2019 (2) TMI 1469 - AT - Income Tax

Eligibility to deduction u/s 80IA(4)(ii) - available to basic Telecom Services Providers is also available to franchisees of such basic service providers also, which is only putting EPEX system without creating infrastructure in the field of Telecom - HELD THAT - This issue in favour of the assessee, wherein it has been held that the assessee who are franchisees of BSNL and who have been permitted to install, maintain and operate in dialing EPABX under the franchisees to support the department can be treated to have provided basic telephone services . This would amount to creation of infrastructure entitling them for deduction u/s 80IA. Relying on authoritative pronouncement of the Hon ble jurisdictional High Court in the assessee s own case 2014 (12) TMI 1331 - GUJARAT HIGH COURT we are of the view that question referred to this Bench deserves to be answered in favour of the assessee, and against Revenue. It is pertinent to observe that the appeal has also been transferred to the Special Bench, therefore, we proceed to deal with the appeal on merits. On perusal of the record would indicate that only substantial issue involved in this appeal is, whether deduction under section 80IA(4)(ii) is available to the assessee or not. Considering the opinion of Special Bench coupled with ratio laid down by the Hon ble High Court in assessee s own case, we are of the view that the assessee is entitled for deduction under section 80IA(4)(ii) of the Act. CIT(A) has rightly granted the same to the assessee. - Decided against revenue.

Summary

Issues:
Whether deduction under section 80IA(4)(ii) available to basic Telecom Services Providers extends to franchisees of such providers only installing EPEX system without creating infrastructure in the field of Telecom?

Analysis:
1. The case involved the assessee filing income tax return claiming a deduction under section 80IA of the Income Tax Act, 1961. The assessing officer disallowed the claim citing past disallowances and departmental appeals. The CIT(A) allowed the claim based on ITAT's previous decisions. The Revenue appealed, arguing that the EPABX system installation by the assessee did not constitute infrastructure development, referencing a conflicting opinion from ITAT, Chennai Bench. This led to the constitution of a Special Bench to address the issue.

2. The counsel for the assessee highlighted that previous Tribunal orders in favor of the assessee had been upheld by the High Court, supporting the eligibility for deduction under section 80IA. The High Court's decision in the assessee's case confirmed that franchisees installing EPABX systems for basic telephone services were entitled to the deduction. The Special Bench concurred with the High Court's ruling, affirming the assessee's eligibility for the deduction.

3. The Special Bench noted that the key issue was the availability of deduction under section 80IA(4)(ii) to the assessee. Considering the High Court's decision and the precedent set in the assessee's case, the Bench upheld the CIT(A)'s decision to grant the deduction. Consequently, the Revenue's appeal was dismissed, affirming the assessee's entitlement to the deduction under section 80IA(4)(ii).

In conclusion, the judgment clarified that franchisees providing basic telephone services through EPABX systems were eligible for deduction under section 80IA, as established by the High Court's ruling in the assessee's case. The Special Bench upheld the CIT(A)'s decision, emphasizing the assessee's entitlement to the deduction based on established legal precedents and relevant provisions of the Income Tax Act.