TMI Blog2022 (1) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee, that the assessment order passed by the AO under section 143(3) of the Act allowing depreciation claimed by the assessee @ 25% on spectrum fee under section 32 of the Act was not erroneous in so far as prejudicial to the interest of revenue 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. 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification 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 prejudicial to the interest of the revenue. Also, the Mumbai ITAT vide its order dated 6 December 2017 (ITA No. 360/Mum/2016) has quashed the proceedings u/s 263 of the Act in AY 2011-12 and held that the VIL has rightly claimed tax depreciation under section 32 of the Act on spectrum so acquired. 1.2.4 The learned PCIT passed the revisionary order on the issues not following binding judicial precedents (also submitted during the revisionary proceedings) leading to unwarranted litigation. 1.3 On the facts and circumstances of the case and in law, the Appellant prays that the impugned Order passed u/s. 263 of the Income-tax Act, 1961 by the PCIT is to be struck down. Without prejudice to the aforesaid grounds: 2. Re: Disallowance of tax depreciation on spectrum : 2.1 On the facts and in circumstance of the case and in law, the learned PCIT has erred in concluding that the order passed by the learned AO, accepting the depreciation Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, 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 contentions raised by the assessee company the Ld. PCIT reached the conclusion that the AO has neither questioned nor examined nor verified qua the issue of depreciation claim made by the assessee on spectrum fee and as such depreciation claim allowed by the AO is incorrect being not examined in accordance with provisions contained under section 35ABB and thereby held the assessment order framed under section 143(3) of the Act under consideration, erroneous in so far as prejudicial to the interest of the Revenue. 5. Aggrieved with the impugned order passed by the Ld. PCIT under section 263 of the Act, the assessee company has come up before the Tribunal by way of filing the present appeal. 6. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the order passed by the Ld. Lower Revenue Authorities in the light of the facts and circumstances of the case and case l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 book wherein detail qua claim of depreciation on spectrum as made by the assessee company has been given under the head Background on claim of depreciation on spectrum fee by the assessee and assessment proceedings and drew our attention towards financial statements Note 2d and 12-fixed assets and tax audit report. Thereafter, the Ld. A.R. has taken us to page 79 wherein detail of depreciation claim on intangible assets amortized on straight-line method has been given. Then on page 82 particulars of allowable depreciation in respect of the each block of assets has been given under the head intangible asset by the assessee company. 12. In the backdrop of the claim of the assessee company qua depreciation on spectrum fees and detail thereof the Ld. A.R. for the assessee drew our attention towards page 84 of the paper book which is a notice issued unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable 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 from license) won by the Assessee in various auctions conducted by the DOT in past, the Assessee capitalizes the spectrum cost under the block Intangible Assets and claims depreciation u/s. 32 of the Act thereon at the applicable rate on being put to use. That the Spectrum is distinct from the Telecom License fee paid to the DOT, is borne out by the New Telecom Policy 1999, Notice inviting Applications for allotment of spectrum, dated 28 September 2012 and 12 December 2013 as also the individual Letters of Allotment issued by DOT in respect of the respective service areas. Further, as per the foregoing Notice, the allottee, has an obligation to roll out mobile telep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Court by holding that when the Ld. PCIT has not mentioned in the show cause notice to invoke explanation 2 to section 263 of the Act the same cannot be invoked while passing the order under section 263 of the Act is squarely applicable to the contentions raised by the Ld. A.R. for the assessee. 19. In view of what has been discussed above, we are of the considered view that the AO has allowed the depreciation @ 25% claimed by the assessee company on spectrum fees by treating the same as intangible assets under section 32 of the Act by making a discreet enquiry and as such it is neither a case of non application of mind on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 decision to not invoke 35ABB and allow depreciation is incorrect. 5.13 In assessee s own case for A.Y 2011-12, order u/s 263 of the act was passed on the similar issue. The said order u/s 263 has been set aside by the Hon ble ITAT. With due respect, since, the department is not in agreement with the decision of Hon'ble ITAT, further appeal has been filed before the Hon'ble Bombay High Court for A.Y 2011-12 on the same issue, which is still pending. 5.14 In the light of the above, the order made by the Assessing Officer accepting the depreciation claimed on spectrum is erroneous as well as prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally 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 of which the market worth of the assessee-Company stood increased. This finding has also been upheld by Income Tax Appellate Tribunal [`ITAT', for short]. We see no reason to interfere with the factual finding. 7. One more aspect which needs to be mentioned is that, against the decision of ITAT, the Revenue had preferred an appeal to the High Court in which it had raised only the question as to whether goodwill is an asset under Section 32 of the Act. In the circumstances, before the High Court, the Revenue did not file an appeal on the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
