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M/s Bharti Airtel Ltd. Versus Commissioner of Income Tax, New Delhi

2015 (5) TMI 865 - ITAT DELHI

Revision u/s 263 - AO failed to examine the taxability of the difference between the cost of the assets and fair value of the assets transferred to BIL, shown directly credited to the ‘Reserves for Business Restructuring’ by the assessee company in its balance sheet and that the AO failed to examine as to whether the said difference was to be assessed as capital gain u/s 45 of the Act or as a business income u/s 28(iv) of the Act - capital loss on transfer of PI undertaking by the assessee to BI .....

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o the Reserves for Business Restructuring, out of the said reserves an amount equal to the loss of ₹ 5739 crores had been credited to the P & L a/c.

From the above entries it is clear that the assessee had claimed the loss in the P & L A/c. However, the said amount was suo-motu added in the computation of income because it was not an allowable loss. This fact was examined by the AO who framed the draft assessment order for the approval of the DRP. The AO prepared a draft assessm .....

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page nos. 125 to 130 of the assessee’s compilation.

From the above noted facts, it therefore, appears that the issue on the basis of which assessment order was considered by the ld. CIT as erroneous and prejudicial to the interest of the Revenue was examined by the AO in detail and it was directed by the DRP that the addition was not to be made after proper verification. However, the AO arbitrarily made the addition. On the appeal of the assessee, the said addition was directed to b .....

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T was not justified in holding that the AO had not examined the issue relating to the loss on account of transfer of passive telecom infrastructure to the subsidiary company. Therefore, it cannot be said that the assessment order dated 30.10.2012 was erroneous and prejudicial to the interest of the Revenue.

As regards to the adjustment entry for revaluation of investment in subsidiary company i.e. BIL the amount of ₹ 5739 crores transferred from Business Restructuring Reserves o .....

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the ld. CIT himself failed to arrive at a definite conclusion and to form an opinion regarding the tax implication of the impugned transaction. In the present case, the ld. CIT on the one hand, stated that the transfer of telecom passive infrastructure undertaking at Nil consideration resulted in a capital gain of ₹ 2479 crores, on the other hand, the same transaction was alternatively alleged to have resulted in a business income of ₹ 2479 crores u/s 28(iv) of the Act. Moreover, th .....

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s either under section 45 or section 28(iv) of the Act.

As regard expenditure incurred by the assessee towards amount paid to BIL for usage of passive telecom infrastructure ld. CIT directed the AO to re-examine the allowability of expenditure claimed by the assessee but he had not stated as to how and in what manner the expenses claimed by the assessee were impermissible, therefore, the action of the ld. CIT was not justified. As in the former part of this order that the AO in the or .....

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his issue. This revision u/s 263 set aside - Decided in favour of assesse. - ITA No. 3120/Del/2014 - Dated:- 6-5-2015 - Sh. N. K. Saini, AM And Sh. C. M. Garg, JM,JJ. For the Petitioner : Sh. S. K. Tulsiyan, Adv. & Ms. Abha Agrawal, CA For the Respondent : Ms. A. Mishra, CIT DR & Ms. Y. Kakkar, Sr. DR ORDER Per N. K. Saini, A.M. This is an appeal by the assessee against the order dated 30.03.2014 passed by the ld. CIT, Delhi-I, New Delhi u/s 263 of the Income Tax Act, 1961, (hereinafter .....

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al provisions of the Act have not been examined by the assessing officer/Draft Resolution Panel (DRP), is without jurisdiction, bad in law and voidab- initio. 2. That on the facts and circumstances of the case and in law, the proceedings under section 263 of the Act having been initiated on the basis of incorrect facts, the impugned order passed pursuant thereto is without jurisdiction, illegal and bad in law. 3. That on the facts and circumstances of the case and in law, the CIT failed to appre .....

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f a collegium of three CITs, such an assessment was not amenable to revision under section 263 of the Act. 3.2. That on the facts and circumstances of-the case and in law, the CIT failed to appreciate that the order of the assessing officer stood merged with the order/directions of the DRP qua the specific issue of determination and allowability of 'capital loss' suffered by the assessee pursuant to the scheme of arrangement sanctioned by the High Court and thus the CIT had no jurisdicti .....

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and in law, the CIT erred in alleging that the order of assessing officer was erroneous and prejudicial to the interest of the revenue in as much as he had not examined as to whether the transaction of transfer of passive telecom infrastructure by the appellant to its 100% subsidiary for Nil consideration, resulted in capital gains/business income to the appellant and whether the said transaction was a colorable device to evade tax. 4.1 That on the facts and circumstances of the case and in law .....

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me transaction. 4.2 That on the facts and circumstances of the case and in law, the revisionary proceedings under section 263 of the Act having being initiated by the CIT on a mere 'change of opinion' as regards the tax implication of the transaction of 'transfer of passive telecom infrastructure', the impugned order passed pursuant thereto is without jurisdiction and bad in law. 5. That on the facts and circumstances of the case and in law, the CIT erred in setting aside the ass .....

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of the transaction of transfer of passive telecom infrastructure, as would be clear on perusal of para 20 of the impugned order alongwith the first show cause notice issued by the CIT on 25.11.2013 and the second show cause notice issued on 29.03.2014. Without prejudice: 7. The CIT erred in holding that the 'notional' difference between the book value and the fair market value of the 'passive telecom infrastructure' transferred by the appellant to Bharti Infratel Ltd. (BIL), cons .....

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f the passive telecom infrastructure, the issue of applicability of capital gains tax under section 45 did not arise in view of the specific exclusion provided in section 47(iii) of the Act. 7.3 That the CIT failed to appreciate that in absence of receipt of any consideration for transfer of the telecom infrastructure, the question of attributing any notional sum as consideration and bringing the transaction to capital gains tax did not arise and such an action had absolutely no basis in law. 7. .....

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the Act. 7.6 That the CIT failed to appreciate that the bonus shares issued by BIL in the subsequent years had no nexus with the transfer of the passive telecom infrastructure and the same could not be held to be consideration received on transfer of the telecom infrastructure. 8. Without prejudice, that the CIT erred on facts and in law in observing that the assessing officer had failed to examine the implications of section 50 and section 43(6) of the Act in relation to the transaction of tran .....

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preciate that the ingredients of section 28(iv) of the Act were not fulfilled in as much, as (i) there was no 'benefit or perquisite' accruing to the appellant on transfer of the telecom infrastructure, and (ii) the transaction was purely a capital transaction which was not in the appellant's regular course of business. 10. That the CIT erred on facts and in law in setting aside the assessment order passed by the assessing officer under section 143(3)/144 of the Act as regards allowa .....

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f such expenditure under the Act. 10.2 That the CIT failed to appreciate that there was no prejudice caused to the Revenue in the aforesaid transaction in as much as the amount allowed as deduction in the hands of the appellant was ultimately taxed in the hands of BIL at the same rate. The appellant craves leave to add to, alter, amend or vary the aforesaid grounds of appeal before or at the time of hearing. 3. From the above grounds it is gathered that the only grievance of the assessee relates .....

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/s 143(1) of the Act on 09.11.2010 resulting a refund of ₹ 12,90,886,170/-. Subsequently, the case was selected for scrutiny. 5. The assessee was engaged in the business of providing telecommunication services, like mobile, fixed lined, long distance and data services across the country. The assessee and M/s Bharti Infratel Ltd. (BIL in short) filed Scheme of Arrangement (SOA) before the Hon ble Delhi High Court for transfer of passive infrastructure undertaking (PI undertaking), all asset .....

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im such loss as deductible expenditure in its return of income being loss of capital nature. The assessee revalued its investment in BIL to ₹ 8218 crores from ₹ 5,00,000/- and the corresponding amount (i.e. difference between the fair value and the book value of the investment) was credited to reserve for business restructuring , out of the said reserve an amount of ₹ 5739 crores corresponding to capital loss arising out of transfer of PI undertaking for Nil consideration was c .....

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P) on 15.12.2011 and the DRP vide directions dated 30.08.2012 held that the disallowance of ₹ 5739 crores by the AO being capital loss on transfer of PI undertaking by the assessee to BIL at Nil consideration was perfectly in order. At the same time, the AO was directed to verify the claim of the assessee for not reducing the equivalent sum from the computation of income on account of amount transferred from the reserves. The DRP passed an order u/s 144C(5) of the Act on 30.08.2012 which w .....

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ed the appeal before the ITAT on the issue of disallowance made by the AO. In the meantime, the ld. CIT exercised his revisionary power u/s 263 of the Act and issued a show cause notice to the assessee on 25.11.2013 asking it to submit the objection if any against the proposed revision. The contents of the aforesaid show cause notice issued to the assessee are reproduced verbatim as under: On perusal of the Assessment Records and other records available with undersigned, before coming to the exa .....

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ed nil has been entered into between BAL (transferor) &BIL (transferee), approved by the Hon'ble Delhi High Court vide order dated 26.11.2001. ii) BIL has been incorporated as a whoIIy owned subsidiary of the transferor company with authorized and paid up share capital of ₹ 5 lacs ........1.2.2 iii) Free reserves means uncommitted reserves, not being capital reserves, available without limitation for all purposes including declaration of dividends and bonus share. ......1.1.5 iv) T .....

