9911796707
TMI Blog2022 (1) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of Rs. 5,01,85,899/- of capitalization of licenses fee which give assessee company long term right to use telecommunication spectrum and the annual extension of the same be considered as capital expenditures." 4. The facts giving rise to the present appeal are that in this case, the assessee filed its return of income declaring an income of Rs. 15,04,07,710/- on 28/11/2011. The case was selected for scrutiny and the assessment u/s. 143(3) of the Income Tax Act, 1961 ["the Act"] was framed vide order dated 28/3/2014. The Assessing Officer while framing the assessment noticed that the assessee had claimed license fee expenses amounting to Rs. 6,01,14,532/- during the year under consideration. The Assessing Officer was of the view that by paying license fee the assessee got the right to use telecommunication spectrum and the license so acquired should be treated as intangible assets hence, the assessee was entitled to claim the depreciation on the same. But in the instant case, the assessee claimed it as revenue expenditure. Thus, the Assessing Officer vide orders sheet entry dated 30/1/2014 asked the assessee to explain as to why license fee paid to the Department of Tel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant that by virtue of the impugned payment of the licence fee to DOT, the appellant only obtained a year to year right to provide VSAT services -the license was granted initially for a period of ten years and was extendable beyond the initial period yearly. The appellant contended that in its case (i) no bid price was undertaken to be paid as part of the tender (ii) an annual fee was paid for obtaining the right to provide VSAT services for each year (iii) the annual fee was paid on the basis of number of VSATs installed and was in the nature of royalty and, (iv) it could opt not to pay the annual charge in any year if it decided not to provide the VSAT services in that year. 5.2b It is observed from the extract of the relevant agreement mentioned as a part of its written response dated 13/02/2014 at the assessment stage as well as its submission at the appellate stage that the Department of Telecommunications (DOT) vide licence agreement dated 3/08/1994 awarded licence to the appellant to operate Closed User Group Domestic 64 KBPS Data Network via INSAT Satellite System using VSAT Further, it is observed as under:- * Granted initially for 10 years, license extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority (Government) for the business operations of the assessee (businessman) is revenue in nature and allowable u/s. 37(1) of the Act - the leading case law in regard to the determination of an expenditure as capital or revenue is the decision of the Apex Court in Empire Jute Co. Ltd. vs. CIT (supra) wherein the test for determining as to what constitutes capital expenditure was laid down as under: "...It is not every advantage of enduring nature acquired by an appellant that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the appellant's trading operations or enabling the management and conduct of the appellant's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future..." The ratio decided in laid down in the aforesaid judgment has been reiterated by the Supreme Court in CIT vs. Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reversed by the Hon'ble High Court of Delhi. The Ld. CIT (A) has given a finding on fact that the Revenue share fee was for the operation and usage of the right given under the license and had not result into creation of capital asset or advantage. This finding on fact is not rebutted by the Revenue. Moreover, the Revenue has not brought to our notice any other binding precedent on this point. Under these facts, we do not see any infirmity into the order of the Ld. CIT(A) The same is hereby affirmed. The Grounds raised by the Revenue is dismissed. 12. Now, we take up the appeal for the Assessment Year 2013-14 in ITA No. 569/Del/2018. The solidarity effective ground by the Revenue in this appeal reads as under:- "Whether on the facts and circumstances of case the Ld. CIT(A) has not erred in deleting disallowance of Rs. 7,88,14,281/- of capitalization of licenses fee which give assessee company long term right to use telecommunication spectrum and the annual extension of the same be considered as capital expenditures." 13. The Ld. Authorized Representative of the parties have adopted the same argument as were in ITA No. 5827/Del/2017. It is submitted by the Ld. Senior Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
