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M/s Idea Cellular Ltd. Versus Asstt. Commissioner of Income Tax

2015 (4) TMI 92 - ITAT MUMBAI

Pre-operative income - Held that:- Assessee was in receipt of ₹ 38 lacs prior to commencement of operation which was adjusted against the capital expenditure. By applying the decision of Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. (1997 (7) TMI 4 - SUPREME Court), the A.O. has taxed the same as ‘income from other sources’. The ld. A.R. has relied on the decision of Triveni Engineering Works Ltd. vs. CIT,[1997 (11) TMI 77 - DELHI High Court], CIT vs. B .....

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ering the nature of receipt vis-ŕ-vis intrinsic connection with the capital expenditure incurred by the assessee. - Decided in favour of assessee for statistical purposes.

Provident fund dues - disallowance u/s 37 deleted by CIT(A) - Held that:- CIT(A) has allowed the claim by applying the provisions of section 43B of the Act wherein deduction n respect of provident fund was allowed on payment basis. The ld. CIT(A) held that the amount has been paid during the year under consideration .....

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). As the expenditure was incurred was revenue in nature as held by the Hon’ble High Court, we do not find any infirmity in the order of ld. CIT(A) deleting the disallowance - Decided in favour of assessee.

Disallowance of brand service fees treated as capital expenditure - Held that:- brand servicing fee was paid by the assessee since last several years and in the earlier assessment orders, this expenditure has been held to be revenue in nature by the A.O. himself. No distinguishing .....

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vanced to subsidiaries - CIT(A) deleted the disallowance - Held that:- found that Tata Group were promoters of idea Cellular Ltd. and they were in land line telephone service in area of Madhya Pradesh. Because of this operation of Tata’s in Madhya Pradesh and because of connection between Tata’s and assessee company, assessee could not have entered into Mobile telephone services in the area of Madhya Pradesh. However, assessee wanted to enter into Madhya Pradesh for providing Cellular facilities .....

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ial on record, therefore do not find any reason to interfere with the order of ld. CIT(A) deleting the disallowance of interest attributable to funds advanced to subsidiaries - Decided in favour of assessee. - I .T.A. No.3261/Mum/2008, I .T.A. No.3568/Mum/2008 - Dated:- 11-3-2015 - Shri R.C. Sharma And Shri Vijay Pal Rao JJ. For the Appellant : Shri J.D. Mistry & Shri Krupa R. Gandhi For the Respondent : Shri Kishan Vyas ORDER Per R.C. Sharma, A.M. : These are the cross appeals filed by the .....

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pe of operation in 2000-01 in Andhra Pradesh by acquiring Tata Cellular Ltd. Further, in the year 2002-03, the company acquired a licence from DoT through bidding to operate in Delhi. Thus, currently the company operates in four telecom circles. The company also trades in handsets and accessories which are integral part of the nature of business in which the assessee is operating. During the course of scrutiny assessment, the A.O. observed that the assessee has shown capital work-inprogress at & .....

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the entire pre-operative income has been accrued to the assessee during the previous year relevant to the assessment year under consideration. As per the A.O. in view of Supreme Court decision in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT (227 ITR 172) it was obligatory on the part of the assessee to offer this income for taxation. Since the assessee has failed to do so, the same was brought to tax in this assessment year. An addition on this account of ₹ 38,00,0 .....

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td. (supra), the A.O. has taxed the same as income from other sources . The ld. A.R. has relied on the decision of Hon ble Delhi High Court in the case of Triveni Engineering Works Ltd. vs. CIT, 232 ITR 639 (Del), Hon ble Supreme Court decision in the case of CIT vs. Bokaro Steel Ltd. , 236 ITR 315 (SC) and the decision of Hon ble Delhi High Court in the case of Indian Oil Panipat Power Consortium Ltd. vs. TO (2009) 315 ITR 255 (Del) and contended that such pre-operative receipt was liable to be .....

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We direct accordingly. 4. The second grievance of the assessee relates to two additional grounds raised before the ld. CIT(A) for allowing Revenue Share Licencee Fees u/s 37(1) of the Act. 5. At the outset, the ld. A.R. invited our attention to the order of the Tribunal in assessee s own case in ITA No. 3260/Mum/2008 dated 29-04- 2014 for A.Y. 2001-02 wherein both the issues regarding accepting the additional ground as well as licence fees paid under revenue sharing was examined by the Tribunal .....

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the fresh claim first time before the appelate authority is concerned, we find that an identical issue was before the Hon ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra). The issue in the said case emerged from the fact that the assessee offered an amount to tax in the return of income which was not taxable as income. The inclusion of the said amount was not objected by the assessee even before the CIT(A) and only after filing appeal before the Tribunal .....

