2021 (12) TMI 102 - AT - Income Tax

Disallowance of license fee paid by the assessee - Revenue treated the amount to be capital expenditure and not allowable u/s 37 - SLP has been filed by Revenue in some other case on identical facts - HELD THAT - Agreement pursuant to which the impugned license fee has been paid was entered by the assessee in the year 2006 and assessee has been paying the license fee and in the past the payment of license fee has been accepted by Revenue as no addition by disallowing the same has been made. The addition has been made only in the year under consideration for the reason that Department has filed SLP in the case of Bharti Hexacom Ltd. 2013 (12) TMI 1115 - DELHI HIGH COURT Vodafone Mobile Services Ltd 2016 (11) TMI 1702 - DELHI HIGH COURT - Hon ble Bombay High Court in the case of CIT vs. Forest Development of Maharashtra Ltd. 2017 (7) TMI 1384 - BOMBAY HIGH COURT has observed that even if the principle of res judicata does not apply in tax matters yet consistency and certainty of law would require the State to take uniform position and not change their stand in the absence of change in facts and /or law. In the present case, admittedly there is no change in the facts and/or law. In such a situation, merely because on SLP has been filed by Revenue in some other case on identical facts, cannot be justification for the disallowance of expenditure. We thus find no justification in the order of AO for disallowing the expenditure. We therefore direct the deletion of addition made by AO. Thus the ground of assessee is allowed

Summary

Issues involved:
1. Disallowance of annual license fee as capital expenditure
2. Justification of deduction under section 35ABB
3. Charging of interest under section 234B
4. Initiation of penalty under section 271(1)(c)

Issue 1: Disallowance of annual license fee as capital expenditure:
The appeal was filed against the order determining the income for Assessment Year 2014-15. The assessee, a subsidiary of a telecom company, had paid an annual license fee of &8377; 51,63,89,972 and claimed it as a revenue expenditure. The Assessing Officer (AO) considered the fee as capital in nature due to its enduring advantage to the assessee. The Department's stand was supported by Supreme Court cases. The Dispute Resolution Panel (DRP) upheld the AO's decision. However, the assessee argued that similar payments were allowed in previous years and no change in facts justified disallowance. The tribunal agreed, citing the need for consistency in tax matters and directed the deletion of the addition made by the AO.

Issue 2: Justification of deduction under section 35ABB:
This issue was not adjudicated as it was contingent on the decision regarding the disallowance of the annual license fee. The tribunal's decision on the first issue rendered this issue academic and therefore not discussed further.

Issue 3: Charging of interest under section 234B:
The tribunal did not address this issue specifically in the judgment. It was mentioned that Ground No.4, related to the charging of interest, was considered consequential and did not require adjudication. Hence, no detailed analysis or decision was provided regarding the charging of interest under section 234B.

Issue 4: Initiation of penalty under section 271(1)(c):
Similarly, the tribunal did not provide a detailed analysis or decision regarding the initiation of penalty under section 271(1)(c). Ground No.5, related to the penalty, was considered premature and not discussed in the judgment. Therefore, no specific information was provided regarding the penalty issue.

In summary, the tribunal allowed the appeal of the assessee concerning the disallowance of the annual license fee as capital expenditure. The tribunal emphasized the importance of consistency in tax matters and directed the deletion of the addition made by the Assessing Officer. The other issues related to the deduction under section 35ABB, charging of interest under section 234B, and initiation of penalty under section 271(1)(c) were not discussed in detail in the judgment.