TMI Blog2016 (5) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... the undertaking is very long. Thus, for the purposes of the time frame the legislature has given the timeline of fifteen years from which ten consecutive years could be opted. The fact remains that the legislature aware of the differences in the use of terms used consciously ensures that "profits and gains derived from" used in sub-section (1) is not used in sub-section (2A). Instead in sub-section (2A) the term used is "profits and gains of eligible business" juxta posed with the glaring fact that the sub-section (2A) starts with a non-obstante clause namely "Notwithstanding" qualified further by the use of the words "anything contained in". In the face of the clear and unambiguous statutory provisions we find ourselves unable to agree with the arguments advanced by the Ld. CIT DR however valiantly as what the law is has very clearly been enunciated and set out in the relevant provision giving cause to no debate whatsoever. - Decided in favour of assessee Disallowance of depreciation claimed for the current year - Held that:- The Government of India has transferred the assets to the petitioner company at their book value i.e., the value at which thesaid assets are reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned A.O upon a mis-reading of the facts and accounting involved.- Decided in favour of assessee - ITA No. 2196/Del/2012, ITA No. 6459/Del/2012, ITA No. 5916/Del/2012, ITA No. 2799/Del/2012 - - - Dated:- 13-5-2016 - Shri S. V. Mehrotra, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Appellant : Shri Tarandeep Singh, Adv For the Respondent : Shri Ravi Jain, CIT DR ORDER Per Sudhanshu Srivastava, Judicial Member I.T.A. Nos. 2196 and 2799 pertain to assessment year 2005-06. I.T.A. No. 2196 has been preferred by the assessee against the order dated 14.3.2012 passed by the Ld. CIT(A)-V, New Delhi, partly confirming the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter called 'the Act') whereas I.T.A. No. 2799 has been preferred by the Department as a cross appeal for partly allowing the assessee's appeal challenging the imposition of penalty u/s 271(1)(c) of the Act. 1.1 I.T.A. Nos. 5916/Del/2012 and 6459/Del/2012 are again cross appeals by the Department and the assessee respectively and pertain to assessment year 2009-10, challenging the findings and adjudication of the Ld. CIT(A)-V, New ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Ld. CIT (A) on the disallowance of deductions u/s 80IA on account of Interest from others and Rent of staff quarters. Aggrieved, the assessee is before us challenging the imposition of penalty on these two issues. The Department is in appeal challenging the deletion of the penalty on all the issues on which relief has been granted by the Ld. CIT (A). 4. The Ld. AR submitted that the issue of disallowance of depreciation allowance of ₹ 2268,05,00,000/- has been deleted in the quantum appeals by the ITAT 'A' Bench in I.T.A. Nos. 2162/Del/2007 and 2176/Del/2008 vide order dated 22.01.16. On the issue of write off of assets, it was submitted that the issue has been restored to the file of the Assessing Officer for fresh examination by the ITAT in the quantum appeals (supra). On the issue of additions on account of denial of deduction u/s 80IA, the Ld. AR submitted that the ITAT's order in the quantum appeals (supra), has allowed the deduction u/s 80IA on all disputed items by holding that in terms of the non-obstante clause used in section 80IA (2A), deduction for an undertaking engaged in provision of telecommunication services will be available in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision for bad and doubtful debts for the purpose of computation of book profits u/s 115JB of the Act. It is seen from the penalty order that the penalty has been imposed by the Assessing Officer by applying clause (i) of Explanation (1) to section 115JB of the Act. The said clause was retrospectively inserted w.e.f. 1.4.2001 by the Finance (No.2) Act, 2009. On perusal of the assessment order as well as the penalty order, it is seen that it is not the case of the Assessing Officer that the assessee had furnished any incorrect particulars or had concealed any material fact. Penalty cannot be levied on the basis of subsequent retrospective amendments in law. When the return of income was filed by the assessee, the retrospective amendment to section 115JB regarding provision for bad and doubtful debts (amount set aside towards provision of diminution in the value of assets) was not in the Statute and, therefore, we do not see any infirmity in the order passed by the Ld. CIT (A) on this issue and decline to interfere. Accordingly, drawing support from the order passed by ITAT Delhi in the case of Escorts Construction Equipment (I.T.A Nos. 5313 5314/Del/2012), ground no. 4 of the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy received by the appellant from Universal Service Fund of ₹ 667.28 Crores is an ancillary income and hence is not eligible for deduction u/s 80-IA of the Income Tax Act. 3. That on the facts and circumstances of the case and in law the learned CIT (A) has erred in holding that the Interest from Others amounting to ₹ 39.99 Crores is not eligible for deduction u/s 80-IA of the I.T. Act, 1961. 