TMI Blog2020 (1) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... are capital expenditure as per Section 35ABB - HELD THAT:- Since the Revenue is in the process of filing appeal before the Hon'ble High Court the additions have been made. We are of the considered opinion that since the impugned issue is covered by the decision of the coordinate bench in assessee s own case for Assessment Year 2007-08 [ 2015 (1) TMI 924 - ITAT DELHI] as held if any expenditure on account of licence fee was payable up to 31.07.1999, it should be treated as capital expenditure and the licence fee on revenue sharing basis after 01.08.1999 should be treated as revenue in nature. - Decided in favour of assessee. TDS claimed on the deferred Revenue - HELD THAT:- We find that section 199(3) of the Act gives power to the Board to make such rules for the purposes of giving credit in respect of tax deducted or tax paid in terms of provisions of the Act and also A.Y for which such credit may be given. Rule 37BA(3)(ii) provides that where tax has been deducted at source and paid to Central Government and income is sustainable over a number of years, credit for tax deducted at source shall be allowed across those years in same proportion in which income is assessable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the appellant had deferred in the books of account, without appreciating that it was only a case of timing difference and no loss to the Revenue arose on account of said approach followed by the appellant. 3. Facts relating to Ground No. 1 are that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee company has made an investment to the tune of ₹ 2,79,74,27,002/- in the shares of mutual funds for earning dividend income. The Assessing Officer further noticed that the assessee has earned dividend income of ₹ 1,65,69,728/- from these investments. The Assessing Officer was of the firm belief that the provisions of section 14A of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] r.w.r 8D of the Income Tax Rules squarely apply on the facts of the case and proceeded to compute the disallowance u/s 14A r.w.r 8D as under: Expending to be aggregate of the following: i) The amount of expenditure directly relating to income which does not form part of total income. Nil/- Nil/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that no expenditure has been incurred in the process. 6. The ld. CIT(A) found that in Assessment Year 2011-12, disallowances were made under similar situation and drawing support from the findings of his predecessor, upheld the disallowance made by the Assessing Officer. 7. Before us, the ld. counsel for the assessee for the first time took the plea that formula envisaged in Rule 8D cannot be applied on the facts of the case in hand since there is no opening balance of investment nor there is any closing balance of any investment. It is the say of the ld. counsel for the assessee that it is impossible to determine the average value of investment and hence disallowance computed by the Assessing Officer has to be deleted. 8. We have given thoughtful consideration to the orders of the authorities below. The balance sheet of the assessee company is placed at pages 4 to 12 of the paper book. We find that the mutual funds, which are the subject matter of computation of disallowance, are neither in the opening balance nor in the closing balance. This means that the mutual funds have been purchased and sold during the year itself. u/r 8D, the average of value of investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the first appellate authority and how the ground remained unadjudicated. 14. To this, the ld. DR stated that the issue may be restored to the file of the ld. CIT(A) for adjudication. 15. We find that while making additions, the Assessing Officer himself has observed that similar disallowance was deleted by the Tribunal in Assessment Year 2007-08. Since the Revenue is in the process of filing appeal before the Hon'ble High Court the additions have been made. We are of the considered opinion that since the impugned issue is covered by the decision of the coordinate bench in assessee s own case for Assessment Year 2007-08 ITA No. 4546/DEL/2013 and 5106/DEL/2013, there is no need to burden the first appellate authority on a decided issue. It is not the case of the Revenue that the Hon'ble High Court has stayed the operation of the order of the coordinate bench [supra]. Relevant findings of the coordinate bench read as under: 30. We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that the issue under consideration is squarely covered by the judgment of the Hon'ble Jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue sharing basis was for carrying on business as cellular telephone operator and, thus it was a normal business expense. HCL Comnet Systems Services Ltd. Read in this manner, the licence granted by the Government/authority to the assessee would be a capital asset, yet at the same time, the assessee has to make payment on yearly basis on the gross revenue to continue, to be able to operate and run the business, it would also be revenue in nature. Failure to make stipulated revenue sharing payment on yearly basis would result in forfeiting the. right to operate and in turn deny the assessee, right to do business with the aid of the capital asset. Non-payment will prevent and bar an assessee from providing services. In aforesaid circumstances, it would be appropriate and proper to apportion the licence fee as partly revenue and partly capital. The next obvious question is, on what basis apportionment should be done and what could be the proportion of apportionment between capital and revenue expenditure. In this regard it would be appropriate and proper to divide the licence fee into two periods i.e. before and after 31-7-1999. The licence fee paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed, it would be revenue or tax neutral provided the tax rates remain the same during this period. 31. The Hon'ble Jurisdictional High Court concluded as under: (i) The expenditure incurred towards licence fee is partly revenue and partly capital. Licence fee payable up to 31- 7-1999 should be treated as capital expenditure and licence fee on revenue sharing basis after 1-8-1999 should be treated as revenue expenditure. (ii) Capital expenditure will qualify for deduction as per section 35ABB. 32. Facts of the present case appears to be similar to the facts involved in the case of CIT Vs Bharti Hexacom Ltd. (Delhi) (supra), we, therefore, restored this issue to the file of the AO to be decided in accordance with the findings given by the Hon'ble Jurisdictional High Court in the case of Bharti Hexacom Ltd. (supra) and if any expenditure on account of licence fee was payable up to 31.07.1999, it should be treated as capital expenditure and the licence fee on revenue sharing basis after 01.08.1999 should be treated as revenue in nature. 16. Respectfully following the decision of the coordinate bench, we direct the Assessing Officer to delete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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