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creating BIL by the assessee included restructuring within the group of companies controlled by the transferor company, the holding of telecom infrastructure undertaking in a more efficient manner consistent with the diverse need of the business. ........3.1.1 vi) As per tile scheme of arrangement, it does not involve any movement of assets or liabilities to any company outside the group controlled by the transferor company. ......3.1.1 vii) Therefore, as per the SOA, the transferee company was .....

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unt equal to fair value of telecom infrastructure as general reserve which shall constitute free reserves available for all purposes as the transferee company at its own discretion considers proper. .......3.2.2 x) The transferor company shall revalue in particular the investment in the transferee company at its fair value and the difference between the book value of investments and fair value of investments will be accounted as reserves for business restructuring, available to meet the increase .....

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for the quarter in which the scheme becomes effective. Such reserves for business restructuring shall be arising out of this scheme and shall not be considered as reserves created by the transferor company. .........3.3.1 xi) The transferor company shall reduce from its account the book value of the demerged telecom infrastructure undertaking and shall be debited by the transferor company to its P&L a/c prepared for the quarter in which the scheme becomes effective. ...........3.3.2 xii) On .....

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s noted above, by the Hon ble Delhi High Court's order dated 26.11.2007, a Share holders agreement was entered on 08.12.2007 among Vodafone Essar Limited(VEL), Bharti Airtel Limited(BAL), Bharti Infratel Limited(Bharti), Idea Cellular Infrastructure Services Limited(Idea), Idea Cellular Limited(ICL) and Indus Infratel Limited(Indus). ii. As per this shareholpers agreement VEL, Bharti; and Idea have agreed to establish Indus as an independently managed joint venture company to conduct the bus .....

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the Indus Company is to operate and maintain the existing passive infrastructure of the shareholders in the territory until the date of merger of the above assets in Indus and after the merger to own the above assets. The Annual Report of Bharti lnfratel Limited for F.Y. 2007-08 and F.Y. 2008-09. The main facts related to the issues under consideration are noted below:- i. Investments of 1.35 billion USD from leading International Investors were received in BIL during the financial year 2007-08. .....

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share premium per equity share works out to ₹ 52, 73,324/- taken by BIL within less than two months, after the transfer of passive infrastructure by the transferor company on 31.1.2008. Besides this 32,03,550 fully and compulsory convertible noncumulative unsecured and interest free debentures of ₹ 10,000/- each has also been issued, out of which 30,25,575 debentures have been issued in the March, 2008 itself. iii. During F.Y.2008-09, BIL bas issued bonus shares in the ratio of 1:99 .....

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of India. ii. BAL and Vodafone will hold shares approximately 42% each in Indus Tower and balance 16 percent will be held by the Idea. iii. Pursuant to the joint venture agreement Bharti Infratel Limited has subscribed 50,000 equity shares of ₹ 10 each in Indus Tower Limited on17.12.2007 for an aggregate value of ₹ 500000/- iv. It is further mentioned that for this purpose, Bharti Infratel Ventures Limited has been incorporated as a wholly owned subsidiary of Bharti Infratel Limited .....

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3,000 as on 31.03.2008. The increase in value has been explained to be on account of the value of the fair market value of transferred assets to BIL. vii. The Company has transferred the Telecom Infrastructure worth ₹ 57,396,005,000 to BIL at nil Value and the fair market value has been recorded at ₹ 82,181,203,000. The reserve for Business restructuring arising there on: net of above, stands at ₹ 24, 785, 198,000 in its balance sheet as of March 31, 2008 viii. As per Annual Re .....

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was having 500,000,000 equity shares, and the total value of the investments as on 31.3.2009 has been shown same i.e. ₹ 82,181,703,000/- as on 31.03.2008. Bonus shares totalling to 499,950,000 were allotted to the assessee company by BIL during the financial year ending on 31.03.2009. x. The relevant portion how the reserve has been created is reproduced below: "The assets and liabilities have been recorded at following fair values [based on independent fair valuation report for fixed .....

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lnfratel Limited & Indus Towers Limited. Effective Date 1.1.2009 The main fact related to the Issue under consideration is noted below:- (i) Indus wishes to use the Passive Infrastructure located at the Sites owned or acquired or possessed by the Operator, to the extent permitted by applicable laws in India, to provide access to such Passive Infrastructure to various telecommunications operators in India on a non- discriminatory basis. (ii) The Operator is willing to provide to Indus an ind .....

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e exclusive, unrestricted and indefeasible right to use the Passive Infrastructure located at each Site for any legal purpose, including the right to provide access to the Passive Infrastructure at a Site, in its sole discretion, to various telecommunications operators in India, for purposes of sharing such Passive Infrastructure. Provided, however, that Indus' right to unrestricted use of the Passive Infrastructure at each Site is subject to the provisions of Clause 4.1. - 2.1.2 (v) Indus s .....

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any Site. - 3.4.1 (vi) Neither this Agreement or any of the rights, interests or obligations hereunder shall be assigned or transferred by either of the Parties without the prior written consent of the other Part, provided however, that the demerger of Passive Infrastructure by the IRU Grantor Party into another entity by way of one or more schemes of arrangement under Sections 391 to 394 of the Companies Act (a 'Demerger'), shall not require the prior written consent of Indus. - 4.3 (vi .....

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ring the Term, except as set out in Clause 6.1.2. - 6.1 7. The ld. CIT observed that from the Shareholders Agreement dated 08.12.2007, Annual Report of M/s Bharti Infratel Ltd. for the Financial Years 2007-08 and 2008-09, Annual Report of the assessee and the agreement, it was clear that the assessee had not disclosed the full and true intention in the SOA approved by the Hon ble High Court. He pointed out that in the SOA, it was mentioned that the passive infrastructure of the assessee is being .....

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ention of the transferor company that a joint venture company in the name of Indus Infratel Ltd. was to be created in which the passive infrastructure of the transferor company has to ultimately reach through the intermediaries i.e. Bharti Infratel Ltd. and Bharti Infratel Ventures Ltd. The ld. CIT pointed out that as per the Shareholders agreement, the passive infrastructure transferred by the assessee company, before the effective date and after the effective date was to be managed and operate .....

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foreign investors by Bharti Infratel Ltd. at huge premium in March, 2008 itself. He also pointed out that the assessee company in the SOA submitted that the difference in book value of investments and fair value of investments will be withdrawn from the reserve to the credit of profit and loss account for the quarter in which it became effective, however no such amount had been credited by the assessee company in profit and loss account of the March quarter, in which the scheme became effective .....

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movement of assets or liabilities to any company outside the group. The ld. CIT was of the view that the assessee company has totally misrepresented before the Hon ble High Court and that the schedule 6 of the balance sheet for the Financial Year 2007-08 revealed that the assessee had increased the value of its investment in M/s Bharti Infratel Ltd. (BIL) from ₹ 500,000/- to ₹ 82,181,703,000/- which had been explained by way of Note 2(b) of schedule 21 of the balance sheet, to be due .....

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. The ld. CIT further observed that the cost of investment in BIL had been revised from ₹ 5,00,000/- before the transfer of assets by the assessee company to the transferee company to ₹ 82,181,703,000/- on transfer, after adding the fair market value of passive infrastructure transferred to BIL in the Financial Year ending on 31.03.2008. Thus, the consideration for transfer of assets to BIL had been received by the assessee directly and credited by it to the investments in the name o .....

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9 and ₹ 126,831,000/- in the assessment year 2009- 10. In this manner, the difference of ₹ 2492 crores arising on transfer of those assets which had been credited to Business Restructuring Reserve had not been offered to tax nor credited to the P & L a/c of the quarter in which the assets had been transferred as per the scheme of arrangement. The ld. CIT was of the view that the increase of difference in the value of transferred assets, credited to Business Restructuring Reserve .....

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t to use the telecom infrastructure for the purpose of its business without any obligation to pay for the same or payment of such charges as may be reasonable and acceptable. However, the assessee had paid to the transferee company, the charges at the market rate for use of assets transferred by it to the transferee company which was clear from the Revenue earned by BIL, this issue had also not been examined by the AO during the course of assessment proceedings, therefore, the assessment order w .....

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sets, shown directly credited to the reserves by the assessee company in its balance sheet, of the assets transferred by it on 31.01.2008 to its subsidiary company, which no longer remained a wholly owned subsidiary of the assessee company as on 31.03.2008. (b) The AO failed to examine the allowability of the expenditure claimed by the assessee company for the usage of its transferred assets to its subsidiary company contrary to the assessee company having a Non-exclusive right of use of its tra .....

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A reference was made to the following case laws: M/s GKN Driveshafts (India) Ltd. Vs ITO & Others 259 ITR 19 (SC) Janaki Exports International Vs UOI 278 ITR 296 (Del) (HC) 9. The ld. CIT after considering the submissions of the assessee observed that the decisions cited by the assessee were not applicable for the proceedings u/s 263 of the Act and there is no requirement for the Commissioner before initiating the proceedings u/s 263 of the Act to be satisfied which is the requirement for t .....

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ous dates (last being 17.02.2014). Whereas, the submissions and arguments advanced by you against the show cause notice referred above are under active consideration, you are hereby being given an additional show cause notice to submit as to why the assessment order dated 30.10.2012 passed by AO may not be treated erroneous and prejudicial to the interest of revenue on one more ground (other than ground mentioned in the show cause notice dated 25.11.2013) that he failed to conduct any enquiry an .....

