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TMI Blog2014 (9) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... f Additional claim u/s 35ABB of the Act. 1. On the fact and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO of disallowing Rs. 11,24,92,260/- being the amount of license fees paid by TATA Cellular Ltd to Department of telecommunication upto December 31, 2000, on the ground that the claim was made by a letter without filing a revised return of income. Ground no. 3: Amount paid towards Revenue share Expenses be allowed as Revenue Expenditure u/s 37 of the Act. 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not entertaining the additional ground in allowing deduction u/s 37 or u/s 35ABB of the Act on Revenue Share Expenses on the ground that the claim was not emanating from the Return of Income and even was not taken before the AO in the assessment proceedings. 2. Ground No. 1 is regarding disallowance of expenditure on abandoned project. 2.1 During the course of assessment proceedings, the AO noted that the assessee has incurred expenses on abandoned project to the tune of Rs. 3,94,75,619/-. On query from the AO, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes as well as feasibility report, therefore, the expenditure of such nature is in the capital field and loss due to the abandonment of the project would certainly be a capital loss and not revenue loss. He has relied upon the orders of authorities below and reiterated that the entire expenditure has been incurred for the purpose of brining into existence new asset and new source of income. Therefore, the expenditure of such nature is not allowable as revenue expenditure. 2.5 We have considered the rival submissions as well as relevant material on record. There is no dispute that the expenditure in question was incurred by the assessee for the purpose of construction/erection of cellular towers which were abondoned due to the reason that the same were not found suitable. The authorities below have disallowed the claim of the assessee on two reasons viz. (i) the expenditure has been incurred for bringing up a capital asset into existence. (ii) the capital asset being cellular sites/towers would be the new source of income. As far as the cellular towers being new source of income is concerned, we find, that the towers were being erected for the purpose of assessee's own business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot completed and the project was abandoned, therefore, it is an abortive expenditure. The expenditure incurred by the assessee is as under:- 1. Architectural fee in respect of abandoned project Rs. 2,57,335/- 2. Old capital work in progress abandoned Rs. 46,379/- 3. Cost of damaged cabinets Rs. 12,776/- 13. The company's contention was that the company had entrusted the study and design, detail working and drawings of a multi-storied (12 storied) building to a party names Acme Compartments Pvt. Ltd., Calcutta. After the preliminary work was undertaken, the project was to be abandoned due to adverse soil and other adverse conditions at the proposed site. The assessee company had to incur some expenditure on preliminary work. It was said that all designs, drawings etc. became useless and that was why the expenditure was written off. After narrating the detail facts in respect of the above expenditure, it has been claimed that it may be treated to be abortive expenditure. The Assessing Officer rejected the claim of the assessee as misconceived on the ground that it is a case of capital expenditure. The C.I.T. (Appeals) also upheld the said finding but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue expenditure. Hence by following the decision of Hon'ble High Court of Jharkhand in the case of CIT Vs. Tata Robins Fraser Ltd. (supra), we set aside the order of authorities below qua this issue and allow the claim of the assessee. 3. Ground No. 2 is regarding disallowance of claim u/s 35ABB of the Income Tax Act. 3.1 On 01st January 2001, the assessee company taken over TATA Cellular Ltd and accordingly the TATA cellular Ltd. merged with the assessee. At that point of time the license fee was paid by the operators as fixed license fee under the license agreement. The TATA Cellular Ltd had paid the license fee upto 31st December 2000 and also claimed the expenditure u/s 35ABB. From 01st January 2001 on wards. The assessee paid the license fee for the area of operation which were earlier with the TATA Cellular Ltd. merged with the assessee. In the return of income the assessee did not make claim u/s 35ABB with respect to the license fee paid by the TATA Cellular Ltd upto 31st December 2000. However during the assessment proceedings the assessee claimed that in terms of section 35ABB, consequent to the amalgamation of TATA Cellular Ltd, with the assessee the entire licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... algamation period of three months w.e.f 1.1.2000 to 31st March 2001, however during the course of assessment proceedings the assessee made a claim for the entire