TMI Blog2012 (11) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... of lease rent received as advance rent - assessee has received IRC fees in one go - Held that:- The agreement dated 30/4/2003 entered into between Reliance Infocomm Ltd. and the respondent assessee concluded that Reliance Infocomm Ltd. in terms of the agreement had only a right to use the net work during the tenure of the 20 year agreement. Further that the agreement was liable to be terminated at the sole discretion of Reliance Infocomm Ltd. and consequently, the amount received as advance for 20 years lease period would have to be returned on such termination for the balance un-utilized period. Thus the respondent assessee had in terms of AS-19 & relying on J.K. Industries ltd. v. CIT [2007 (11) TMI 401 - SUPREME COURT OF INDIA] wherein theory of matching principles and application of accounting standards upheld, correctly spread the entire fee of ₹ 3037 crores over the period of 20 years and to pay tax thereon over the entire period - in favour of assessee. - ITA No.4727 of 2010 - - - Dated:- 22-10-2012 - J P Devadhar And M S Sanklecha, JJ. Appellant Rep by: Suresh Kumar Respondents Rep by: S. E. Dastur, Sr. Adv. with Mr. Niraj Seth with Mr. B. G. Yewale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance Infocomm Ltd. (RIL) were transferred at the rate of ₹ 1/- per share ( the face value per share) to one Mukesh Ambani when the market value of the share was ₹ 53.01 per share. Therefore, the notice proposed to assess a sum of ₹ 2635 crores as a short term capital gain being a difference between market value per share of ₹ 53.71 and face value per share was ₹ 1/-. (ii) amount of ₹ 3037 crores received from Reliance Infocomm Ltd. as fees for grant of Indefeasible Right of Connectivity (IRC) for a period of 20 years was income accrued to the assessee in the assessment year 2004-05 itself. c) The respondent-assessee responded to both the notices and contended that 50 crores shares of the face value of ₹ 1/- per share were given as pledge to one Mukesh Ambani for an amount of ₹ 50 crores borrowed from him and there was no sale of shares. Alternatively, it was contended that at the highest the short term capital gain could be on the basis of ₹ 50 crores received as consideration for sale of the shares and not the market value of the shares. So far as the second ground was concerned viz. ₹ 3037 crores rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a detailed examination of the Agreement concludes Reliance Infocomm Limited has only a right to use the net work during the tenure of the agreement. This was so as the agreement was in the nature of a lease between Reliance Infocomm Ltd. and the respondent-assessee. Further, the agreement could be terminated at the sole discretion of Reliance Infocomm Ltd. Therefore the Tribunal by placing reliance upon Accounting Standards formulated by the Institute of Chartered Accountants concluded that the fees had to be spread over the period of the lease as the entire fees had not accrued during the assessment year 2004-05. The Tribunal upheld the treatment given by the respondent-assessee to the IRC fees received from Reliance Infocomm Ltd. by having offered an amount of ₹ 63.28 crores as the income accrued for the five months between November 2003 to March 2004. Further, the Tribunal held that the condition precedent to invoke powers under Section 263 of the Act did not exist and the same was incorrectly exercised by the Commissioner of Income Tax. 4. Mr. Suresh Kumar in support of the appeal places reliance upon the order of the Commissioner of Income Tax dated 9/03/2006 and subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2005-06 also shows that an amount of ₹ 50 crores shown under the head other loans as on 31/3/2004 was shown as nil as on 31/3/2005. In case it was not a loan, as rightly observed by the Tribunal there would have been no occasion to repay the amounts. Further the appellant before us has not disputed the fact of return of loan and also the receipt of pledged shares from Mukesh Ambani. In fact, the evidence in the form of transaction statement of Demat Account dated 24/12/2004 was produced at the time of hearing showing the return of 5-crores shares of Reliance Infocomm Limited to the respondent on 24/10/2012 i.e. the date when the loan was returned by the respondent to one Mukesh Ambani. Besides, the finding of the Tribunal is a finding of fact and the revenue has not been able to show that the same was in any manner perverse. Consequently, question (a) does not raise any substantial question of law and is dismissed. Re Question (b) : 11. So far as the second issue is concerned, the Tribunal has on examination of the agreement dated 30/4/2003 entered into between Reliance Infocomm Ltd. and the respondent assessee concluded that Reliance Infocomm Ltd. in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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