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TMI Blog2025 (5) TMI 1412X X X X Extracts X X X X X X X X Extracts X X X X ..... y Assessment Unit, Income Tax Department (hereinafter referred to as "AO") under Section 143(3)read with section 144B of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for Assessment Year 2022-23. 2 Brief facts, appellant company is a Public Limited Company, engaged in business of providing remote infrastructure management service and telecommunication service. The appellant company in its return of income filed on 25.10.2022 has declared Nil income and claimed refund of Rs. 92,53,060. That on 27.6.2023 case was selected for complete scrutiny vide issuance of notice u/s 143(2) of the Act. Ld. AO, from the information available on record, observed that appellant has paid an amount of Rs. 7,75,32,989/- to the Government of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to be incurred to earn the revenue, thus entire expenditure to the tune of Rs. 5,80,89,337/- has been claimed as revenue expenditure u/s 37(1) of the Act and is not covered under the ambit of section 35ABB of the Act. Having not satisfied with the reply of the appellant, Ld. AO by relying upon the judgment of Hon'ble Apex Court in the case of Bharti Hexacom reported in 458 ITR 593(SC), is of the view that the Transponder Fees is akin to the license obtained by the appellant-which the Apex Court deemed capital in nature, despite being paid in instalments, the Transponder Fees constitutes payment towards the acquisition of a right essential for the operation of telecommunication services, thereby qualifying as capital expenditure and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under separate agreements and there was no correlation between the two expenditures. He submits that the license fees was paid by the appellant for securing the license to operate and provide telecommunication services for a period of twenty years, however appellant only received the right to use bandwidth capacity in the transponder for a period of one year by making payment of transponder fee and even the said right would be taken away in a case where no payment could be made, which would also result in the agreement being terminated. Thus he submitted that the payment of transponder fee amounting to Rs. 5,80,89,337/- did not result in any enduring benefit to the appellant and therefore, the same deserves to be allowed in entirety as rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission filed by appellant and also the judgments relied upon by the respective parties. 7. Ground Nos. 1 & 2 are general and need no adjudication. Ground No. 3 to 3.4:- 8. The crux of the issue is that as to whether the payment made by appellant towards transponder fees is capital expenditure as held by lower authorities or revenue expenditure as claimed by appellant. 8.1 Lower Authorities by relying upon the judgment of Hon'ble Apex Court in case of Bharti Hexacom Ltd. (supra) was rendered subsequent to filing of return of income by the appellant, has held that the Transponder Fees is akin to the license obtained by the appellant- which the Apex Court deemed capital in nature, despite being paid in instalments, the Transponder Fees con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer 5,28,03,660 2018-19 Disallowance made by the assessing officer and confirmed by the CIT(A) 7,63,23,985 2021-22 Disallowance made by the assessing officer and confirmed by the CIT(A) 2,27,94,115 9.1 However, after the judgment of Hon'ble Apex Court in case of Bharti Hexacom Ltd. (supra) both, revenue and appellant are of the view that the claim of license fees should be amortized in accordance with provisions of section 35ABB of the Act, therefore out of the total expenditure of Rs. 1,94,43,653/- claimed in return of income, only expenditure of Rs. 14,95,666/- to be allowed for the year under consideration. Resultantly remaining expenditure of Rs. 1,79,47,987/- to be disallowed as far as year under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereby appellant claims that as the expenditure of license fees was disallowed in preceding assessment years, corresponding amortized expenditure pertains to year under consideration should be allowed in the year under consideration, despite the fact that the such disallowances was separately challenged in respective appeals or even appeal effect making disallowance for assessment year 2016-17 is yet to be given. Further we have already decided the identical issue in appellant's own case for assessment year 2021-22 in ITA No. 4965/D/2024, wherein identical claim has been made via additional grounds raised before First Appellate Authority, which has been remitted by us to the First Appellate Authority in absence of any finding of First App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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