4. That on the facts and circumstances of the case and in law the learned CIT (A) has erred in holding that the Rent of Staff quarters amounting to ₹ 12.96 Crores is not eligible for deduction u/s 80-IA of the I.T. Act, 1961. 5. That on the facts and circumstances of the case and in law the learned CIT (A) has erred in holding that the Misc Income from USO Toners. amounting to ₹ 6.40 Crores is not eligible for deduction u/s 80-IA of the I.T.Act, 1961. 6. That the learned CIT (A) erred, on the facts circumstances of the case and in law in confirming the disallowance of depreciation claimed for the current year to the extent of ₹ 674.65 crores, whereas the disallowance had been made by the A.O. on the basis of re-assessment proceedings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed in favour of the assessee in assessee's own cases for earlier years, the assessee's appeal should be allowed and that of the Department dismissed. 11. The learned Departmental Representative supported the order of the Assessing Officer. 12. We have heard the rival submissions and also perused the material on record. As far as ground nos. 1 to 5 of assessee's appeal and ground nos. 1 1.1 of Department's appeal are concerned, we concur with the submissions of the Ld. AR that they are covered in favour of the assessee by the order of the ITAT Delhi 'A' Bench in the assessee's own case in I.T.A. Nos. 3304 3386/Del/2010 for assessment year 2004-05 wherein the coordinate bench has discussed the issue at length. It will be worthwhile to reproduce paras 13 to 13.18 for a ready reference:- 13. Having so held, we now propose to examine the relevant provisions of Section 80-IA of the Income Tax Act in order to decide whether the legislature intended that the words derived from should be read into sub- section (2A) or not. While so deciding, we are guided by the following observations of justice Gajendragadkar the first and primary rule of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legislature on a plain reading of the said sub-section is loud and clear. Reference to the decisions which establish a nexus of the first degree at this stage is refrained from as the position is well-settled legally and at this stage is not an issue for consideration in the present proceedings as both the parties agree that sub-section (1) of section 80-IA envisages only first degree nexus for the purposes of claiming deduction. The fact that deduction is available to hundred percent of the profits for a period of ten consecutive years is also not an issue under debate and even otherwise we find that the above provision in the said extent is clear and unambiguous. 13.3. What we may take note of is that on reading of only this sub-section in isolation what emanates clearly is that the deduction is applicable to any undertaking or an enterprise from any business referred to in sub- section (4) of section 80-IA which the legislature describes as eligible business . The said sub-section sets out in unequivocal terms that the deduction is available to the gross total income of such undertaking/enterprise which includes profits and gains derived from such business. The meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanation to clause (i) of sub- section (4), the provisions of this sub-section shall have effect as if for the words fifteen years , the words twenty years had been substituted. 13.6. A plain reading of the above proviso to sub-section (2) of section 80-IA shows that the legislature further carves yet another exception for such an assessee who develops or operates and maintains any infrastructural facility referred to in clause (a); (b) or (c) of Explanation to clause (i) of sub-section (4) of section 80-IA. For these undertakings the legislature has extended the period during which deduction can be claimed from fifteen years to twenty years. The fact that the restrictions placed on the eligible business by sub-section (1) of section 80-IA shall continue to be read into sub-section (2) of section 80-IA is made clear in the opening words of sub-section (2) itself and as observed in the earlier part of this order is not in doubt and the restrictions of derived from have not been diluted either in sub- section (2) or in the proviso to sub-section (2) of section 80-IA. Accordingly it is seen that the referent business i.e. the undertakings or enterprises covered under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vey the legislative intent that whatever may have been said in sub-section (1) and (2) but the legislature has not rested there and has taken care to qualify the word with the all encompassing, all inclusive, well understood word anything contained in sub-section (1) or (2). The meaning, use and import of the said word does not lead to any confusion or ambiguity. Thus prima-facie to our understanding when considering the para phrasing used by the legislature in its plain and literal meaning there cannot be any doubt about what the intention of the legislature is as it is loud and clear in stating that while considering and deciding the intent of sub-section (2A) the mandate of sub- sections (1) and Sub-section (2) are not required to be imported in respect of the referent undertaking or enterprises providing telecommunication services. 