TMI Blog2012 (7) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... laborated its claim for deduction to the query issued by the AO during such correspondence and if the AO was of the opinion that such expenditure had to be spread over as provided in Section 35ABB nothing prevented AO from doing so in the original assessment that he framed. Full facts with respect to such claim were on record before him as it was not for the assessee to lead the Assessing Officer to any particular legal inference - impugned notice is not sustainable - in favour of assessee. - Special Civil Application No.9817 of 2009 - - - Dated:- 2-7-2012 - Akil Kureshi and Harsha Devani, JJ. For Appellant: Ms S N Soparkar, Sr. Counsel with Mrs Swati Soparkar For Respondent: ms Paurami B Sheth JUDGEMENT Per: Akil Kureshi: 1. The petitioner has challenged notice dated 17.3.2009 as at Annexure-A to the petition by which the assessment for the assessment year 2003-2004 is sought to be reopened. The petition arises in the following factual background : 2. The petitioner is a company registered under the Companies Act and is regularly assessed to tax. For the assessment year 20032004, the petitioner filed its return of income on 30.11.2003. The return of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22nd September, 2001, the Company has paid/provided for license fees at the rate of 12% and for WPC fees at the rate of 3% of the Adjusted Gross Revenue (AGR) from licensing activities w.e.f. 25th January, 2001." 4. While processing the return of the petitioner, the Assessing Officer issued a communication dated 1.9.2005 and required the representative of the petitioner to remain present before him on an appointed day with necessary documents and replies to several queries annexed to such letter which included the following: "22. Please furnish the detailed working deduction claimed u/s. 35ABB of Rs.27,62,40,888/and justify your claim. 27.Please refer to Note No.8(c) in Schedule 21 regarding license fees of Rs.3667.63 Million and the amortization of the same. Please explain and submit the details of the same. Please also furnish the details of amount payable as revenue sharing contribution to DOT as stated in Note 8(d) of the same schedule." 5. In response to such communication, the petitioner replied under letter dated 15.9.2005. Such letter contained explanation with respect to deduction under section 35ABB of the Act as under : "2. In respect of following expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Guarantee and for the same Comparable Uncontrolled Price method has been adopted and it has been reflected from Annexure-'A' to Form No.3CEB file along with the return of income copy of which is enclosed as Annexure2. 5. Detailed working of deduction claimed u/s.35ABB of Rs.27,62,40,888 is enclosed as Annexure3" 8. In yet another communication dated 20.12.2005, the petitioner clarified with respect to this claim which as under : "Point No.20: The assessee has been asked to give the bifurcation of Expenditure amortized U/s.35ABB before commencement and after commencement of business and nature of expenditure. The details of the same is attached herewith vide Annexure4." 9. Yet again on 9.2.2006,the petitioner wrote to the Assessing Officer and stated interalia as under : "The assessee has been asked to provide for the details of Licence fee. In the same connection it is stated that the amount of 3667.63 million, as mentioned in the point no.8(c) of schedule21 is the balance license fee, as on 31st July, 1999, which is amortized over the period of license, which is ending in 2014. The same is reproduced here under : License Fee payable to the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. On asking about detailed explanation about the working of the allowability,in all your replies dated 29.10.2005 and 9.02.2006, you have just enclosed the copy of annexure3( clause 15(1))of the return. Ion these replies, it is not clear as to whether this waiver of Rs.81.55 crores have been accounted for. Further details of claim made in each year, prior to this year is also not clear. Under this circumstance, and in the absence of clear bifurcation of allowability u/s.35ABB of the Act for each of the years, it will be assumed that the waiver of Rs.81.55 crores has not been taken care of. Suitable working will be made accordingly." 11. In reply to said letter dated 17.3.2006, the petitioner sent its communication dated 21.3.2006 clarifying this issue in the following manner : "Point 1 Claim under Section 35ABB of Rs.37.62 Crore Please note that company has been granted waiver of two installments I.e. Rs.81.55 Crore from Department of telecommunication(DOT) in respect of payment of licence fees. This amount was reduced from the amount payable to DOT upto 31.7.99. The deduction under Section 35ABB is claimed on the basis of actual payment made to DOT as per working at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year was charged to profit and loss account. However, license fee was in the nature of capital expenditure as it was paid to acquire and keep in force the license/right to operate the telecommunication services. Further, the fee paid to keep the license in force had an enduring benefit since the account had obtained a right to operate the telecommunication service for a period