TMI Blog2012 (5) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Respondent ORDER D.K. Agarwal, Judicial Member 1. This appeal preferred by the assesee is directed against the order dated 01-01-2010 passed by the ld. CIT(A) for the assessment year 2005-06. 2. Briefly stated facts of the case are that the assessee company was incorporated 17-2-2000 with the primary object to provide E-Tendering services, Cyber Cafe services and sale of Internet packs. During the year under consideration, the assessee company has rendered the abovementioned services. During the course of assessment, the AO observed that the assessee company has claimed deduction u/s.80IA of the I.T. Act, 1961 ("the Act"), Rs.97,29,026/-. The assessee was asked to explain as to how the company is eligible for deduction u/s.80IA. In response, it was submitted by the assessee that: "1) Millennium Telecom Limited has been incorporated under the Companies Act as a separate entity from 17.10.2000 (sic). 2) It is not formed by transfer of old plant and machinery. 3) The undertaking was engaged in providing telecommunication services i.e. E-Tendering Services which comes under Internet Services and Electronic Data Inter change Services. (Category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 3. On appeal, the ld. CIT(A) observed and held as under:- (i) The deduction under section 80IA(4)(ii) is available only if telecommunication services provided are basic or cellular. The meaning of basic telecommunication service has to be understood in its normal commercial sense as understood by an ordinary user of telecommunication services. Traditionally speaking, such services could be provided through the connectivity of a landline. Further, it should satisfy the basic needs of an ultimate customer in telecommunication. (ii) While referring to the dictionary meaning of the term 'basic' which means "confirming or serving as a base; fundamentally; simplest or lower in level, the ld. CIT(A) observed that "basic telecommunication services" means telecommunication services of lowest level/first level rendered to an end customer. He further observed that the facts of the present case do not show that the assessee is not providing basic or cellular telecommunication services. (iii) For carrying out the business of providing telecommunication and internet services, licence of Department of Telecommunication is required. It is true that the licence was granted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234B and 234C. 5. At the time of hearing, the ld. counsel for the assessee, at the outset, refers to the observation of the ld. CIT(A) that the assessee has provided only eservices to its parent company, M/s. Mahanagar Telephone Nigam Ltd. and these receipts are not for providing telecommunication services. It has been further held that the assessee is only marketing internet services and is not itself providing any basic telecommunication services. He further submits that in this regard the relevant provisions of section 80IA(4)(ii) are as under: "(ii) any undertaking which has started or starts providing telecommunication services whether basic or cellular, including radio paging, domestic satellite service, network of turnking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, 2003". 6. He further submits that it will be important to refer to the developments which have taken place in this section 80IA(4)(ii) since its introduction by the Finance Act 1997, which reads as under (written submissions): "......... On going through the scheme of the Section 80IA it may be noted that Section 80IA provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestic satellite service, networking trunking and electronic data inter-changes." The scope of this caluse was further expanded by the Finance Act, 2001 by adding "broadband network and internet services." Thus, the telecommunication service is not limited to basic or cellular as is being alleged by the CIT(A). The scope has been expanded to include various valued added services including internet services. In this regard, the contention of the AO that the assesee has not made any investment in the infrastructure is not relevant as this section nowhere requires that certain investments need to be made for this purpose. Further the observation of the AO that the assessee was using the infrastructure of Mahanagar Telephone Nigam Ltd. is also not relevant as there is no such condition that the eligible company cannot use the infrastructure of other companies. There is no provision of using old plant and machinery as is the case applicable in the case of an industrial undertaking under sub-section (3). Now, coming to the observation of CIT(A), the observation of the CIT(A) on page 4 to the effect that telecommunication services which are basic and which should satisfy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NL decided to have a separate company in the name of Millennim Telecom Ltd. i.e. assessee company to start these value added services and accordingly this company was incorporated on 17th February, 2000 and it started providing its services in the year 2002. The object clause of the company was to operate and maintain all types of value added services in the field of telecommunication including but not limited to providing cellular mobile services, ISB services, IN services, ISDN services, Multi-media services, Paging services, and other value added services to meet the demands of the customers or otherwise. These objects clauses are placed at paper book page 25. The licence was granted by the Department of Telecommunication on 6th October, 2000 to provide the above services and the same was extended on 13th August, 2002. As a part of its first business strategy, the assessee company started providing E-tendering services which is a valued added services and is an internet service covered by clause (ii) of Sub-section(4) of 80IA. This was a new service. The first customer of its services was its parent company i.e. Mahanagar Telephone Nigam Ltd. itself. In this process, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l note providing E-Tendering Internet Services was not submitted before the AO and the ld. CIT(A), therefore, he has no objection if the issue is set aside to the file of the AO. 8. On the other hand, the ld. D.R., while relying on the orders of the AO and the ld. CIT(A), submits that he has no objection if the issue is set aside to the file of the AO. 9. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that before the AO and ld. CIT(A) the assessee has not submitted any material to show the process, function and opinion in respect of its claim that the assessee company is providing E-Tendering Internet Services eligible for deduction u/s.80IA(4)(ii). Now, at this stage, the assessee has filed a detailed note on E-Tendering Internet Services. The said note was not before the AO and the ld. CIT(A). 10. In CIT vs. Emptee Poly-Yarn Pvt. Ltd. (2010) 320 ITR 665 (SC), it has been observed by Their Lordships (placitum 5 at page 666 of ITR): "Repeatedly this court has recommended to the Department, be it under Excise Act, Customs Act or the Income-tax Act, to examine the process ..... X X X X Extracts X X X X X X X X Extracts X X X X
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