13.9. A further reading of the said sub-section makes it clear that the deduction in computing the total income is available only to an undertaking which is providing telecommunication services and that too which have been specified in clause (ii) of sub-section (4). Thus by virtue of this sub-section, a specified class of undertakings have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s nature of business the direct nexus presumed by sub-section (1) of section 80-IA is also fulfilled. On a careful reading of the above provisions, we find that the legislature has left no ambiguity in the wording of the sub-section (2A). Having started with the non-obstante clause in sub-section (2A) which over-rides the mandate of sub-section (1) and (2), the legislature is well aware that the phrase derived from has been used only in sub-section (1). The meaning of the said terms is judicially well-accepted and understood and it is not the case of that Revenue that the legislature was not conscious of the said term. It is seen that the import of this term continues to exist for an assessee covered under sub-section (2) of section 80-IA. The legislature has consciously retained it for enterprise/undertaking falling in sub-section (2) and the proviso thereto only keeping in mind the nature of the enterprises/undertakings contemplated under sub- section (2) the option of claiming deduction in any ten consecutive years is given to be claimed from the first fifteen years of beginning operation is given. 13.11. Thus, we find that the legislature being alive to providing tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of being mis- understood, however in such cases the person using the language can be approached for a clarification. The language used in a statute till it is amended, repealed or modified remains static as the Legislature cannot be approached for clarification. After having enacted a law or an act, the legislature becomes functus officio as far as the particular Act is concerned and it cannot itself thereafter interpret it. Though the Legislature retains the power to amend or repeal the law so made and can also declare its meaning but this can be done only by making another law or statute after undertaking the whole process of law making once again. Accordingly statutory interpretation requires the Courts to seek, ascertain the meaning of the words used by the legislature through the medium of authoritative forms in which it is expressed. Interpretation differs from construction, whereas interpretation is finding out the true sense of any form, construction would mean drawing of a conclusion in respect of subjects that lie beyond the direct expression of the text. 13.14. It is well understood that the Court only interprets the law and cannot legislate. Even if a provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aganath Dham vs Jammullu Ramulu AIR [2001] (SC) 2699 at 2703. Any presumption to the contrary in the absence of any ambiguity would be contrary to the settled legal position as the legislature as far as possible is presumed to know what it intends to stay. 13.18. Thus reverting again to considering the words use in sub-section (2) the proviso thereto and sub-section (2A) it is seen that whereas in sub-section (2) and the proviso thereto the restrictions on the profits as set out in sub-section (1) is retained and intended businesses are given to option of any ten years from fifteen years the proviso introduced to sub-section (2) of section 80-IA, it is seen that for an assessee who is developing or operating and maintaining infrastructure referred to in clause (a) or clause (b) or clause (c) of Explanation to clause (i) of sub- section (4) is given a further leeway of exercising its option in any of the ten consecutive years from the first twenty years instead of fifteen years as contemplated under sub-section (2) of section 80-IA from the beginning developing or operation and maintaining the infrastructure facility. Thus the legislature in its wisdom giving due consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that activity in the first five years and thereafter the allowable deduction is substantially reduced to thirty percent in the next five years presuming that by then the heavy infrastructural costs would have been recovered and/or the objectives of the governmental policy would have been attained. Keeping in mind the services and functions performed by such an assessee towards the aims of the government policy wherein gestation period necessarily looking at the nature of the undertaking is very long. Thus, for the purposes of the time frame the legislature has given the timeline of fifteen years from which ten consecutive years could be opted. The fact remains that the legislature aware of the differences in the use of terms used consciously ensures that profits and gains derived from used in sub-section (1) is not used in sub-section (2A). Instead in sub-section (2A) the term used is profits and gains of eligible business juxta posed with the glaring fact that the sub-section (2A) starts with a non-obstante clause namely Notwithstanding qualified further by the use of the words anything contained in . In the face of the clear and unambiguous statutory provisions we find our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. 