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Undesirable litigation by revenue in case of PUS- BSNL- claim was allowed by Tribunal as per clear provisions of S.80IA (2)

Income Tax - Direct Tax Code - DTC - By: - CA DEV KUMAR KOTHARI - Dated:- 10-8-2016 - Case: Pr. Commissioner of I. Tax-Delhi Versus Bharat Sanchar Nigam Ltd. [2016 (8) TMI 270 - DELHI HIGH COURT] Links and references: Provisions: S. 80IA (2) was applicable, Revenue tried to also apply S.80IA (1) and (2). S.80IE in which words derived from are not used, therefore the ruling in case of BSNL is applicable. Provisions relevant to the issue are reproduced below with highlights: S.80- IA Deductions in .....

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sessee, 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) xxx not relevant to main issue involved [(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-section (4), shall be hundred per cent of the profits and gains of the eligible business for t .....

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standing anything contained in sub-section (1) or sub-section (2), In sub-section (1) provisionsays …. a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. In sub-section (2A) provisions says shall be hundred per cent of the profits and gains of the eligible business Revenues contentions and appeals seems without application of mind, properly: On reading of provisions, it appears that the revenue tried .....

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to un-necessary and undesirable litigation, particularly because there was no merit at all in view taken by AO and CIT(A) so there should not be appeal before ITAT. Another reason for considering litigation as undesirable is that assessee (BSNL) is a Public Sector Undertaking) fully/ mostly controlled by the Government. Therefore, in such cases such litigation, which have no merit should be avoided. History of case: We find that in this case learned AO restricted deductions based on concept of d .....

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revenue is un-necessarily initiating litigation from assessment stage and carrying such litigation up to the honourable Supreme Court also ( as we can see many cases) . Let us hope that the revenue shall not appeal against judgment of Delhi High Court. Other provisions in which this judgment is applicable: We find some other provisions in which this judgment is applicable because in those provisions also restrictive words like derived from undertaking or eligible business are not use. For exampl .....

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is why honourable Court has, while considering contention raised by Counsel held that In the first place as far as the present appeals are concerned, the above issue as posed by learned counsel for the Revenue is purely hypothetical. However, honourable Court has not passed any order for costs. Heavy costs in favour of assessee in such cases can put a check on un-necessary litigation which causes lot of wastage of public money and valuable time of tax authorities, counsels , courts and also of .....

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of the ITAT that the first 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 .....

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red 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, form, waster paper, etc. 9. The AO held that the six items of income could not be said to be derived from the business of the Assessee and added the .....

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ed 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 explicit. Indeed, the legislature appears to have made a conscious departure in adopting for sub-section (2A) a wording different from that .....

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A (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 needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/e .....

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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 is in the business of providing telecommunication services, deduction in respect of the above items in terms of Section 80IA(2A) are uns .....

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