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solution Panel/Draft assessment order stands merged with the direction of Dispute Resolution Panel. (b) Assessment order passed pursuant to directions of Dispute Resolution Panel. (c) Order not passed by the assessing officer. (d) Notice is issued on mere change of opinion. (e) Notice is issued on factually incorrect premise. 12. The assessee also submitted to the ld. CIT as under: 6(i) In the assessment proceedings, the assessing officer after examining the scheme and the accounting entries pas .....

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mounting to ₹ 5,739 crores made by the assessing officer in the draft assessment order dated 16.11.2011, resulting in double addition and all facts pertinent to the said issue, which included the scheme of arrangement, the audited accounts and the computation of income etc., were disclosed/filed before the DRP. After considering the facts and above documents in their entirety, the DRP agreed with the finding of the assessing officer that the assessee-company had incurred 'capital loss& .....

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the objections raised by the assessee to the draft assessment order has, under the Act, plenary powers; the power of the DRP are, in other words, co-terminus with those of AO and traverse over the whole assessment. The powers of the DRP are akin to the powers vested in the CIT(A) while disposing of an appeal. Since the DRP sits in judgment over the draft assessment order and the power of DRP (including power of enhancement) traverses over the whole assessment, the draft assessment order mergers .....

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g officer and has categorically held that the assessee had suffered 'capital loss', pursuant to the scheme arrangement and has also taken note of the fact that an amount proportionate to the loss suffered by the assessee, pursuant to the scheme of arrangement was withdrawn from the business restructuring reserve and credited to the profit and loss account in the assessment year under consideration. (ii) Where the assessment order is passed with the approval of the DRP, it is not open to .....

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case laws: - Hari Iron Trading Co. V, CIT: 263 ITR 437 (P&H) - CIT V. Hastings Properties: 253 ITR 124 (Cal.) - FestoElgi (P) Limited V. CIT: 246 ITR 705 (Mad.) A reference to the recent decision rendered by the Madras High Court in the case of R. Srinivasan vs. ACIT: ITA No. 354 of 2006, was also made wherein the High Court held that where order under section 158BC of the Act was passed by the assessing officer, with the statutory approval of the CIT under section 158BG of the Act, it was .....

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after hearing the objections of the assessee issues directions qua such objections raised by the assessee as well as on other issues which may come to its notice during the pending proceedings. Further, the directions issued by the DRP are, in view of the Section 144C(10) of the Act, binding on the assessing officer and the final order is passed by the assessing officer without further going into the merits of the case. On perusal of the above provisions, it may be noted that section 144C(13) p .....

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remain the initial draft order which was passed by the assessing officer. In other words, where an order is passed under section 144C(13) of the Act, in pursuance of the directions of the DRP, revisionary powers cannot be exercised under section 263 of the Act, as such order cannot be construed to be an order passed by the assessing officer. (iv) The assessing officer had after examination and after due application of mind as regards the nature of income/loss arising in relation to the transact .....

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ered capital loss in the transaction of transfer of the passive telecom infrastructure, on account of nil consideration received on such transfer, there was, no warrant to assume revisionary jurisdiction under section 263 of the Act, for the purpose of substituting the view of the assessing officer, more so when the view of the assessing officer has been affirmed by the Hon'ble Dispute Resolution Panel (DRP). In the aforesaid show cause notice dated 25.11.2013, the conclusion drawn by the as .....

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a plausible view. Once the assessing officer has accepted the fact that the assessee received 'nil' consideration on transfer of the passive telecom infrastructure, which consequently resulted in capital loss of ₹ 5,739 crores, the attempt to now consider the revalued amount of such assets at ₹ 8,218 crores, amounts to change of opinion. (v) The primary observation made in the above show cause notice, that the difference in the book value and fair market value of the investme .....

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to the extent necessary to compensate the loss incurred by the assessee, pursuant to the scheme was to be withdrawn and credited to the profit and loss account. The present show cause notice primarily proceeds on the aforesaid wrong factual premise that the assesse company had failed to comply with the terms stipulated in the scheme. Thus, the very foundation of show cause notice alleging non-declaration of capital gains tax by the assessee-company in the assessment year 2008-09 ceases to exist .....

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d the accounting entries passed in this regard by the assessee had concluded that the assessee in the transaction of transfer of passive telecom infrastructure suffered a capital loss, was not factually correct. The ld. CIT also observed that the claim of the assessee that the AO had already given a finding in the assessment order that such capital loss was not allowable which conclusively proved that he had applied his mind and reached a conclusion that the transaction had resulted into capital .....

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luation reserve and asked as to why the said action of the assessee may not be disapproved while computing the book profit u/s 115JB of the Act, in view of the decision of the Hon ble Apex Court in the case of Indo Rama Synthetics (2011) 196 Taxman 539 and after receiving the reply from the assessee that its action of reducing the amount of ₹ 5739 was not in line with the decision of the Hon ble Apex Court, the AO simply added back the said amount in the computation of book profit for the .....

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be disallowed and after considering the reply of the assessee held that the assessee offered for tax the entire amount of ₹ 5739 crores as per provisions of the I.T Act which revealed that even for normal computation, the AO had not examined the transaction perse, correctness of the consideration at Nil or as to whether this transaction had resulted into capital loss or gain. 14. As regards to the claim of the assessee that the DRP had, on detailed examination of the issue and on due appl .....

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action had resulted into capital loss or not and as to whether such capital loss was allowable or not. The ld. CIT pointed out that the assessee did not raise any issue before the DRP relating to correctness of the consideration, taxability on account of transfer of assets, impact of revaluation of assets so transferred. Therefore, the issue for which show cause notice had been issued was not at all before the DRP. The ld. CIT observed that it cannot be said that to the extent of issues not exam .....

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consideration was not allowable and this observation had been confirmed by the DRP also but this was not at all an issue as the assessee itself had added back the amount of capital loss so debited in P & L a/c while computing the income and the AO had not given finding in the assessment order that the transaction had resulted into a capital loss. Therefore, it cannot be said that the AO had applied his mind on this issue and came to the conclusion that the said transaction had resulted a ca .....

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and so it was not valid show cause notice and therefore, the proceedings should have been dropped. The ld. CIT also discussed the submissions of the assessee at para 15 of the impugned order which are reproduced verbatim as under: 15(i) Twin conditions of section 263 namely order being erroneous and prejudicial to the interest of revenue are not satisfied. The assessment order dated 30.10.2012 for the assessment year 2008-09, is neither 'erroneous' nor 'prejudicial to the interest o .....

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treatment provided in the books of the assessee, the computation of income and due application of mind as regards the nature of income/ loss arising in relation to the aforesaid transaction of transfer of passive telecom infrastructure undertaking without consideration to Bharti Infratel Ltd., concluded that there was sale of the telecom infrastructure pursuant to the scheme of arrangement, which resulted in capital loss of ₹ 5,739 crores, which was proportionate to the amount withdrawn by .....

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ding to the CIT enquiries should have been conducted in a particular manner and/ or further enquiries ought to have been conducted by the assessing officer. As a necessary corollary, when on a particular issue the assessing officer did conduct certain enquires during the course of assessment proceedings, such order cannot be regarded as erroneous so as to exercise revisionary jurisdiction under section 263 of the Act. (iii) Further, in the above notice, it has been observed that the increase in .....

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gh Court. The consequential increase in the value of investment in Bharti Infratel Ltd. was not on account of receipt of any additional shares in the said company, but was merely a notional book entry. It may be pertinent to note here that the investment of the assessee-company in Bharti Infratel Ltd. pursuant to the scheme remained intact i.e. in other words, prior to the transfer of telecom infrastructure the assessee-company held 50,000 shares of ₹ 10 each in Bharti Infratel Ltd., which .....

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e of 'Investment', when the same is acquired in exchange for another asset. In the case of the assessee, it is an accepted fact that no additional shares were received from Bharti Infratel Ltd. on transfer of the telecom infrastructure and the share-holding of the assesseecompany in Bharti Infratel Ltd. remained unchanged. Thus, the question of receiving any 'investment' in exchange of transfer of assets does not arise. at all and there can, therefore, be no application of the af .....

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ute receipt of actual consideration. (iv) The assessment order passed by the assessing officer is not erroneous, much less prejudicial to the interest of Revenue warranting revision modification under section 263 of the Act The transfer of the passive telecom infrastructure resulted in loss to the assessee-company aggregating to ₹ 5,739 crores, which has been rightly held by the assessing officer as capital loss in the assessment order dated 16.- 11.2011, passed under section 143(3) r.w.s. .....

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s proposition has been laid down by the Supreme Court in the case of Shoorji Vallabhdas & Co: 46 ITR 144 and in the case of Godhra Electricity Co. Ltd. v. CIT: 225 ITR 746. (v) Regarding the issue of non-examination of allowability of the expenditure incurred by the assessee as charges paid to M/s Bharti Infratel Limited, for usage of the passive telecom infrastructure by the assessing officer, it is submission of the assessee that the assessing officer cannot be said to have not examined th .....

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hether any payment was to be made for use of the aforesaid infrastructure. There was no embargo, in the terms of the scheme, prohibiting the assessee from making payment to M/s Bharti Infratel Limited, for usage of the transferred telecom infrastructure. As per the terms of the scheme, the usage of the transferred telecom infrastructure by the assessee-company was allowable on payment of reasonable charges. The payment made by the assessee-company to Bharti Infratel Limited in the assessment yea .....

