TMI Blog2013 (11) TMI 1269X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected from the record of the assessee, the onus laid on it stood discharged – Decided against Revenue. License Fee - Amortization u/s 35ABB – Applicability of Section 37 - Whether the CIT (A) has erred in directing to allow license fee paid to Department of Telecommunication - Held that:- Following ASSISTANT COMMISSIONER OF INCOME-TAX Versus BHARTI CELLULAR LTD. [2006 (4) TMI 50 - ITAT, KOLKATA] - Annual license fee calculated on the basis of annual revenue of the assessee company was of revenue expenditure and have to be allowed u/s. 37 and not u/s. 35ABB – thus Assessing Officer was directed to treat the licence fee as revenue expenditure covered u/s. 37 of the I.T. Act. Rate of Depreciation - Higher rate of depreciation on computers, printers and scanners - Whether the CIT (A) has erred by allowing the depreciation @ 60% on computer peripherals though the I.T. Rules allows 60% depreciation only on computer and computer software – Held that:- Following C.I.T. vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] - Computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system - the computer acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts in directing to allow license fee of Rs. 548,16,12,350/- paid to Department of Telecommunication ignoring the fact a) that the same were correctly amortized over a period of 20 years by applying provisions of Section 35ABB of the Act. b) provisions of section 37 of the Act applied by the Ld. Commissioner of Income Tax (A) are not correct appreciation of facts. iii). In the facts and circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred in law and on facts by allowing the depreciation @ 60% on computer peripherals amounting to Rs. 41,83,174/- though the I.T. Rules allows 60% depreciation only on computer and computer software. iv) The Ld. Commissioner of Income Tax (A) has erred in law and on facts in directing the delete addition of Rs. 17,50,02,49,000/- from block profit ignoring the fact that the clause (b) of the Explanation to subsection 2 of section 115JB of the Act clearly states that if any reserve by whatever name called are debited to the P L account. The book profit has to be increased by that amount. v). The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the disallowance of interest made in earlier year has been set aside by the Ld. Commissioner of Income Tax (A), which order of the Ld. Commissioner of Income Tax (A) has been confirmed in favour of the assessee company by the ITAT. 4.1 Before the Ld. Commissioner of Income Tax (A) assessee interalia submitted that the disallowance in this regard was deleted by the Ld. Commissioner of Income Tax (A) in earlier year and the same was further confirmed by the ITAT. Ld. Commissioner of Income Tax (A) concluded that the Assessing Officer has made the addition of Rs. 186,40,95,000/- on account of interest on term loan amounting to Rs. 184,91,00,000/- and out of the other interest Rs. 1,49,95,000/-. Ld. Commissioner of Income Tax (A) held that there were sufficient availability of adequate interest free funds and following the decision in the case of the assessee in A.Y. 2001-02, 2003-04 and 2004-05 by the ITAT on same facts as confirmed by the Assessing Officer the addition of Rs. 186,40,95,000/- made by the Assessing Officer was therefore deleted. 5. Against the above order the Revenue is in appeal before us. 6. We have heard the rival contentions in light of the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt. Hence, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (A). Accordingly, we uphold the same. 7. Apropos ground no. 2 On this issue Assessing Officer observed that an amount of Rs. 7,63,14,56,000/- was claimed as license fee on the revenue sharing basis. Assessee was asked to explain as to why the license fee paid may not be amortised over the remaining period of license of 20 years. Assessing Officer noted that in earlier years, Ld. Commissioner of Income Tax (A) has decided the issue in favour of the assessee. Assessing Officer noted that the department has not accepted the decision of the Ld. Commissioner of Income Tax (A) and preferred an appeal before the ITAT on the similar issue. Therefore, he held that for the sake of consistency, variable license fee is amortized over the remaining period of license i.e. 20 years. Accordingly, an amount of Rs. 214,98,43,220/- was allowed as deduction u/s. 35ABB of the Act, 1961 and the remaining amount of Rs. 548,16,12,350/- was disallowed and added to the income of the assessee. 8. Before the Ld. Commissioner of Income Tax (A), assessee submitted that payment of the license fee calculation was on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% as against the claim of 60% by the assessee. Therefore, excess depreciation amounting to Rs. 41,83,174/- was added to the income of the assessee company. 13. Upon assessee s appeal Ld. Commissioner of Income Tax (A) observed that computer peripherals were part and parcel of the computers and hence, entitled to 60% depreciation. Ld. Commissioner of Income Tax (A) further noted that the same has been allowed by the ITAT in assessee s group company case. Therefore, Assessing Officer was directed to allow the depreciation @ 60% on computer peripherals. 14. Against the above order the Revenue is in appeal before us. 15. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that the Hon ble Jurisdictional High Court in the case of C.I.T. vs. BSES Rajdhani Powers Ltd. in ITA No. 1266/2010 dated 31.8.2010 had held that computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system as they cannot be used without the computer. Hence, same are the part of the computer system and entitled to depreciation at the higher rate of 60%. Accordingly, considering the aforesaid pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Rs. 1048,93,55,000/- and written off in the profit and loss account. It was pleaded that such write off has not to be added back while determining the book profit u/s. 115JB. 17.1 It was explained that the cost of investment in the erstwhile company exceeded the net assets as on 1.4.2004, the and therefore the shortfall has been written off as a valid debit to the profit and loss account. The statutory auditors of the company have confirmed in their auditor s report that the profit and loss account has been drawn up in accordance with Accounting Standards and Companies Act, 1956. 17.2 In addition to the above, it was also submitted by the Ld. Authorised Representative that the Expln. 2 of section 115JB does not provide any such adjustment to compute the book profit from the profit and loss account drawn as per Schedule VI of the Companies Act, 1956. Any such adjustments which are not explicitly provided under the said Expln. 2 shall be ultra virus of the I.T. Act. 17.3 On above contention, the assessee has relied on the decision of Hon ble Supreme Court and High Courts in case of Apollo Tyres Ltd. vs. C.I.T. (2002) 225 ITR 273 (SC.) 17.4 It was also explained that a simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 ITR 273 (SC) - Kinetic Motor Co. Ltd. 262 ITR 340 (Bom) - Rain Commodities Ltd. 4 ITR (TRIB) 551 (Hyd.) SB. 19.1 It was further submitted that the matter is now covered in favour of the assessee by the Ld. Commissioner of Income Tax (A) s decision in assessee s own case for A.Y. 2002-03 which has been accepted by the Revenue. 19.2 Ld. Departmental Representative on the other hand relied upon the order of the Assessing Officer. 19.3 We have heard the rival contentions and perused the records. We note that subsidiary company namely Bharti Cellular Ltd. and Bharti Infotel Ltd. merged with the assessee holding company Bharti Airtel Ltd. The share capital investment by the assessee in the subsidiaries got extinguished. The net worth being assets less liabilities of the subsidiaries, on merger, became assets and liabilities of the holding company in lieu of extinguished capital. The difference between the value of investment in shares of subsidiaries and the value of the merged net wroth was a loss on the investment of the assessee in the subsidiary company. The company has debited 1750 Cr to the profit and loss account on account of this loss on its investments. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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