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2022 (12) TMI 28 - AT - Income TaxDeduction u/s 80IA - profits and gains derived from telecommunication service in AY 2005-06 for the first time - assessee started providing telecommunication services before 01/04/1995 or thereafter - admission of additional evidences - DR submitted that to be eligible to claim the benefit of deduction, the primary requirement of section is that the undertaking starts providing telecommunication services on or after 01/04/1995 and documents on record suggest that the assessee had started services prior to 01/05/1995, hence, the assessee is not eligible to claim benefit of deduction u/s. 80IA(4) - One of the objection raised by the Department is that the assessee has not maintained separate books of account HELD THAT - The Circular clarifies that the condition introduced by the Finance (No.2) Act, 2004 will not apply to undertakings which have started providing telecommunication services prior to 01-4-2004. Documents on record clearly show that the assessee started providing telecommunication services after 01/4/1995 but before 01/4/2004. Thus, even if the assessee s undertaking is formed after merger/reconstruction, still the assessee would be eligible for deduction u/s.80IA of the Act in the light of CBDT circular There is no infirmity in the order of CIT(A) in coming to the conclusion that the assessee had started telecommunication services after 01/04/1995 and the assessee is eligible for deduction u/s. 80IA(4) of the Act. Additional Evidences - HELD THAT - This case has travelled between Assessing Officer and the Appellate Authorities four times over a period of decade. Four times the assessment order has been passed. The issue that was considered time and again in assessment proceedings and the Appellate proceedings was the assessee s eligibility to claim deduction u/s. 80IA with reference to assessee s date of start of telecommunication services. Sufficient time was available to the Department to furnish these evidences. For the reasons best known to the Department these additional evidences which are factual and were very much in existence even during at the time of passing first assessment order for AY 2005-06 were not relied upon by the Department. Dehors, belated filing of these additional evidences, even if these additional documents are admitted, it would not make any material difference.As sale of pagers during FY 1994-95 has already been admitted by the assessee and the same has been reflected in the books of account. - the Revenue s application for admitting additional evidences at this belated stage is rejected. Whether interest income and miscellaneous income earned by the assessee would be eligible for deduction u/s. 80IA? - We find that similar issue had come up before the Tribunal in the case of BSNL 2015 (12) TMI 1531 - ITAT DELHI in terms of non- obstinate clause used in section 80IA(2A), deduction for telecommunication services is available in respect of profits of eligible business and is not restricted to profits derived from eligible business as mentioned in section 80IA(1) - The aforesaid findings of the Tribunal were affirmed by the Hon ble Delhi High Court 2016 (8) TMI 270 - DELHI HIGH COURT - As observe that the DRP in directions dated 21/09/2017 for assessment year 2013-14 has observed that no SLP has been filed against the decision of Hon ble Delhi High Court by the Revenue and allowed assessee s claim of deduction u/s. 80IA of the Act in respect of other incomes. Respectfully following the decision of BSNL we direct the Assessing Officer to allow the benefit of deduction u/s. 80IA of the Act in respect of interest Income as well as miscellaneous income. Ground No.2 of the assessee s appeal is thus allowed. Charging of interest u/s. 234B is mandatory and consequential. We deem it appropriate to restore this issue back to the file of AO for charging interest in accordance with the provisions of section 234B - Ground No.3 of the appeal is thus, allowed for statistical purpose.
Issues Involved:
1. Whether the assessee started providing telecommunication services before 01/04/1995 or thereafter. 2. Whether the assessee is eligible to claim deduction u/s. 80IA(4)(ii) of the Act. 3. Disallowance of deduction under section 80IA of the Act on 'Other Income'. 4. Charging of interest under section 234B of the Act. Detailed Analysis: Issue 1: Whether the assessee started providing telecommunication services before 01/04/1995 or thereafter The primary contention by the Department was that the assessee started providing telecommunication services, including radio paging and cellular phone services, before 01/04/1995, thus disqualifying them from claiming deductions under section 80IA(4)(ii) of the Act. The Department relied on various documents, including Form No.10CCB for AYs 2005-06 and 2006-07, returns of income for AY 1995-96 and 1996-97, information from the web portal of Max Telecom, license agreements, and additional evidences such as communications with the DoT and invoices. Conversely, the assessee argued that the telecommunication services commenced after 01/04/1995, supported by assessment orders for AY 1995-96 and 1996-97, letters of approval and clearance from DoT, auditors' certificates, and interface/service approval certificates. The Tribunal noted that the assessment orders for AY 1995-96 and 1996-97 concluded that the business was not set up until after 31/03/1995, and these findings were not challenged by the Department through revision or reopening proceedings. The Tribunal also referred to the decision in ACIT vs. Vodafone Essar Gujarat Ltd., which emphasized that the initial assessment year for claiming deductions should be based on the year the services actually commenced. Issue 2: Whether the assessee is eligible to claim deduction u/s. 80IA(4)(ii) of the Act The Tribunal found that the assessee started providing telecommunication services after 01/04/1995, based on the evidence presented, including the assignment of radio frequencies and service approvals received post-01/04/1995. The Tribunal concluded that the Department could not revisit the settled findings of earlier assessment years in later years. The Tribunal also dismissed the Department's argument that the assessee failed to maintain separate books of account for different segments of telecommunication services, citing the decision in CIT vs. Micro Instruments Co. which held that maintaining separate books was not mandatory for claiming deductions under section 80IA. Issue 3: Disallowance of deduction under section 80IA of the Act on 'Other Income' The assessee claimed deductions under section 80IA for interest income and miscellaneous income, which were disallowed by the Assessing Officer and the CIT(A). The Tribunal referred to the decision in Bharat Sanchar Nigam Ltd. (BSNL) vs. DCIT, upheld by the Hon'ble Delhi High Court, which held that deductions for telecommunication services under section 80IA(2A) are available for "profits of eligible business" and not restricted to "profits derived from eligible business." The Tribunal directed the Assessing Officer to allow deductions for the interest and miscellaneous income based on this precedent. Issue 4: Charging of interest under section 234B of the Act The assessee challenged the levy of interest under section 234B for the period beyond the date of the original assessment order. The Tribunal noted that charging interest under section 234B is mandatory and consequential, and restored the issue to the Assessing Officer for recalculating the interest in accordance with the provisions of the Act. Conclusion: The Tribunal dismissed the Department's appeal, upholding the CIT(A)'s decision that the assessee started telecommunication services after 01/04/1995 and was eligible for deductions under section 80IA(4) of the Act. The Tribunal also allowed the assessee's appeal regarding deductions for other income and directed a recalculation of interest under section 234B.
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