of 20 years beginning January 1997 and ending in December 2016.This was in fact more that the premigration license for 10 years period of January 1997 to December 2006. Prior to migration too the new policy too, assessee was required to pay license fee on a fixed formula basis. Under the new policy assessee was required to pay license fee each year but on a revenue sharing basis. Thus, except for the change in mode of computation of license fee, the nature of payment remained same from the commencement of business itself. In fact, assessee had acquired a greater enduring benefit than that was in place prior to migration. On migration to the new telecom policy, license granted for enhanced period of 20 years from 10 years earlier. The principals laid down by the Hon'ble Supreme Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that completed assessment cannot be reopened beyond a period of four years in absence of failure on part of the assessee to disclose truly and fully all material facts. It was contended that entire issue was examined threadbare by the Assessing Officer while framing the original assessment. Any attempt to deny this benefit at this stage would only amount to change of opinion. 16. The Assessing Officer however, rejected the objection vide his order dated 24.8.2009. He was of the opinion that though the assessee had effected the change in his accounting policies for the purpose of its books, the expenditure incurred on the license fee continued to be in the nature of capital expenditure and the deduction thereof can be allowed only within the ambit of Section 35ABB of the Act. The Assessing Officer placed reliance on certain decisions of the Apex Court to suggest that every disclosure cannot be treated as true and full disclosure and that mere production of evidence before the Income Tax Officer would not be enough and there may be cases of omission or failure to make true and full disclosures. If some material for the assessment lay embedded in the evidence which the assessee cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef that income chargeable to tax has escaped assessment, requirement of proviso to section 147 also must be fulfilled which reads as under : "Provided that where an assessment under subsection( 3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection( 1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year." 20. The moot question in the present case is whether there was any failure on part of the assessee to disclose fully and truly all material facts necessary for the assessment of assessment year in question. 21. Answer to such question, shall have to be ascertained from the reasons recorded by the Assessing Officer which reasons would have to be appreciated with the aid of the documents on record. 22. In the reasons recorded, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of the same and also asked the petitioner to furnish the details of amount payable as revenue sharing contribution to DOT as stated in note 8(d) of the said schedule. The petitioner replied to such queries and submitted the details as available. 25. Further reply came to be issued by the petitioner on 29.10.2005 in which the petitioner stated interalia that regarding the amortization of license fees, the company had balance of Rs.3,031.87 million of unabsorbed license fees under the heading Miscellaneous expenditure. Out of the same license fees amounting to Rs.238.24 million has been amortized against the profit of said assessment year and same has been disallowed in the return of income. Detailed working of such deduction was also provided. 26. There are further queries by the Assessing Officer and replies by the petitioner on this issue. It is however, not necessary to take note of the same. Suffice it to record that during the original assessment that the Assessing Officer framed after scrutiny, he was fully conscious and alive to the petitioner's claim of deduction of license fee expenditure. Such deduction was claimed at the outset. Claim was explained and justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceeding the Assessing Authority would for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help in coming to the correct conclusion. From the primary facts in his possession, whether on the disclosure by the assessee, or discovered by him on the basis of the facts disclosed or otherwise the Assessing Authority had to draw inferences as regards certain other facts and ultimately from the primary facts and further facts inferred from them, the authority had to draw the proper legal inferences and ascertain on the correct interpretation of taxing enactment, the proper tax leviable. So far as primary facts were concerned, it was the assessee's duty to disclose all of them. The duty however, did not extend beyond full and truthful disclosure of all primary facts. Once all primary facts were before the Assessing Authority, it was for him to decide what inferences of facts can be drawn. It is not for somebody else, far less the assessee to tell the assessing authority what inferences, whether of facts or of law, should be drawn. 30. To our mind, this important aspect and conclusion of the Constitution Bench of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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