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sessee, other than challenging the validity of 263 proceedings on jurisdiction issue, Is that the view that the notional difference between the book value and the fair market value of the 'passive telecom infrastructure undertaking' transferred by the assessee-company to Bharti Infratel Ltd., constitutes revenue receipt under section 28(iv) of the Act, is not valid and unsustainable in law. Section 28(iv) provides two preconditions to be satisfied: (a) There should be a non-monetary ' .....

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to the provisions of the Act. Reliance in this regard is placed on the landmark decision of the Supreme Court in the case of CIT vs. Excel Industries Ltd: 358 ITR 295, where the Apex Court has categorically held that hypothetical income cannot be brought to tax under section 28(iv) of the Act and it is only real income, which has actually accrued to the assessee that can be taxed under the said section. Further there was no benefit which arose to the assessee pursuant to upward revaluation of i .....

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particular advantage, perquisite or receipt is not in the nature of income, there cannot be any occasion to bring the same to tax under section 28(iv). Further, it is settled law that a capital receipt, in principle, is outside the scope of income chargeable to tax. The transaction was purely a capital transaction which was not in the course of the assessee's regular business dealing. In view of the aforesaid, by no stretch of argument, the assessment order could, be regarded as erroneous s .....

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he computation of income which was added back by the assessee also in its computation of income. As regards to the twin conditions required for passing the order u/s 263 of the Act, the ld. CIT referred to the following case laws: CIT(Central-II) Vs Goetz (India) Pvt. Ltd. (Del.) (HC) order dated 09.12.2013 CIT Vs Nagesh Knitwear Pvt. Ltd. 345 ITR 135 (2012) (Del.) Malabar Industrial Co. Ltd. Vs CIT 243 ITR 83 (SC) Nabha Investments Pvt. Ltd. Vs Union of India 246 ITR 41(Del.) ITO Vs DG Housing .....

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sset of the assessee to BIL at Nil and then come to a conclusion as to whether the apparent transaction of transferring the passive infrastructure in the form of towers by the assessee to M/s Bharti Infratel Ltd. (BIL) at Nil consideration in pursuant to Scheme of Agreement (SOA), was to be accepted as such as correct or further enquiries were required to ascertain the correct nature of the transaction by lifting the corporate veil. The ld. CIT was of the view that what was apparent was not real .....

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s claimed by assessee that it is only on account of revaluation of asset and there is no actual consideration received, same does not appear to be correct if facts examined in depth. This is so as the assessee (BAL) has shown the value of 50,000 Equity Shares of Bharti Infratel Limited at ₹ 5,00,000/- as on 31.03.2007 while after the transfer of the passive infrastructure to BIL on the effective date i.e. 31.1.2008, the value of 50000 Equity Shares has been shown at ₹ 82,181,703,000 .....

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the value of investment (in the form of investment in BIL) has increased to the tune of ₹ 8.218 crores and the value of its passive infrastructure assets has decreased by ₹ 5739 crores. The difference thereof amounting to ₹ 2479crores, during the AY.2008-09 has been credited to Business Restructuring Reserve. This increase in value of investment has been explained in the balance sheet by way of Note 2(b) of schedule 21 of the balance sheet, to be due to the transfer of passive .....

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h share were issued. This appears correct apparently but does not appear to be correct if examined in depth and balance sheet of subsequent year is perused. The fact is that during F.Y.2008-09, BIL has issued bonus shares in the ratio of 1:9999, increasing the share holding of assessee to 50,00,00,000 shares. Thus in the financial year ending on 31 March 2009, the assessee company was having 50,00,00,000 equity shares, and the total value of the investments as on 31.3.2009 has been shown same i. .....

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ructure for the purpose of its business without any obligation to pay for the same or on payment of such charges as may be reasonable and acceptable. However, the assessee has paid to the BIL, the charges at the market rate for use of assets transferred by it to BIL at nil stated consideration. This also suggests that effectively asset has been transferred not at nil value which is apparent but at ₹ 82,181,203,000 which is the market value of the asset as per revaluation of asset shown by .....

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taxability of real transaction/actual consideration and it was important duty of the AO before accepting the claim of the assessee to pierce the corporate veil. The reliance was placed on the judgment of the Hon ble Supreme Court in the case of Jiyajeerao Cotton Mills Ltd. Vs CIT AIR (1959) (SC) 270. The ld. CIT opined that the AO should have been examined the transaction in totality to arrive at as to what was substance in the transaction over the form. He should have also examined whether the .....

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to how provisions of section 45 of the Act will be applicable on the asset transferred to BIL and that the AO also failed to examine how and whether effect of provisions of section 50 of the Act will be required to be given or whether the effect of this transaction of transfer at fair market value will be reflected by change in allowability of depreciation due to change in written down value as per section 43(6) of the Act, if it was claimed that the passive infrastructure assets so transferred .....

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ores which was evident from the fact that in the subsequent year assessee had been allotted bonus shares of M/s BIL in the ratio of 1:9999 and thereby maintaining the total value of shareholding at ₹ 8218 crores whereas asset in form of passive infrastructure had gone down by ₹ 5739 crores thus giving net effect of actual increase of ₹ 2479 crores which was the real benefit arose to the assessee and not hypothetical. As regards to the argument of the assessee that since the tra .....

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as part of bigger business plan as claimed by the assessee to use the assets more efficiently and therefore, it can be said that the transfer happened in the process of conduct of business and the assessee also became richer by ₹ 2479 crores in this process. The ld. CIT held that the AO ought to have examined the evidences on record and conducted enquiries and investigation to ascertain as to whether this amount of ₹ 2479 crores could be treated as income of the assessee u/s 28(iv) o .....

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20. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the ld. CIT and further submitted that the order passed by the AO was not amenable to revisionary jurisdiction of the ld. CIT u/s 263 of the Act on the issue already considered by the Dispute Resolution Panel (DRP). It was stated that the issues relating to the tax implication of transactions pertaining to transfer of PI undertaking to BIL, the revaluation of investments in BIL, .....

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d since the said loss was capital in nature, the assessee company suo-motu added back the same while computing income under normal provisions of the Act. It was contented that the AO although correctly held that the said transfer resulted in a capital loss of ₹ 5739 which was not allowable under normal provisions of the Act, however, while computing business income, he added back the said loss once again to the income returned by the assessee after disallowing such loss, thus, resulting in .....

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that the transfer of telecom infrastructure resulted in a capital loss of ₹ 5739 crores to the assessee company were held to be in order by the ITAT. It was also stated that the ITAT, even before the order dated 30.03.2014 of the ld. CIT u/s 263 of the Act, vide its order dated 11.03.2014 u/s 254(1) of the Act took note of the following facts in para 10 of the said order: (i) The SOA between BAL (assessee) and BIL for transfer of assets and liabilities of passive telecom infrastructure und .....

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same at its fair value of ₹ 82,18,12,03,000/-. (v) The Reserve for Business Restructuring arising thereon net of the above stood at ₹ 24,78,51,98,000/- in the Balance Sheet as on 31.03.2008. (vi) The above treatment was in accordance with the Scheme sanctioned by the Hon ble High Court and there was no impact of it in the Profit & Loss Account. 21. It was further stated that the ITAT deleted the addition of ₹ 5739 crores by observing as under: (i) The addition of ₹ 57 .....

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s was not a tax deductible item. Similarly, the amount transferred from reserves of ₹ 5739 crores was also not a taxable item. (v) These were purely factual issues which were adequately dealt by the DRP. 22. It was contended that the ld. CIT while excercising the powers conferred u/s 263 of the Act clearly exceeded his jurisdiction in directing the AO to verify the matters already covered in totality by the ITAT, Delhi vide order dated 11.03.2014 in the assessee s case in ITA No. 5816/Del/ .....

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g Authority had given an undisputed finding of fact on the issue relating to transfer of passive infrastructure. Therefore, the ld. CIT has no power to differ or to go behind such finding of fact given by the Tribunal or proposed to revise order of assessment on the issues already considered and adjudicated by the ITAT. It was emphasized that the Tribunal held in clear terms that the telecom infrastructure was transferred by the assessee to BIL for Nil consideration resulting in a capital loss o .....

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x implications, therefore, the allegations of the ld. CIT in the order u/s 263 of the Act were completely contrary to the express findings of the fact given by the ITAT vide order dated 11.03.2014. It was further argued that where there is a decision of a higher appellate authority, the subordinate authority is bound to follow such decision. The reliance was placed on the following case laws: Russell Properties Pvt. Ltd. Vs Chowdhury (A.), CIT (Addl), (1977) 109 ITR 229 (Cal.) Agrawal (K.N) Vs C .....

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t of the impugned transactions given by the assessee in its accounts and computation of income were held to be in order. However, the ld. CIT doubted the assessee s motive behind the very same transactions and alleged the same to be colorable device. It was stated that the ld. CIT being a subordinate officer was not empowered to reconsider and review the same set of transaction carried out by the assessee pursuant to SOA approved by the Hon ble High Court. The reliance was placed on the followin .....

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ered by the Dispute Resolution Panel (DRP) and the assessment order u/s 143(3) r.w.s 144C(13) was passed by the AO after taking into consideration the directions of the DRP. A reference was made to page no. 243 of the paper book and it was stated that the DRP vide their order dated 30.08.2012 in para 3.9.3 held in clear terms that the transfer of the telecom infrastructure by the assessee company to BIL resulted in a capital loss of ₹ 5739 crores and the AO held that the capital loss of &# .....

