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M/s. ATC Telecom Tower Corporation Pvt. Ltd. Versus DCIT

2015 (5) TMI 502 - ITAT MUMBAI

Determination of ALP on account of issue of equity shares - TPO adopted the value of each equity share as ₹ 756/- per share whereas according to the assessee it issued 555 lakhs equity shares each at ₹ 100/- per share during the relevant financial year - Held that:- Having regard to the circumstances of the case and in the light of the binding decisions of the Hon'ble Bombay High Court in Vodafone India Services Pvt. Ltd. case [2014 (10) TMI 278 - BOMBAY HIGH COURT] we hold that .....

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stence with regard to the abandoned sites. Such being the case it is but natural to conclude that the expenditure incurred by the assessee has not given any enduring benefit to the assessee. The case law relied upon by the assessee squarely applies to the instant case and therefore we hold that the expenditure incurred by the assessee is allowable as deduction and consequently there is no question of allowing depreciation on the same. - Decided partly in favour of assessee. - ITA No. 974/Mum/201 .....

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ng the learned counsel for the assessee submitted that Ground Nos. (A) to (N) are referable to determination of ALP on account of issue of equity shares of ₹ 10/- each @ ₹ 100/- per share. 3. Brief facts of the issue in dispute are stated as under. Assesseecompany was engaged in the business of Passive Telecom Site Infrastructure Service termed as Infrastructure Service to cellular mobile telephony operators. For the year under consideration return of income was filed on 30.09.2009 w .....

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3CEB. Since the value of international transactions exceeded ₹ 15 crores, the case was referred to TPO, Mumbai to compute Arm s length price in relation to its international transactions. The TPO, in turn, granted sufficient opportunity to the assessee and considered the issue in detail. Vide order dated 30.01.2013, passed under section 92CA(3) of the I.T. Act, he worked out the total transfer pricing adjustment of ₹ 4149 crores in relation to various international transactions of th .....

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ding to the assessee it issued 555 lakhs equity shares each at ₹ 100/- per share during the relevant financial year. On account of the difference between the price adopted by the assessee and the TPO the adjustment worked out to ₹ 3640,80,00,000/-. The DRP considered the value of each equity share @Rs.784.24/-. The DRP observed that the TPO has made a clear finding that the AE is based in Mauritius and has no operational activity and has no credit rating of its own. Hence, in additio .....

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upto 31.03.2009 Arm s length interest adjusted @ 15.09% (12.09% + 3% mark up) 1 Equity shares 07.05.2008 (4,55,00,000) 3113,29,20,000 329 423,45,97,424 2 Equity shares 13.05.2008 (1,00,00,000) 684,24,00,000 323 91,37,07,851 Total 514,83,05,275 6. Accordingly the adjustments under section 92CA of the Act are worked out as under: - Sr.No. Adjustment Amounts 1 Arm s Length Price of the shares and debentures issued ₹ 3797,53,20,000/- 2 Arm s Length interest on the deemed loan to AE ₹ 51 .....

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ia Services Pvt. Ltd. issued 289224 equity shares of the face value of ₹ 10 each on a premium of ₹ 8,509/- per share to its holding company and thus received a total consideration of ₹ 246.38 crores whereas according to the AO/TPO the fair market value of the equity shares was much higher. Assessee determined the fair market value in accordance with the methodology prescribed by the Government of India under the Capital Issues (Control) Act, 1947 whereas according to the AO/TPO .....

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n the resident only in respect of profits earned and not in respect of profits which he would have normally made but not made because of a business association with a non-resident. It was further observed that tax can be charged only on income and in the absence of any income arising, the issue of applying the measure of ALP to transactional value/consideration itself does not arise and also clarified that the Revenue seems to be confusing the measure to a charge and calling the measure a notion .....

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-resident for issue of shares, as it would discourage capital inflow from abroad. In the absence of a charging section in Chapter X of the Act, it is not possible to read a charging provision into Chapter X of the Act. It thus, concluded that in the absence of charging provision to tax issue of shares at premium to a non-resident, the occasion to invoke computation provision does not arise. The learned counsel for the assessee also relied upon another decision of the Hon'ble Bombay High Cour .....

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decided to accept the order of the Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. the Department has decided to accept the view taken by the Hon'ble Bombay High Court. In the light of the decision of the Hon'ble Bombay High Court, which was accepted by the Revenue, the learned counsel for the assessee submitted that in the instant case also the adjustment made by the AO, on account of arm s length price of shares issued and arm s length price of deemed loa .....

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f the aforecited decisions. Having regard to the circumstances of the case and in the light of the binding decisions of the Hon'ble Bombay High Court we hold that the AO erred in making the impugned addition referable to the price of shares and of the interest on deemed loan to the holding company. We direct the AO accordingly. 10. Vide ground (Q) the assessee contends that the DRP erred in enhancing the value of transfer pricing adjustment without issuing any notice of enhancement as contem .....

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g a sum of ₹ 36,17,918/- referable to site survey expenditure and professional fees and also raised an alternative contention that in the event of capitalising the expenditure depreciation should have been allowed on such capitalised value. During the course of argument the learned counsel submitted that the assessee is in the business of arranging site infrastructure services to cellular mobile operators, i.e. building towers on the premises taken on lease and antenna provided therein to .....

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ed to erect towers. The process involves evaluation of multiple sites and at each site a detailed site survey has to be conducted and only on the sites which were finalised towers are erected. In this process it incurs site survey expenses. Assessee has also incurred legal and professional charges of ₹ 1,26,500/- on account of site acquisition. In order to take sites on lease and erect towers, with the objective of earning revenue, it has to conduct site survey, apart from legal and profes .....

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the AO find place in para 5 of his order. 13. Aggrieved, assessee contended before the DRP (page 38 of DRP s order) that the AO erred in relying upon the decision of the Hon'ble Apex Court in the case of Brook Bond India Ltd. 225 ITR 798 since the expenditure is of revenue nature. The DRP, however, chose to follow the decision of the Hon'ble Apex Court (supra) in holding that it is a capital expenditure since it results in an enduring benefit to the assessee. 14. Aggrieved, assessee is .....

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diture is related to business of providing passive telecom infrastructure services and hence the same has to be treated as revenue in nature. He adverted our attention to the decision of the Hon'ble Bombay High Court in the case of Richardson Hindustan Ltd. vs. CIT 169 ITR 516 wherein the court observed that an expenditure incurred in connection with capital asset on lease, for a long/fixed period, is more akin to the nature of rent and the legal expenditure thereon is allowable as business .....

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ITR 114 the court observed that the advance paid for acquisition of land to set up a factory but abandoned later should be treated as revenue expenditure since no benefit of enduring nature has come into existence because no capital asset has come into existence. If the expenditure is treated as revenue in nature there is no question of allowing depreciation on such asset. He has also relied upon the decision of the ITAT I Bench, Mumbai in the case of Idea Cellular Ltd. vs. Addl.CIT 65 SOT 15 wh .....

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allowable as revenue expenditure. The learned counsel also submitted that similar expenditure was incurred by the assessee in earlier years but upto A.Y. 2008-09 no such disallowance was made by the AO; though for A.Y. 2008-09 notice was issued under section 148 of the Act but later on no disallowance was made referable to the expenditure incurred towards site survey. Even in A.Y. 2011-12, though a query was raised by the AO no disallowance was made. Having regard to the circumstances of the cas .....

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