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2016 (8) TMI 270 - DELHI HIGH COURT

2016 (8) TMI 270 - DELHI HIGH COURT - [2016] 388 ITR 371 - Eligible business for the purpose of deduction under Section 80IA - why certain specific items categorized as 'other income' and 'extra-ordinary item' in the Profit and Loss Account in assessment year 2004-05 should not be excluded from the profit and gains of the Assessee? - eligibility for Extra Ordinary Items, Refund from Universal Service Fund, Interest from others, Liquidated Damages, Excess provision written back and Others includi .....

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ess of providing telecommunication services, deduction in respect of the above items in terms of Section 80IA(2A) are unsustainable in law and have rightly been reversed by the ITAT. - Section 80-IA (2A) treats an undertaking providing telecommunication services as a separate species warranting a separate treatment as is evident from the non-obstante clause with which it begins. The Court sees no reason why such an undertaking would not be able to take the benefit of deduction in terms of Se .....

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dhuri, Senior Standing Counsel For the Respondent : Mr. Mayank Nagi with Ms. Husnal Syali, Advocates ORDER CM No. 27273/2016 (for exemption) in ITA No. 476/2016 CM No. 27274/2016 (for exemption) in ITA No. 477/2016 CM No. 27275/2016 (for exemption) in ITA No. 478/2016 CM No. 27277/2016 (for exemption) in ITA No. 479/2016 CM No. 27279/2016 (for exemption) in ITA No. 481/2016 CM No. 27280/2016 (for exemption) in ITA No. 482/2016 CM No. 27281/2016 (for exemption) in ITA No. 483/2016 CM No. 27291/20 .....

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the Income Tax Appellate Tribunal ( ITAT ) in the following appeals: High Court Appeal Nos. Corresponding ITAT Appeal Nos. A.Y. Date of ITAT Order 476/2016 2176/DEL/2008 2005-06 22nd January 2016 477/2016 4275/DEL/2010 2006-07 22nd January 2016 478/2016 3386/DEL/2010 2004-05 23rd December 2015 479/2016 2162/DEL/2008 2005-06 22nd January 2016 481/2016 1901/DEL/2012 2008-09 22nd January 2016 482/2016 3701/DEL/2010 2006-07 22nd January 2016 483/2016 2879/DEL/2010 2007-08 22nd January 2016 490/2016 .....

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degree nexus implicit in the words "derived from" used in section 80 IA is not required for computation of deduction in the case of undertaking engaged in providing telecommunication services since the words "derived from" do not occur in sub-section (2A) of Section 80 IA. According to the Revenue, the ITAT erred in reading the sub-section (2A) in isolation, and thereby carved out a separate scheme with regard to the nature and extent of deduction for undertaking engaged in .....

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n accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise devel .....

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infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the 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. (2A) Notwithstanding anything contained in sub-section (1) or sub- section (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub- .....

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assessment year 2004-05 should not be excluded from the profit and gains of the Assessee. According to the Revenue, these items could not be considered as profits and gains 'derived from' the eligible business for the purpose of deduction under Section 80 IA. The said six items were: (i) Extra Ordinary Items (ii) Refund from Universal Service Fund (iii) Interest from others (iv) Liquidated Damages (v) Excess provision written back (vi) Others including sale of directories, publications, .....

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the Assessee s plea regarding the other three items as being derived from the business was accepted by the CIT (A). 10. The Assessee filed appeals and the Revenue filed cross-appeals before the ITAT. The ITAT in the impugned orders concluded that with sub-section (2A) beginning with a non-obstante clause, the legislative intention of making available to an undertaking, providing telecommunication services, the benefit of deduction of 100% of the profits and gains of the eligible business was ex .....

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hed by the ITAT in para 13.11 of the impugned order correctly encapsulates the legal position as far as the interpretation of Section 80IA (2A) is concerned. 13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, it wanted to curtail the time line during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose ne .....

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and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be derived from . The requirements of the first degree nexus of the profits from the eligible business has not been brought into play. 11. As a result, the orders of both the AO and the CIT (A) to the extent they deny the Assessee, which in this case .....

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