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taxable. It was contended that the assessment order u/s 143(3) r.w.s 144C(13) stood merged with the order/directions of the DRP in respect of specific issue of the determination and allowability or otherwise of gain/loss on transfer of passive infrastructure to BIL, therefore, such order was not amenable to revision u/s 263 of the Act. It was contended that the fact that all the related materials, including the SOA, accounting entries and treatment given in the computation of taxable income in r .....

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Iron Trading Co. Vs CIT (2003) 263 ITR 437 (P&H) CIT Vs Hastings Properties (2002) 253 ITR 124 (Cal.) 26. It was further stated that the ld. CIT initiated the proceedings u/s 263 of the Act on the following two issues: (i) That the AO allegedly failed to examine the taxability of the difference between the cost of assets and fair market value of the assets, shown directly credited to Reserve for Business Restructuring by the assessee company in its balance sheet, of the assets transferred by .....

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igh Court. 27. It was submitted that accordingly to the ld. CIT, the final effect in the balance sheet as on 31.03.2008 was that the value of investment had increased to the tune of ₹ 8218 crores and value of its passive infrastructure assets had decreased by ₹ 5739 crores, the difference thereof amounting to ₹ 2479 crores arising on transfer of those assets standing to the credit of Business Restructuring Reserve was allegedly in the nature of capital gains accruing to the ass .....

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ideration for transfer of impugned undertaking was not nil and the revaluation of investments to fair value of ₹ 8218 crores corresponding to the fair value of assets transferred was to be taken as consideration for transfer. (iv) The impugned transfer resulted in capital gains chargeable u/s 45 of the Act. (v) The amount of ₹ 2479 crores representing the resultant increase in the Balance Sheet of the company due to transfer of PI undertaking (i.e. difference between fair value of as .....

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structuring to the P & L a/c was fully covered by the decision of the Hon ble Supreme Court in the case of Indo Rama Synthetics Vs CIT (2011) 330 ITR 363. It was stated that in the instant case, pursuant to the demerger, two distinct sets of entries representing two facets of transactions/book adjustments were recorded by the assessee in its books of account as under: Loss on transfer of assets on Demerger.....Dr. ₹ 5739 crores To Net Assets (transferred) ₹ 5739 crores Profit &am .....

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rom ₹ 5 lacs to ₹ 8218 crores stood added to the cost of the corresponding assets i.e. Investment in Subsidiary on the asset side of the balance sheet and to equalize both sides thereof, a revaluation reserve in the name of Business Restructuring Reserve was created on the liability side and the adjustment entry recorded for giving effect to the above in the books of the assessee was as under: Investment in Subsidiary A/c…..Dr. ₹ 8218 crores To Business Restructuring Res .....

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ores to recoup such loss was merely in the nature of contra adjustment in the P & L a/c and was also not a taxable item and that the Hon ble Supreme Court in the case of Indo Rama Synthetics (supra) gave a categorical finding that creation of revaluation reserve was merely an adjustment entry to balance both sides of the balance sheet having no impact whatsoever on the profits of the assessee company. It, thus, follows that the balance amount of ₹ 2479 crores standing to the credit of .....

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stments relating to creation of revaluation reserve, utilization thereof, and balance remaining in such reserve have reached finality in view of the direct findings of the Hon ble Supreme Court and the ITAT. Therefore, the order of the ld. CIT u/s 263 of the Act crashes at the very threshold on account of being contrary to the express judgments of the Hon ble Apex Court in the case of Indo Rama Synthetics (supra) and the ITAT in the assessee s own case. It was emphasized that the direct applicab .....

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sessee in the course of assessment proceedings and that the AO while computing the book profits for the purpose of section 115JB had taken the net profit as per P & L a/c as the starting point and certain adjustments in terms of Explanation 1 to section 115JB(2) of the Act were made. It was further stated that the P & L a/c of the assessee company was debited with the loss of ₹ 5739 crores on transfer of telecom infrastructure and credited with a equivalent amount of ₹ 5739 c .....

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Act on the basis of the aforesaid judgment of the Hon ble Supreme Court, the ld. CIT misdirected himself and erred in law in issuing contrary directions for the purpose of computation of income under normal provisions. On the other hand, if the ld. CIT assumed that the consideration for transfer of the telecom infrastructure undertaking was not Nil but ₹ 8218 crores resulting in a profit of ₹ 2479 crores to the assessee company, he should have issued directions to the AO to increase .....

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and the same can be exercised only if the circumstances specified therein exist. It was further stated that two circumstances must exist to enable the Commissioner to exercise the power of revision under this sub-section viz., (i) the order is erroneous (ii) by virtue of the order being erroneous, prejudice has been caused to the interest of the Revenue. However, the said power is not an arbitrary or uncharted power, it can be exercised only on fulfillment of the requirements laid down in the sa .....

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e Revenue. It was stated that the ld. CIT has claimed that the AO had not examined the issue of taxability of transfer of PI undertaking from the assessee company to BIL as a result of which prejudice has been caused to the interest of the Revenue insofar as alleged capital gains/business income amounting to ₹ 2479 crores had escaped taxation, thus rendering the order of the assessment erroneous. It was stated that the AO had made due enquiries and applied his mind on the aforesaid issue, .....

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on of total income of the appellant company. (iii) The Financial statements including the auditor s report, Balance Sheet and Profit & Loss A/c of the assessee company. (iv) The Annual reports of the assessee company. (v) The books of accounts of the appellant company including the entries passed therein pertaining to the transfer of impugned undertaking. (vi) Circle wise details of all assets transferred to BIL under the SOA. 32. The ld. Counsel for the assessee also referred to the disclos .....

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sets and liabilities of passive telecom infrastructure undertaking, as defined in the Scheme, from the company to BIL, which has been duly approved by the Hon ble High Court of Delhi vide order dated November 26, 2007 and filed with the Registrar of Companies, Delhi & Haryana on January 31, 2008 i.e. the effective date of the scheme. Pursuant to the terms of the Scheme; the Company has transferred the telecom Infrastructure worth ₹ 57,396,005,089 to BIL. The depreciation on assets tran .....

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on above assets for 306 days (i.e. upto Jan 31st) = ₹ 7,260,234,550/- The aforesaid depreciation of ₹ 7,260,234,550/- The balance depreciation for 60 days amounting to ₹ 1,423,575,402/- has been claimed by BIL in its return of income. (7) Pursuant to the SOA, the loss on transfer of such undertaking does not require any adjustment for computing book profits u/s 115JB. 33. It was also stated that in the Director s Report which formed the part of the financial statements for the .....

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203 Transferred to profit and loss account during 57,396,005 the year (Refer Note 2(b) of Schedule 21) 24,785,198 34. It was submitted that in the Auditor s Report disclosure was made regarding the revaluation of investments in BIL at fair value, recognition of the difference between the book value and fair value of ₹ 2479 crores as Reserve for Business Restructuring and utilization of this reserve for write off of losses on transfer of Telecom Infrastructure undertaking at ₹ 5739 cr .....

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ssets which were transferred to BIL under the SOA and vide letter dated 23.01.2012, the assessee company demonstrated overall impact of the scheme of arrangement and after due perusal, conducting requisite enquiries and examination of the aforesaid records, the AO held that: (i) The PI undertaking was transferred by the assessee company to its subsidiary company to BIL at nil consideration pursuant to SOA sanctioned by the Hon ble High Court of Delhi. (ii) The book value of the assets transferre .....

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incurred on transfer of PI undertaking was credited to the P & L A/c pursuant to the terms of the SOA. 36. It was stated that the conclusions arrived at by the AO in the draft assessment order were also affirmed by the DRP vide directions dated 30.08.2012 and the ITAT, Delhi Bench vide order dated 11.03.2014 particularly took note of the SOA and all the aforesaid records of the assessee and upheld that the assessee had incurred a capital loss of ₹ 5739 crores on the transfer of the PI .....

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that the AO after examining all the records of the assessee company including the SOA and after due application of mind, held that the transfer of Telecom Infrastructure undertaking to BIL at Nil consideration resulted in capital loss of ₹ 5739 crores and that the said amount debited in the profit and loss account was not allowable as Revenue deduction. Thus, the basic premise taken by the ld. CIT for initiation of proceedings u/s 263 of the Act that the AO failed to examine the taxability .....

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e already concluded. The reliance was placed on the following case laws: CIT Vs Gabrial India Ltd. (1993) 203 ITR 108 (Bom) Raylon Silk Mills Vs CIT (1996) 221 ITR 155 (Guj) CIT Vs George Willamson (Assam) Ltd. (2001) 250 ITR 747 (Gau) 37. It was further stated that the ld. CIT cannot substitute his opinion for that of the AO as to the manner in which enquiries should have been conducted during the course of assessment and when on a particular issue the AO conducted certain enquiries in the cour .....

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l House 344 ITR 554 (Del) CIT Vs Vodafone Essar 212 Taxman 184 (Del) 38. It was further stated that the proceedings initiated by the ld. CIT u/s 263 of the Act were mere a change of opinion as regards to tax implication of transaction of transfer of passive telecom infrastructure . As such there was no justification in assuming revisionary jurisdiction u/s 263 of the Act for the purpose of substituting the view of the AO with the view of the ld. CIT in as much as the same transaction of transfer .....

