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DCIT, Circle-10 (1) , New Delhi Versus Digital Radio (Del) Broadcasting Ltd.

2016 (3) TMI 422 - ITAT DELHI

Penalty u/s 271 (l)(c) - disallowance u/s 35ABB - Held that:- In this case it is merely the claim made was unsuccessful before two authorities but none of the authorities have held that the claim of the assessee not at all sustainable. Merely because the deduction claim was negative by the appellate authorities assessee cannot be subjected to penalty by holding that assessee has deliberately furnished inaccurate particulars of Income. In this case AO has held because the claim of the assessee wa .....

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. 4200/Del/2013, ITA No. 4201/Del/2013 - Dated:- 11-3-2016 - Shri A. T. Varkey, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Appellant : Shri Sunil Chander Sharma, CIT DR For the Respondent : Shri Sanjeev Sapra, CA ORDER Per Prashant Maharishi, A. M. 1. These are the appeals filed by the assessee on identical grounds and the issue involved there in are also same except the amount of penalty therefore same are disposed of by this common order. 2. In ITA No.4199/Del/2013, .....

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in deleting the penalty amounting to ₹ 8,91,62,465/- imposed by the Assessing Officer u/s 27(1)(c) of the IT Act, 1961. 4. In ITA No.4201/Del/2013, Assessment Year 2006-07, the assessee has raised the following grounds:- 1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the penalty amounting to ₹ 56,07,821/- imposed by the Assessing Officer u/s 271 (l)(c) of the IT. Act 1961? Brief facts of the case 5. These assesses are engaged .....

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e cities. Successfully participating in the auction held in March, 2000 it entered in to a licenses agreement dated 27/10/2000 with Ministry of Information and Broadcasting. Tenure of that license was for a period of 10 years. License fee was fixed for the first year at ₹ 7,12,50,000 and subsequently there is an escalation clause of 15 % every year during the term of license. Such licenses were made operational from 29/04/2003, i.e. A Y 2004-05. As the F M radio industry was suffering from .....

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n metro cities were not entitled to participate in these fresh bids but they were given an option as under :- a. Migrate to Phase - II policy regime with fresh term of 10 years provided they had operationalised their FM channels and paid off all license fees dues of Phase -I license up to the cut-off date of 1st April 2005 and were not in default of any other license conditions till the date of migration to phase - II. b. Continue to remain under Phase - I policy regime c. Surrender their FM cha .....

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25 % of the highest valid bid in that city and all the bids below the reserve limits were rejected summarily. The One time entry fee is the charge / fee for the new successful bidder for a period of 10 years with effect from 1.4.2005. Over and above OTEF each successful bidder is also required to pay an annual license fees on revenue sharing basis @ 4 % of gross revenue for the year or 10 % of the OTEF for the concerned city, whichever is higher. On exercise of option given to the exiting broad .....

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enalty is levied 6. Claim of the assessee was that license fee expenditure paid under Phase -I of license regime is allowable in full during the year under consideration in accordance with sub-section (2) of section 35ABB, For this main reliance of the assessee was on the provision of section 35ABB(2) and also the notification issued by the Govt, of India Notification No. 39 dated 9th January, 2004,whereby under the proviso to clause (k) of sub-section (1) of section 2 of the TRAI Act, 1997 as a .....

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t should be looked elsewhere in the Income Tax Act. For this Assessee relied on the definition of transfer u/s 2 (47) of and for definition of capital assets u/s 2 (14) of the Act. Further he submitted that Section 35ABB specifically deals with expenditure for obtaining license to operate telecommunication services and accordingly, the license as obtained by the Assessee for operating FM radio station was clearly a capital asset and therefore, such wide definition of transfer given in sub-clause .....

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exchange for a new license called Grant of permission Agreement (GOPA) dated 02/03/2007 under Phase -II which was made effective w.e.f. 01/04/2005. Accordingly it was claimed that such relinquishment/ extinguishment/exchange/ parting of asset or rights therein in capital asset in any manner whatsoever clearly amounted to transfer as per the definition of transfer u/s 2(47) read with Explanation 2. Therefore his first argument was that there is transfer of license due to migration from phase - I .....

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claim of such license fees as intangible assets depreciable. Assessment & Appellate history of the claim 7. Claim of deduction pertaining to Phase- I of licensing fee was disallowed by the AO holding that same is a capital loss as the license was not transferred as required u/s 35ABB (2) of the act. On appeal before CIT (A) who in turn rejected claim of deduction of whole of license fees paid under phase -I holding that as there is no transfer as per section 35ABB (2) of the act. However he .....