25. The Assessing Officer seems to have proceeded on an assumption that whereas the value of share capital, issued to the Government as part consideration for the transfer of business to the petitioner company, is limited only to the face value of the shares, the reserves represent a subsidy, grant or reimbursement for meeting the cost of assets transferred. We find no basis for such an assumption. We are hard pressed to imagine as to how free reserves and surpluses of a company can be considered anything but as part of shareholders funds. The Assessing Officer erred in completely ignoring that reserves and surpluses of a company are a part of shareholders funds and the book value of equity share consists of not only the paid up capital but also the reserves and surpluses of the company. The format of the balance sheet as prescribed under Schedule VI of the Companies Act, 1956 also clearly indicates that reserves and surpluses are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the whole consideration received by the Government of India for transfer of business is limited to the value of loans and the face value of the shares issued to the Government of India. A reserve represents the shareholders' fund and may be utilized in various ways including to declare dividends or for issuing bonus shares. There is no plausible reason to assume that the value of shareholders' holding in a company is limited to the face value of the issued and paid up share-capital and the reserves represent a subsidy or a grant or a reimbursement by the shareholders from which directly or indirectly the cost of the assets in the hands of a company are met. 14. Hence, in view of the judgment of the Hon'ble Delhi High Court in the assessee's own case as aforesaid, we allow ground no. 6 of assessee's appeal. 15. The next ground for consideration being taken up is ground no. 7 of assessee's appeal pertaining to disallowance @15% of Licence and Spectrum fees. It is seen that this issue is also covered in favour of the assessee by the order of ITAT, Delhi Bench in assessee's own case for assessment years 2003-04 to 2008-09. The relevant paras are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, he followed the decision of Hon'ble Calcutta High Court in the case of CIT vs. Vares International Pvt. Ltd. 225 ITR 831 and held that, the license fee in question cannot be treated as tax, duty, cess or fees as has been envisaged u/s 43B of the Act and hence a disallowance cannot be made under this Section. Aggrieved with this order both the assessee as well as the Revenue have filed appeals. 4.4. After hearing rival contentions we find that the issue in question is no more res integra. The ITAT Mumbai D Bench in the case of Videsh Sanchar Nigam Ltd. vs. JCIT (2002) reported in 81 ITD 456 (Mumbai) vide order dt. 14th September, 2000 held as follows. Section 37(1) of the Income-tax Act, 1961 - Business - expenditure - Allowable as - Assessment year 1995-96 - Assessee, a Government-company, was incorporated in 1986 for entire management, control, operation and maintenance of overseas communication service of Department of Telecommunications (DOT) - Nominal license fee and DOT levy paid by assessee were initially allowed as deduction in .assessment years 1988-89 to 1991-92 - In assessment years 1992-93 and 1993-94 CBDT opined that DOT levy was not revenue e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of S.43B of the Act, we uphold the findings of the First Appellate Authority. The quantum of the license fee paid is neither tax, duty, cess or fees. The Ld. CIT(A) has rightly relied on the decision of Hon'ble Calcutta High Court in the case of CIT vs. Varas International Pvt. Ltd. reported in 225 ITR 831. The 'license fees' being a charge received by the government for parting with rights, is neither a tax, nor a duty, nor a fees, nor a cess within the meaning of S.43B of the Act. Hence this Sec.43B cannot be applied. 4.8. In view of the above discussion we allow the appeal of the assessee and dismiss the appeal of the Revenue on this issue. As we have held so, the alternative contentions raised by the assessee need not be adjudicated as it would be an academic exercise. 16. Consistent with the view taken as reproduced herein above, we allow ground no. 7 of assessee's appeal. 17. The last ground for consideration before us is ground no. 2 of the Department's appeal wherein the Department is challenging the deletion of disallowance of ₹ 169,51,78,618/-made on account of write off of losses. This issue has been discussed by the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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