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judicial to the interest of the Revenue. It was further stated that the ld. CIT passed a confusing order directing the AO to conduct further enquiry and re-examine the matter to determine whether the impugned transaction resulted in capital gains u/s 45 or whether the same was assessable as profit and gains from business or profession u/s 28 of the Act. He also directed the AO to examine the impact of the impugned transaction under various other sections of the Act. Therefore, it was clear that .....

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) 114 ITR 404 (AP) CIT Vs Trustees Anupam Charitable Trust (1987) 167 ITR 129 (Raj.) 39. The ld. Counsel for the assessee analyzed the case of the assessee vis-à-vis the crux of aforesaid rulings as under: (i) In the instant case, there was no material whatsoever to prove that the order passed u/s 143(3) r.w.s. 144C(13) was erroneous or prejudicial to the interest of the Revenue. (ii) Proceedings u/s 263 were initiated with a view to start fishing and roving enquiries and re-examine the t .....

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5 and u/s 28(iv) and also resultant effect u/s 50 and 43(6) of the Act. Thus CIT acted on mere suspicion and failed to prove that the order of the AO was erroneous in so far as being prejudicial to the interest of the Revenue. (iii) The CIT himself failed to come to a definite conclusion as to whether the so-called profit being notional book entry of ₹ 2479 crores was taxable as capital gains or whether the same was assessable as business income taxable u/s 28. Therefore, even the nature o .....

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d. (v) The AO after exercising the quasi-judicial power vested in him in accordance with law and after examination of records of the assessee arrived at a conclusion that the impugned transfer resulted in a capital loss of ₹ 5739 crores to the appellant company. The said view was also upheld by the Hon ble DRP and subsequently by the Hon ble ITAT. Such a conclusion could not be considered as erroneous merely because the CIT was not satisfied with the conclusion arrived at by the AO. The Ld .....

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and DRP, in course of framing of assessment, had access to all records of assessee and after perusing such record, the DRP issued its direction and the AO framed assessment pursuant to such directions. Such an assessment could not be reopened in exercise of revisionary powers u/s 263 for making fresh inquiries. The error envisaged by s. 263 is not one which depends on possibility or guesswork but it should be actually an error either of fact or of law. The CIT failed to conclusively prove any s .....

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e Act. Therefore, in the process of computation of capital gains, the first item to be considered is full value of consideration received or accruing to the assessee and from the said value, the deductions specified in section 48 of the Act are to be made for ascertaining capital gains. A reference was made to the following case laws: CIT Vs George Henderson & Co. Ltd. (1967) 66 ITR 622 (SC) CIT Vs Gillanders Arbuthnot & Co. (1973) 87 ITR 407 (SC) CIT Vs B. M. Kharwar (1969) 72 ITR 603 ( .....

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ld. CIT that the fair value of the assets transferred i.e. ₹ 8218 crores was to be taken as the consideration for transfer of such assets goes completely against the clear verdict of the Hon ble Apex Court. It was further stated that the Hon ble Supreme Court in the case of CIT Vs George Henderson & Co. Ltd. (supra) aptly pointed out that the legislature itself made distinction between the two expressions full value of the consideration and fair market value of the capital asset transf .....

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ssible, then the charge u/s 45 of the Act fails because it cannot be effectuated. The reliance was placed on the following case laws: CIT Vs B. C. Srinivasa Shetty (1981) 128 ITR 294 ACIT Vs Glad Investments (P) Ltd. 102 ITD 227 CIT Vs Mohanbhai Pamabhai 91 ITR 393 42. It was submitted that in the instant case, since no consideration was payable by BIL to the assessee company for transfer of PI undertaking, no capital gains arose on such transfer and it has also been consistently ruled by the Ho .....

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reme Court. Therefore, the very reasoning advanced by the ld. CIT for assuming jurisdiction u/s 263 of the Act i.e. the assessee being taxable u/s 45 of the Act on the difference between the fair value and book value of the assets transferred has no legs to stand. It was further stated that the revaluation of investments of BIL was only a notional adjustment made in the books of account of the assessee company in order to comply with the statutory requirements of the mandate of the SOA approved .....

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t forces but the taxability of capital gain/loss does not arise with every such fluctuation and it was only when the investment was actually sold/transferred that the value of such investment would crystallize and have relevance for the purpose of computation of capital gains u/s 45 of the Act but any prior fluctuation in the books of account would have no relevance for the purpose of computation of capital gains/loss. The reliance was placed on the following case laws: Shinhan Bank Vs DCIT (Int .....

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521 (SC) 43. It was further stated that the accounting entries are not determinative of the taxability of any claim of income or deductibility of expenditure. The reliance was placed on the following case laws: Kedarnath Jute Manufacturing Co. Ltd. Vs CIT 82 ITR 363 (SC) CIT Vs India Discount Co. Ltd. 75 ITR 191 (SC) Pullangode Rubber Produce Co. Ltd. Vs State of Kerala & Anr. (1973) 91 ITR 18 (SC) Sutlej Cotton Ltd. Vs CIT 116 ITR 1 (SC) 44. It was further stated that the ld. CIT alleged t .....

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rs by BIL at huge premium in March 2008. (ii) The transferor company in its SOA had allegedly incorrectly submitted that no shares were to be issued because in the next financial year itself bonus shares totaling to 49,99,50,000 had been issued to the transferor company by the transferee company. (iii) The passive infrastructure transferred by the transferor company were to be managed and operated by Indus Infratel Ltd., a joint venture company, and not even for a single day to be handled by BIL .....

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to any company outside the group. (iv) The transferor company, in the SOA, had apparently submitted that the difference between the book value of investments and fair value of investments would be withdrawn from the Reserve and credited in the P & L A/c for the quarter in which the scheme became effective, however no such amount had been credited by the company in P & L A/c of the March quarter (2008). 45. It was contended that on the basis of the above, the ld. CIT directed the AO to c .....

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pany and the holding of the Telecom Infrastructure Undertaking in a more efficient manner consistent with the diverse needs of the business, for that purpose BIL was incorporated as a wholly owned subsidiary of the assessee company with a view to vest in it the passive telecom infrastructure of the group. It was pointed out that during the relevant previous year only 3,875 shares of BIL were issued to third parties whereas the assessee continued to hold 50,000 shares (accounting for almost 93% o .....

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der the SOA, only 12 circles were managed by M/s Indus Infratel Ltd. and the balance 11 circles continued to be managed by M/s BIL. Thus, the allegation of the ld. CIT that the passive infrastructure was not handled/managed by BIL even for the single day was factually incorrect. It was further stated that the assessee incurred a capital loss of ₹ 5739 crores on account of the transfer of PI undertaking and suo-motu added back the same to the taxable income, therefore, no tax benefit was cl .....

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sue of bonus shares was a separate and independent act dehors the transfer of PI undertaking. It was contended that in the present case, the issue of bonus shares only resulted in the increase in capital base of BIL and consequent reduction in reserves without any change in the holding ratio. Therefore, the action of the ld. CIT correlating the issue of bonus shares by the transferee company in the subsequent year with the socalled consideration for transfer of the PI undertaking in the previous .....

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was misplaced and has arisen from a frivolous and improper reading of the SOA. It was contended that the accounting treatment in the books of the assessee was fully in accordance with the terms of the scheme and there was no requirement to withdraw the entire amount of reserves in the year under consideration. Consequently, there was no violation of the terms of the scheme which has also been certified by the auditors who observed that the books of the assessee company have been drawn in complia .....

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27.03.2014 asked the assessee to submit as to why the assessment order dated 30.10.2012 passed by the AO may not be treated as erroneous and prejudicial to the interest of the Revenue on one more ground that the AO failed to conduct enquiry of records to ascertain as to whether the amount of ₹ 2479 crores representing the increase in the balance sheet of the assessee only due to transfer of passive infrastructure assets under reference to BIL was taxable as its income for the assessment y .....

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ction of transfer of PI undertaking which was held by the AO to be in the nature of capital transaction resulting into a capital loss to the assessee was being alleged to be in the nature of revenue receipt by the ld. CIT resulting in business income u/s 28 of the Act and such an action is not permissible u/s 263 of the Act. It was further submitted that the fact that the impugned balance of ₹ 2479 crores standing to the credit of the reserve for business restructuring account as at 31.03. .....

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try as per the ratio laid down by the Hon ble Supreme Court in the case of Indo Rama Synthetics (I) Ltd. Vs CIT (2011) 330 ITR 363. Accordingly, it was submitted that the said transaction did not fall within the mischief of section 28(iv) of the Act as no benefit was accruing to the assessee pursuant to upward revaluation of investments in BIL and a notional book entry cannot be treated as income for the purpose of section 28(iv) of the Act. The reliance was placed on the following case laws: CI .....

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he uses of its transferred assets to its subsidiary company contrary to the assessee company having a non-exclusive right to use of its transferred assets to BIL without any obligation to pay or on payment of such charges as may be reasonable and acceptable to both the assessee and the transferee company as per the SOA approved by the Hon ble High Court. It was stated that the ld. CIT alleged that the AO had not examined the allowability of such expenditure incurred by the assessee at market rat .....

