9911796707
TMI Blog2022 (1) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... d void ab-initio. Without prejudice to the above, 1.2 On the facts and circumstances of the case and in law, the Principal Commissioner of Income Tax ("PCIT") has erred in passing the Order dated 31 March 2021 u/s. 263 of the Income-tax Act, 1961. 1.2.1 On the facts and circumstances of the case and in law, the PCIT has erred m holding that the Order dated 29 December 2017 passed by the Deputy Commissioner of Income Tax - 14(2)(1) ("DCIT") u/s. 143(3) of the Income-tax Act, 1961 was erroneous and prejudicial to the interests of revenue and in thereby revising the same. 1.2.2. On the facts and circumstances of the case and in law, the Appellant submits that the Order passed by the Ld DCIT was neither erroneous nor prejudicial to the interest of the revenue and hence the revision of the same by the PCIT u/s. 263 of the Income-tax Act, 1961 is erroneous and bad in law. 1.2.3. The learned AO had not only made adequate inquires, but had also undertaken necessary verification basis the details/ documents sought from the Appellant during the course of assessment proceedings, and hence, the assessment order dated 29 December 2017 passed by learned AO is neither 'erroneous' nor 'p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is into the business of providing cell phone and data services. In its books of accounts assessee company amortized amount spent on acquiring 3G spectrum and claimed 1/20th of the expenditure for the year as fee paid for spectrum. However, for the income tax purposes the assessee company capitalized the item and claimed depreciation @ 25% treating the spectrum as an 'intangible asset'. The assessee company by filing return of income for A.Y. 2015-16 declared total income at Rs. 4350,27,68,335/- by claiming depreciation to the tune of Rs. 1682.48 crores @ 25% on the spectrum fees paid by treating it as 'intangible asset', which was allowed by the AO under section 32 of the Act. 3. However, the Ld. PCIT by invoking the revisionary jurisdiction called upon the assessee company by way of issuance of notice under section 263 of the Act, as to why the spectrum fee claimed as depreciation by the assessee company, should not have been amortized on pro-rata basis over a period of license in force as per provisions of section 35AB of the Act as the assessment order is erroneous in so far as prejudicial to the interest of the Revenue. 4. After considering the written submissions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mind on the part of the AO; that AO has duly thrashed the issue as to the allowability of depreciation @ 25% on spectrum fees as claimed by the assessee company by raising repeated queries and has taken the Bench to numerous letters/questionnaire issued by the AO and reply filed thereto. 10. However, on the other hand, to repeal the argument addressed by the Ld. A.R. for the assessee company, the Ld. D.R. for the Revenue contended inter-alia that the AO has failed to do adequate enquiries rather accepted the claim of the assessee without raising any specific question as to the use of spectrum as well as qua the claim of depreciation on "spectrum fee" made by the assessee; that in all the questionnaires the AO raised generic queries which lead to the conclusion that no enquiry has been made by the AO; that impugned order under section 263 of the Act has been rightly passed by the Ld. PCIT under explanation 2 to section 263 of the Act as depreciation claim has been allowed without making enquiry and relied upon the case cited as Malabar Industrial Co. Ltd. vs. CIT (2000) 109 taxman 66 (SC). 11. First of all, the Ld. A.R. for the assessee has taken us to the page 76 of the paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee company, on the other hand, in order to submit reply/explanation to the queries raised by the AO during assessment proceedings had written a letter dated 22 August, 2017 available at page 95 giving complete details of addition made to the fixed assets and sample invoices of fixed assets purchased as annexure II(A) and annexure II(B). Then again written letter dated 21st November 2017 available at page 97 wherein in para 1 the details of spectrum capitalized is given as annexure I, examined by the tax auditor with necessary calculation of depreciation claimed and certified by the tax auditor as annexure II. Then again assessee company issued letter dated 26.12.2017 available at page 99 wherein detail as to bidding by the assessee company in various spectrum options conducted by the department of telecommunication (DOT) in order to acquire right to use spectrum is given. 15. Then Ld. A.R. for the assessee has taken us to the letter dated 5 April, 2017 issued to the AO giving complete detail of depreciation on cost of right to use spectrum as under: "2. Depreciation on cost of right to use Spectrum ("the Spectrum Cost"): In respect of the Spectrum (being distinct f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ld. D.R. for the Revenue are misconceived because information duly received by the AO during the official course of assessment proceedings in continuation of earlier communications, though submitted on its own by the assessee, are deemed to be examined by the AO by applying his mind. 17A. So far as the contention raised by the Ld. D.R. for the Revenue that Ld. PCIT has passed the order by invoking explanation 2 to section 263 of the Act is concerned, the Ld. A.R. for the assessee contended that unless explanation 2 to section 263 of the Act is used in the show cause notice under section 263 of the Act the same cannot be invoked while passing the order under section 263 of the Act and relied upon the decision rendered by the Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax vs. Shreeji Prints (P.) Ltd. reported in (2021) 130 taxmann.com 294 (SC). 18. Bare perusal of the notice issued by the Ld. PCIT under section 263 of the Act available at page 11 of the paper book shows that explanation 2 to section 263 of the Act has not been used in notice and as such the view taken by the Hon'ble High Court of Gujarat having been upheld by the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 has been set aside but he has keept this issue alive on the pretext that the order passed by the Tribunal is not accepted by the Department by returning following findings: "5.11 As regards, the legal objection to taking action against 263 and maintainability of this provision suffice to say that perusal of records and filing does not indicates any debate or discussion for considering Section 35ABB or Section 32 at all. It is thus, not the case that the AO has examined both the provisions and took a conscious decision after detailed enquiry, examination and verification of facts that it is not 35ABB but Section 32 which should be invoked and depreciation is to be allowed. 5.12 The submissions made before the AO only indicates what the assessee had to tell about various expenditures items he had claimed. It is interesting to note that the AO queried about amortization and apparently was satisfied that amortization was done. There is no question about depreciation claim nor any examination or verification. The AO thus apparently was not even alert to the difference between book treatment and income tax claim. Hence, to say that there was application of mind and conscious decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) of Explanation 3 indicates that goodwill would fall under the expression `any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 5. In the circumstances, we are of the view that `Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act. 6. One more aspect needs to be highlighted. In the present case, the Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) [`CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee Company in the process of amalgamation had acquired a capital right in the form of goodwill because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order." 24. Since the issue as to the allowability of depreciation on spectrum fee as claimed by the assessee under section 32 of the Act and the provisions contained under section 35ABB are not applicable has already been decided in favour of the assessee by the Tribunal, the order of the Tribunal cannot be allowed to be disobeyed by Ld. PCIT merely on the pretext that the department has not accepted the said decision and appeal has already been filed before the Hon'ble High Court. In order to maintain judicial discipline Ld. PCIT had no option but to follow the order. 25. Following the order passed by the co-ordinate Bench of the Tribunal, we are of the considered view that even on merits the assessee's claim for depreciation on "spectrum fee" is allowable under section 32 of the Act as the provisions contained under section 35ABB of the Act being not applicable to the issue at hand. Hence, the order passed by the AO is not erroneous. So we are of the considered view that the AO has rightly allowed the claim by virtue of the assessment order framed under section 143 of the Act. So the question No.II framed is also decided in favour of the assessee and against the Revenue. 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
