business being internet services by entering into an agreement with DOT on 5th Jan., 1999. It was the further submission that vide agreement dt. 19th April, 2002 the assessee had started another business under the style of internet telephony. It was the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(4) of the Act. It was further submitted that the AO had not considered the different incomes being the income from fax mail and the income from internet services and internet telephony. It was the submission that the fax mail services was not eligible for the deduction under s. 80-IA. 4. In reply, the learned Authorised Representative submitted that the decision of Special Bench of this Tribunal in the case of Videsh Sanchar Nigam Ltd. (supra) did not apply insofar as it was a case in relation to the earth station which was being run by the VSNL and in the said decision it had been categorically found that the assessee therein had commenced two earth stations in the previous year being during May, 1995 and another in June, 1995 but had been in business of telecommunication service provider was as back as since 1986 and the earth station by itself could not be considered as separate and independent undertaking and consequently the deduction under s. 80-IA had been denied. It was the submission by the learned Authorised Representative that in the assessee's case this was not so. It was the submission that the business of the assessee had commenced after 1st April, 1995 and befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services on or after the 1st day. of April, 1995, but on or before the 31st day of March, 2005." 5.1 A perusal of the provisions of s. 80-IA(3) clearly shows that the term "cl. (ii)" was inserted by the Finance (No. 2) Act of 2004 w.e.f. 1st April, 2005; this insertion is not with retrospective effect, as it is not so specified in the Act. The circular issued by the CBDT explaining the provisions relating to Direct Taxes Finance (No. 2) Act of 2004 also shows that the insertion is to take effect from 1 st April, 2005 and is to apply in relation to the asst. yr. 2005-06 and subsequent years. The 1st year of claim of the assessee for deduction under s. 80-IA undisputedly is the asst. yr. 2004-05. The business of fax mail has been started by the assessee in 1997 and the business of providing internet services during the year 2000 being 17th Oct., 2000 relevant to asst. yr. 2001-02. Therefore, what is to be seen is whether there has been any violation of the provisions for the claim of deduction under s. 80-IA(4)(ii) for the asst. yr. 2001-02 or at the maximum in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise the cl. (ii) of sub-s. (4) of s. 80-IA having been inserted in sub-s. (3) of s. 80-IA w.c.f. 1st April, 2005, and the business of the assessee having been formed and started much before that date be it 1997 or January, 1999 or 19th April, 2002 as the business of the assessee has been formed and commenced much before 1st April, 2005 the restrictions placed by s. 80-IA(3) to the provisions of s. 80-IA(4)(ii) would not bar that assessee for continuing with its claim of deduction under s. 80-IA. Thus, as the provisions of s. 80-IA(3) are not applicable to the present assessee's case, the bar provided under s. 80-IA(3) would not disentitle the assessee from claiming the deduction under s. 80-IA on its income from internet services and internet telephony. 5.3 In regard to the submissions of learned Departmental Representative that the business of the assessee and the income from the business of fax mail cannot be considered for deduction under s. 80-IA, it is noticed that the assessee has not made a claim nor does the assessee have any income from the business of fax mail during the relevant assessment year. We are not going into the issue as to whether fax mail itself is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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