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telecom infrastructure for the purpose of its business without any obligation to pay for the same on payment of such charges as may be reasonable and acceptable. It was further stated that the ld. CIT alleged that the AO had not examined this issue which rendered the assessment order erroneous and prejudicial to the interest of the Revenue. The ld. Counsel for the assessee stated that the ld. CIT failed utterly in proving that the order of the AO allowing such expenditure was erroneous and preju .....

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ailed to bring out any error either of fact or of law in the assessment order passed by the AO for allowing such expenditure. It was further stated that the AO could not be presumed to have not examined the matter merely because there is no separate discussion in the assessment order in this regard. It was stated that the SOA, audited accounts, tax audit report and documents in relation to the claim of such expenses were before the AO, so it cannot be said that he had not examined the assessee s .....

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nsel for the assessee submitted that as per the terms of the SOA, the assessee was allowed to use the telecom infrastructure on payment of reasonable charges but the ld. CIT failed to appreciate that there was no embargo in terms of the scheme prohibiting the assessee from making payment to BIL for usage of telecom infrastructure. It was contended that under the taxing system, it is up to the assessee to conduct business in his wisdom and the Revenue cannot justifiably claim to put itself in the .....

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2 CTR (Del) 296 49. It was stated that the ld. CIT failed to prove how the claim of the assessee of having paid charges at market rate which was mutually accepted by the parties and as per the SOA was incorrect and disallowable under the Act and how payment of such charges at market rate by the assessee made the assessment order allowing such claim erroneous and prejudicial to the interest of the Revenue. It was stated that on this basis that the matter required further enquiry and examination b .....

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e assessment order allowing the charges as claimed by the assessee was erroneous and incorrect. It was contended that since during the course of framing the assessment, the AO had access to all records of assessee and after perusing such records, the AO framed the assessment, such assessment could not be reopened in exercise of revisionary power u/s 263 of the Act for making further enquiries because the error envisaged by section 263 of the Act is not one which depends on possibility or guesswo .....

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n the hands of BIL at the same rate as the assessee. In support of the above contention our attention was drawn towards page Nos. 561 to 563 of the assessee s paper book which are the copies of the Income Tax Return and computation of Income of BIL for the A.Y. 2008-09. It was emphasized that the assessee claimed deduction u/s 80IA of the Act in respect of its telecom operations and the claim of the impugned expenditure has only resulted in a reduced claim of deduction u/s 80IA of the Act. It wa .....

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the Hon ble High Court and that the Schedule 6 of the balance sheet for the Financial Year 2007-08 revealed that the assessee had increased the value of its investment in BIL from ₹ 5,00,000/- to ₹ 8218 crores, the value of investment in the subsidiary company had gone up only and only for the reason of transfer of assets by the assessee to its subsidiary company at fair market value. Thus, the consideration for transfer of assets to BIL had been received by the assessee which was d .....

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r under consideration and ₹ 12.68 crore shown in the assessment year 2009-10 totaling to ₹ 2492 crores arising on transfer of these assets had been credited to business restructuring reserve but the same had not been offered to tax. It was submitted that the aforesaid amount was not credited to the P & L a/c of the quarter in which the assets had been transferred as per the SOA and as the AO had not examined this issue at all alongwith the issue relating to the share premium of & .....

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and fair market value of the assets, shown directly credited to the reserves by the assessee company in its balance sheet, of the assets transferred by it on 31.1.2008 to its subsidiary company, which no longer remained a wholly owned subsidiary of the assessee company as on 31.3.2008. (b) The AO failed to examine the allowability of the expenditure claimed by the assessee company for the usage of its transferred assets to its subsidiary company contrary to the assessee company having a Non exc .....

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ction as well as merit issue had been considered, a reference was made to para 7 of the impugned order. It was accordingly submitted that the submissions of the ld. Counsel for the assessee that the AO had already given a findings that capital loss was not allowable and as such applied his mind was not factually correct. It was also stated that the AO had not examined the facts relating to taxability of transfer of passive assets of the assessee to BIL, impact of revaluation of the assets so tra .....

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be disallowed but he had not examined the transaction per se, correctness of the consideration at Nil or as to whether this transaction has resulted into capital loss or gain. It was further stated that the DRP had given directions only on the objection raised by the assessee relating to the amount of ₹ 5739 crores which was not included in the P & L a/c and no other issue was either raised or adjudicated by the DRP. Therefore, the principle of merger applies only to the issue which w .....

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sideration and then examined the taxability of real transaction but the AO had not examined the transaction in totality. Therefore, the ld. CIT rightly held the assessment order passed by the AO as erroneous and prejudicial to the interest of the Revenue. It was further stated that the AO had not examined the issue relating to the taxability of the amount of ₹ 2479 crores and had also not examined the scheme of amalgamation in right prospective. It was contended that the AO has also not co .....

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sue. Therefore, the order passed by the AO was rightly treated by the ld. CIT as erroneous and prejudicial to the interest of the Revenue. The reliance was placed on the following case laws: CIT, Chennai Vs Alagendran Finance Ltd. (2007) 293 ITR 1 (SC) CIT Vs Lloyd Sales Corp. (2000) 113 Taxmann 546 (Delhi) CIT Vs Goetze (India) Ltd. (2014) 361 ITR 505 (Delhi) CIT Vs Ashok Lagani (2012) 347 ITR 22 (Delhi) CIT Vs. DLF Power Ltd. (2012) 345 ITR 446 (Delhi) 52. We have considered the submissions of .....

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ortunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 53. From the above provisions it is clear that an order can be revised only and only if twin conditions of error in the order and prejudice caused to the Revenue , co-exist. The subject of revision under section 26 .....

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enue. The only limitation on his powers is that he must have some material(s) which would enable him to form a prima facie opinion that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he comes to the conclusion on the basis of the material that the order of the Assessing Officer is erroneous and also prejudicial to the interests of the Revenue, the Ld. CIT is empowered to pass an order as the circumstances of the case may .....

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tion and fair play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well as in section 263 of the Act. In our opinion, an order can be treated as erroneous if it is passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration the irrelevant facts. The word prejudice as contemplated under section 263 of the Act is the prejudice to the Income Tax administ .....

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ection 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, than the said section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be trea .....

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ircumstances of the case and determines the income, the ld. CIT, while exercising his power under section 263 of the Act, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conc .....

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e Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 56. Reverting to the facts of the present case, it is noticed that the ld. CIT considered the assessment order dated 30.10.2012 passed by the AO as erroneous and prejudicial to the interest of the Revenue to the following extent: (i) The AO failed to examine the taxability of the difference between the cost of the assets and fair value of the assets transferred .....

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on payment of such charges as may be reasonable and acceptable to both the assessee company and the transferee company. 57. As regards to the above said first issue on the basis of which the assessment order was considered by the ld. CIT as erroneous and prejudicial to the interest of the Revenue, it is noticed that the assessee transferred telecom passive infrastructure undertaking to BIL at Nil consideration resulting in capital loss of ₹ 5739 crores. The said loss was not a tax deducti .....

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of assets on Demerger….Dr. ₹ 5739 crores To Net Assets (transferred) ₹ 5739 crores (b) P & L A/c…………Dr. ₹ 5739 crores To Loss on transfer of assets on Demerger ₹ 5739 crores 58. From the above entries it is clear that the assessee had claimed the loss in the P & L A/c. However, the said amount was suo-motu added in the computation of income because it was not an allowable loss. This fact was examined by the AO who framed the dra .....

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to 78 of the draft assessment order dated 16.11.2011, copy of which is placed at page nos. 125 to 130 of the assessee s compilation. The assessee specifically explained to the AO in reply to the query raised by the AO as under: (i) That the assessee (BAL) had entered into a SOA with BIL for transfer of passive infrastructure undertaking having book value of ₹ 57,39,60,05,089/- at NIL consideration. The SOA was duly approved by the Hon ble Delhi High Court vide order dated 26.11.2007 and fi .....

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en pursuant to the SOA. The scheme approved by the High Court mentioned that such reserve for Business restructuring shall be arising out of this Scheme and shall not be considered as reserve created by the Transferor Company para 3.3.1 at page 18 of the Scheme. (iv) However, taking note of the recent decision of the Hon ble Supreme Court in the case of Indo Rama Synthetics (2011) 196 Taxman 539 (SC), in the interest of avoiding litigation, the assessee requested the AO to follow the said decisi .....

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.9.3 of the order dated 30.08.2012 as under: 3.9.3 We have considered the facts of the case. Submission of assessee has also been gone through. The disallowance of ₹ 5739,60,05,000/- by the AO in normal computation provisions as capital loss representing loss on transfer of Telecom Infrastructure to Bharti Infratel Limited is held as perfectly in order. Therefore, as far as disallowance is concerned, no interference is called for. However, as regards the claim of assessee of not reducing t .....

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: 11. A plain look at the above material shows that there was no effective debit to the profit and loss account as the amount of ₹ 5739,60,05,089 reflected in the Loss on transfer of telecom infrastructure to Bharti Airtel Limited was squared up against the credit amount of ₹ 5739,60,05,089 representing Amount withdrawn from Reserve for Business Structuring in the inner column of the profit and loss account. These entries were absolutely profit neutral so far as the profit as per pro .....

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s is precisely what the assessee has done. As much as the loss on transfer of assets is not a tax deductible item, the amount transferred from reserves is also not a taxable item. The assessee thus reversed both these entries, as depicted above, in the computation of income. The Assessing Officer has taken note of the fact that in the computation of income attached to the return of income, the assessee has first added ₹ 5739,60,05,089 as Loss on transfer of telecom infrastructure to Bharti .....