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the findings of CIT (A) for granting deduction u/s 35ABB being 1/10th of license fees of Phase -I every year over 10 year period of Phase-ll License Fee commencing from AY 2006-07 onwards. Appeal as filed by the Assessee for allowing the entire deduction of phase -I of license fees itself has also been dismissed by ITAT by observing that migration of license from Phase-l to Phase-ll is just a modification of terms and conditions of the license and hence it cannot be said that Phase-l License ha .....

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Honourable courts. He held that assessee has not furnished any inaccurate particulars of the income regarding the claim u/s 35ABB of the Income tax act and therefore penalty u/s 271(1) 9c) of the Act is not leviable. 10. Therefore now revenue is in appeal before us Arguments of the parties 11. Ld DR relied up on the order of assessing officer. 12. LD AR submitted that it was a bona-fide claim and merely because such claim as made is not sustainable in law cannot amount to furnishing of inaccurat .....

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can be levied on debatable issues. It was further argued that dispute with regard to merely the year of allowability of license fee expenditure cannot attract penalty under section 271 (1)( c ) of the Act. He submitted that Explanation (1) (B) as applied by the AO was not applicable as the assessee had offered an explanation which was bona-fide in nature and all facts relating to the same and material to the computation of its total income had been disclosed and moreover, such explanation as of .....

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table issue the penalty u/s 271(1) (c) cannot be levied as assessee has disclosed full particulars of its claim. He deleted the penalty holding as under :- 5.2 I have considered the submission of the appellant, observation of the Assessing Officer and various case laws. It is seen that appellant company was engaged in the business of Radio Broadcasting at Delhi under the channel identity 93.5 Red F.M. During the year, the appellant had claimed deduction u/s 35ABB of ₹ 12,65,82,440/-under t .....

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hase-I to Phase-II, the earlier license of Phase-I has come to an end and therefore, the loss incurred under Phase-I on account of license fee was a capital loss. The Assessing Officer also treated the interest income as income from other sources against business income shown by the appellant. The CIT(A) vide its order dated 29.07.2011 has held that license fee expenditure of Rs.l2,65,82,440/-claimed as revenue expenditure cannot be totally disallowed and directed the Assessing Officer that same .....

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alty u/s 271(l)(c) of the IT Act of ₹ 3,96,39,894/-on the amount of Rs.l2,65,82,440/-of the license fee claimed u/s 35 ABB and the amount of ₹ 38,41,383/-treated as income from other sources as against business income shown by the appellant. The claim of the revenue expenditure u/s 35ABB made by the appellant was disallowed, however, CIT(A) allowed 1/10th of such expenditure u/s 35ABB and rest of the amount was to be allowed in next nine years. It is claimed by the appellant that it .....

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putation of its total income had been disclosed. The appellant has also submitted that such explanation furnished by the appellant was not found to be false by the Assessing Officer. The appellant has also submitted that the Assessing Officer has treated the entire license fee of Phase-I as capital loss whereas C1T(A) has held that such license fee is allowable proportionately over the ten years license term starting from A.Y. 2006-07 onwards in accordance with section-35ABB. This clearly shows .....

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nt submitted that no penalty is leviable in its case. A glance at the provisions of section 271(l)(c) suggests that in order to be covered u/s 271(l)(c) there has to be concealment of income of the appellant. Secondly the appellant must have furnished inaccurate particulars of its income in the return of income. However, in the instant case, the appellant has given all particulars of its income shown in the return of income. The appellant did not conceal or suppress any facts relating to the inc .....

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ore, the appellant cannot be held guilty of furnishing inaccurate particulars of income or concealment of income. Making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars of income. Mere making a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the appellant. In the instant case the issue involved was whether the unclaimed license fee was a capital loss to the appellant or the same was in r .....

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ld inter-alia by the Hon'ble Supreme Court in a recent judgment in .e case of Commissioner of Income tax Vs. Reliance Petro products Pvt. Ltd. reported in 322 ITR 158 (SC) the head notes of the said case reads as under:- "A glance at the provisions of Section 271(l)(c) of the Income Tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of h .....

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nishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the asse .....

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onal Delhi High Court and also Delhi Tribunal in numerous subsequent cases. XXXXXX Since the appellant has not concealed any income or did not furnish any inaccurate particulars of its income, therefore, the case of the appellant cannot be covered under the provisions of section 271(l)(c) explanation-(l)(B). Hence, the penalty levied by the assessing officer was not justified and same is deleted. From the above legal pronouncements, it is amply clear that whenever there is a genuine debate on an .....

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facts and had clearly disclosed the treatment of license fee made in its accounts and interest income as business income in the computation of income as well as in the audited accounts, financial statements, tax audit report which were attached. Even when the return was processed under section 143(1), this fact came out properly. In fact the assessing officer discovered the issue only from the financial statements filed voluntarily by the appellant alongwith the return of income. Therefore, it .....

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