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the ground no. 2. It is clear from the decision of Hon ble Supreme Court that when a claim which is otherwise allowable /permissible but was not allowed as the assessee did not claim the same in the return of income, there is nothing under law to prevent the assessee to raise such claim before the appellate authorities if the facts relating to such new claim are already on record and do not require any investigation. Accordingly in the facts and circumstances of the case when the denial of claim .....

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lowable revenue expenditure. In the latest decision of Hon ble High Court of Delhi dated 9th December 2013 in the case of CIT Vs. Bharati Hexacom ltd. & Others, one of the issues before the Hon ble High Court was regarding the allowability of variable license fee on revenue sharing basis paid under the new telecom policy of 1999. The Hon ble High Court has discussed the issue and held in para 42 and 47 as under:- 42 The next obvious question is, on what basis apportionment should be done and .....

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ntioned above in item Nos.1 to 9 is answered in the following manner: (i) The expenditure incurred towards licence fee is partly revenue and partly capital. Licence fee payable upto 31st July, 1999 should be treated as capital expenditure and licence fee on revenue sharing basis after 1st August, 1999 should be treated as revenue expenditure. (ii) Capital expenditure will qualify for deduction as per Section 35ABB of the Act. 4.6 We further note that this Tribunal in the cae of Mahanagar Telepho .....

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he Tribunal, we direct the A.O. to allow the assessee s claim of licence fees paid under revenue sharing scheme to telephone department. We direct accordingly. 8. The first grievance of Revenue relates to allowing provident fund dues amounting to ₹ 1,70,388/-. We found that the ld. CIT(A) has allowed the claim by applying the provisions of section 43B of the Act wherein deduction n respect of provident fund was allowed on payment basis. The ld. CIT(A) held that the amount has been paid dur .....

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of the club and that right is enduring in nature. Consequently it cannot be treated as revenue. By the impugned order, the ld. CIT(A) had deleted the disallowance after observing as under:- 4.1 Learned counsel has drawn my attention to the decision of Hon'ble Mumbai High Court in the case of Otis Elevators & Hon'ble Gujarat High Court in the case of Gujarat Estate Export Corporation Ltd. reported at 209 ITR 649. In these decisions, it is claimed that the expenditure 'Under consi .....

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the decision of Hon ble Gujarat High Court in the case of Gujarat Estate Export Corporation Ltd. reported in 209 ITR 649 (supra). As the expenditure was incurred was revenue in nature as held by the Hon ble High Court, we do not find any infirmity in the order of ld. CIT(A) deleting the disallowance of Club fees paid by the assessee company. 11. Ground No. 3 is with respect to the depreciation on licence fees amounting to ₹ 39,37,22,853/- disallowed by the A.O. This ground has become infr .....

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argued that the nomenclature suggests that expenditure has been incurred for projection and development of the brand and therefore it is of capital nature. He has, accordingly, made the disallowance. By the impugned order, the ld. CIT(A) allowed the claim after having the following observation:- 7.2 I have perused the facts of the case and I find the only basis for making disallowance is nomenclature of expenditure, This is not a rational base for making this disallowance. If Assessing Officer .....

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Mistry that the payment is recurring in nature and does not give any enduring benefit to the assessee. The assessee gets only right to use the brand "AT&T" only till the time it paid such fee. In any case, "Idea" Brand was used by the assssee w.e.f. May 2002 and subsequently, AT&T exited. Hence, the question of any enduring benefit in the captioned year does not arise at all. Reliance was placed by the ld. A.R. on the following decisions for the proposition that a pay .....

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found that during the year under appeal, the assessee had paid brand servicing fees amounting to ₹ 86,70,000/- to AT&T Communications Services India Private Limited ("AT&T") for using the brand "AT&T" for the Maharashtra and Gujarat Circles and the same was debited to Profit & Loss Account and claimed as revenue expenditure. AT&T Corporation - USA was one of the promoters of the assessee. The assessee was earlier known by the name "Birla AT& .....

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y for the purpose of the assessee s business. 16. We find that in all earlier years as mentioned above, the assessee paid brand service fees to AT&T and debited the same to Profit & Loss Account and claimed as revenue expenditure in the return of income. The claim was never disputed by the revenue in any earlier Assessment Years and the same was allowed. During the year under appeal, the assessee paid brand service fees to AT&T only for the month of April 2002 and after that the asse .....

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owance of brand servicing fee paid by the assessee insofar as findings recorded by the ld. CIT(A) had not been controverted by the ld. CIT - DR by bringing any positive materials on record. 18. The next grievance of the Revenue i.e. ground No. 5 relates to disallowance of interest for interest free loans advanced to subsidiaries. By the impugned order, the ld. CIT(A) deleted the disallowance of interest after having following observation:- 9. Ground No.9 is against disallowance of interest amoun .....

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