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loss account. Neither there was an effective debit to the profit and loss account, since the loss was squared up by transfer from reserve rather than by debit to profit and loss account, nor was it open to the Assessing Officer to take into account loss on transfer of assets, though reflected in the inner column, without taking into account another inner column item reflecting transfer from reserves to square up this loss. Whichever way one looks at these entries, the inescapable conclusion is .....

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the assessee was specifically against the erroneous approach of the Assessing Officer in not taking a holistic view of the accounting entries. There is no, and there was never, any dispute on whether such a loss is tax deductible or not. The dispute was confined to the question whether, on the given facts, the Assessing Officer could have made an addition for this amount to the income returned by the assessee. The contention of the assessee was that no such addition was justified because the as .....

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ry action , but then it was the inaction and inability of the Assessing Officer in correctly doing so that the objection was raised before the Dispute Resolution Panel and all the related facts, including accounting entries and treatment given in the computation of taxable income, were placed before the Dispute Resolution Panel. The fact that even such purely factual issues are not adequately dealt with by the DRPs raises a big question mark on the efficacy of the very institution of Dispute Res .....

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a comprehensive and effective manner. While we delete the impugned addition of ₹ 5739,60,05,089, we also place on record our dissatisfaction with the way and manner in which this issue has been handled at the assessment stage. Let us not forget that the majesty of law is as much damaged by not rendering justice to the conduct which cannot be faulted as much it is damaged by a wrongdoer going unpunished; not giving relief in deserving cases is as much of a disservice to the cause of justice .....

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he ld. CIT as erroneous and prejudicial to the interest of the Revenue was examined by the AO in detail and it was directed by the DRP that the addition was not to be made after proper verification. However, the AO arbitrarily made the addition. On the appeal of the assessee, the said addition was directed to be deleted by the ITAT vide its order dated 11.03.2014. We, therefore, do not see merit in this observation of the ld. CIT that the assessment order dated 30.10.2012 appeared to be erroneou .....

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roved the view of the AO, the transfer of passive telecom infrastructure was in accordance with the SOA approved by the Hon ble High Court of Delhi and even the ITAT vide its order dated 11.03.2014 while deciding the appeal filed by the assessee in ITA No. 5816/Del/2012 categorically held that as per the SOA approved by the Hon ble Delhi High Court, the assessee company had transferred telecom infrastructure assets to BIL at Nil consideration resulting in a capital loss of ₹ 5739 crores an .....

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was primarily in the nature of contra adjustment in the profit and loss account and not a case of effective credit in the profit and loss account (as contemplated in clause (i) of the Explanation). The amount withdrawn from any reserve must in effect impact the net profit as shown in the profit and loss account. Unless an adjustment has the effect of increasing the net profit as shown in the profit and loss account, that entry cannot be said to be a credit to the profit and loss account and, the .....

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ucture to the subsidiary company. Therefore, it cannot be said that the assessment order dated 30.10.2012 was erroneous and prejudicial to the interest of the Revenue. 62. As regards to the adjustment entry for revaluation of investment in subsidiary company i.e. BIL is concerned. It is noticed that the assessee passed the following entry: Investment in Subsidiary A/c……..Dr. ₹ 8218 crores To Business Restructuring Reserve (BRR) ₹ 8218 crores The assessee also transferre .....

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ture of balance of notional credit, remaining in the revaluation reserve could not be brought to tax, has attained the finality in view of the judgment of the Hon ble Supreme Court in the case of Indo Rama Synthetics Ltd. Vs CIT (supra) and the said view is also fortified by the fact that in the assessee s own case in ITA No. 5816/Del/2012, the ITAT Delhi Bench vide order dated 11.03.2014 held that the impugned transfer resulted in a capital loss of ₹ 5739 crores which was not tax deductib .....

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f the adjustment were to be done for the sake of completeness and transparency those were required for both the entries i.e. loss of ₹ 5739 crores on transfer and an equal amount withdrawn from Business Restructuring Reserves. In the instant case, the amount of ₹ 5739 crores transferred from Business Restructuring Reserves of ₹ 8218 crores was not a taxable item, the obvious corollary would be that the balance amount of ₹ 2479 crores (Rs. 8218 crores - ₹ 5739 crores .....

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se, the ld. CIT on the one hand, stated that the transfer of telecom passive infrastructure undertaking at Nil consideration resulted in a capital gain of ₹ 2479 crores, on the other hand, the same transaction was alternatively alleged to have resulted in a business income of ₹ 2479 crores u/s 28(iv) of the Act. Moreover, the ld. CIT directed the AO to re-examine and verify the issue, however, he himself failed to arrive at a definite conclusion. Therefore, we are of the view that th .....

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a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. This decision of the Income-tax Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allo .....

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of transfer of passive infrastructure, no notional sum would be attributed as consideration. As such the issue of taxability of capital gain does not arise. Furthermore, in the absence of any benefit or perquisite accruing to the assessee during the course of business and the impugned transfer which was purely a capital transaction, the notional difference between the book value of assets transferred and their fair value would not be taxed u/s 28(iv) of the Act. 65. In the instant case, it appea .....

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unting treatment of the commission in the books of account of the assessee as both accounting systems were acceptable. The Assessing Officer had duly applied his mind and was satisfied with the explanation offered by the assessee and did not make any addition in that regard. The Assessing Officer had not incorporated the facts in detail in the order but that would not mean that there had been no application of mind. The Tribunal noted the fact that the details of tax deducted at source during th .....

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on ble Delhi High Court in the case of Hari Iron Trading Co. Vs CIT (2003) 263 ITR 437 (supra) held as under: In the absence of any suggestion by the Commissioner as to how the inquiry was not proper, the action taken by him under section 263 could not be sustained. The letter by the Assessing Officer to the Commissioner supported the contention of the assessee that the case was being monitored by the Commissioner from time to time and the assessment order had been passed after a draft order alo .....

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ndertaking by the assessee to BIL for Nil consideration. The said issue was also considered by the DRP who directed the AO to verify the claim of the assessee. The said loss was added back by the assessee in the computation of income and was offered for taxation but the AO added the same again. Thereafter the assessee preferred an appeal to the ITAT wherein explanation and contention of the assessee was accepted and the addition made by the AO was deleted. Therefore, the view taken by the ld. CI .....

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the Act. 67. As regard to the last issue relating to expenditure incurred by the assessee towards amount paid to BIL for usage of passive telecom infrastructure. The ld. CIT alleged that the AO had not examined the allowability of such expenditure incurred by the assessee at market rate and allowing such deduction of expenses was not only erroneous but also prejudicial to the interest of the Revenue. However, in the present case it appears that the AO applied his mind to the material placed on .....

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nd the transferee i.e. BIL. The above said provision in the SOA, was an enabling provision and the parties to the SOA chose the later option i.e. payment at market rate. Therefore, allowing the claim of the charges paid by the assessee at market rates would not be held as erroneous merely because the ld. CIT at his whims felt that the assessee had either not paid such charges or paid charges at a different rate and the same required further verification. In this regard, it is relevant to point o .....

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ssets to its subsidiary company. From the above observations it is clear that the ld. CIT directed the AO to re-examine the allowability of expenditure claimed by the assessee but he had not stated as to how and in what manner the expenses claimed by the assessee were impermissible, therefore, the action of the ld. CIT was not justified. 68. On a similar issue, the Hon ble Jurisdictional High Court in the case of CIT Vs Hero Auto Ltd. 343 ITR 342 has held as under: That there was no discussion i .....

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1999- 2000 after an order under section 263 of the Act. This order passed was struck down by the Tribunal and that decision had been upheld by the High Court. 69. Similarly, the Hon ble Delhi High Court in the case of CIT Vs Sunbream Auto Ltd. (2011) 332 ITR 167 held as under: The Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc. Whether there was application of mind before allowing the expenditure in question .....

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as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Section 263 does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer who passed the order unless the decision is held to be erroneous. Where the Incometax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply .....

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st give reasons to justify the exercise of suo motu revisional powers by him to reopen a concluded assessment. A bare reiteration by him that the order of the Incometax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice. The exercise of the power being quasi-judicial in nature, the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment w .....

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ion 263 of the Act, when read as a composite whole, make it incumbent upon the Commissioner before exercising revisional powers to: (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the Commissioner may pass an order exercising his power of revision. If a query is raised during the course of scrutiny by the Assessing Of .....

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of the claim and the ld. CIT had not given any finding as to how and in what manner the order of the AO on this issue was erroneous and prejudicial to the interest of the Revenue. He simply directed the AO to make further verification and examination for allowing the claim which the AO had already done, therefore, the order of the ld. CIT u/s 263 of the Act deserves to be set aside on this issue. 72. As regards to the decisions relied by the ld. CIT DR is concerned, it is noticed that these are .....

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esaid cases relied by the ld. CIT DR are distinguishable on facts. Similarly, in the case of CIT Vs Goetze India Ltd. reported at (2014) 361 ITR 505 (Del.), the ld. CIT in her order had specifically recorded that enhanced depreciation on revalued reserve was claimed in earlier assessment year and the proviso to clause (i) of the explanation to section 115JA was not applicable as a reserve was not created during the relevant period and that the AO had not applied section 14A of the Act and made n .....

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