year u/s 35ABB for the license fee paid in respect of the TATA Cellular Ltd amalgamated with the assessee. The CIT(A) has allowed the claim of three months and disallowed for nine months only on the ground that the assessee has not made the claim in the revised return of income. The restriction on the jurisdiction for entertaining a fresh claim otherwise than a revised return is applicable only of the AO and not of the appellate authorities. There is no fetter on the power and jurisdiction of the appellate authorities to entertain a fresh claim if no new facts are required to be investigated to adjudicate such fresh claim. The Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra) has observed at page 386 as under:- "Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to Tata Cellular Ltd merged with assessee for entire year u/s 35ABB. 4. Ground No. 4 is regarding claim for revenue sharing license fee to be allowed u/s 37(1). 4.1 In the return of income the assessee has not claimed the deduction in respect of amount paid towards revenue sharing expenses to the Govt. of India as it was capitalized in the books of accounts. Only before the CIT(A) the assessee has raised an additional ground towards the amount paid under revenue sharing basis of license fee. The CIT (A) has rejected the claim of the assessee on the ground that this issue has not emerged from the order of assessment. 4.2 Before us, the Ld. Senior Counsel has submitted that so far as the issue of admission of additional ground is concerned, the same is covered by the decision of Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra) as well as the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Pruthvi Brokers & Shareholders Pvt. Ltd (Supra). On merits the Ld. Senior Counsel has submitted that this issue is covered by the various decisions of Hon'ble High Courts as well as this Tribunal. He has referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a ground by way of forwarding a letter. In those facts, Hon'ble Supreme Court has held that when it is found that non taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal first time so long as relevant facts are on record in respect of that item. We have already reproduced the relevant finding of the Hon'ble Supreme Court in the foregoing paras while discussing the ground no. 2. It is clear from the decision of Hon'ble Supreme Court that when a claim which is otherwise allowable /permissible but was not allowed as the assessee did not claim the same in the return of income, there is nothing under law to prevent the assessee to raise such claim before the appellate authorities if the facts relating to such new claim are already on record and do not require any investigation. Accordingly in the facts and circumstances of the case when the denial of claim by CIT(A) is not on the ground that it is not allowable but for want of such claim before the AO and further on merits this issue is covered by the series of decisions as relied upon by the assessee then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers as well as other decisions relied upon by the assessee, we allow the claim of the assessee. 4.7 Before parting with the appeal of the assessee we note that the assessee has filed additional grounds, however, the same are only repetition of ground no. 2 and 3 raised along with form No. 36, therefore, the additional ground raised by the assessee becomes infructuous. 5. The revenue has raised only ground as under:- "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of foreign exchange loss of Rs. 22,38,39,000/- by holding that the principle amount was not utilized by the assessee for acquisition of capital assets" 5.1 The assessee has borrowed funds in foreign currency for payment of license fee. At the end of the year due to fluctuation in foreign exchange rate the loss was incurred. This loss has been clubbed in schedule 17 of the Balance Sheet relating to the interest and financial charges and has been specified as net loss on foreign exchanger fluctuation. The AO denied the claim of the assessee on the ground that the loss under consideration has led to increase in liability towards repayment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant material on record. There is no dispute that for the A.Y. 1998-99, an identical issue came before this Tribunal and the Tribunal has held that the loss due to foreign exchange fluctuation is an allowable expenditure in para 8 as under:- "8 We have considered the rival submissions. We have considered the statement by the learned counsel of the assessee and also taking note of the findings of the CIT(A). We are of the view that the order of the CIT(A) does not call for any interference. The details of the utilization of the loans are at page 27 of the assessee's paper book. The details of the loans utilized for revenue purposes as given in page No. 23 of the assessee's paper book have also been perused by us. The loan-wise bifurcation of foreign exchange loans as given at page no. 28 has also been considered. In the light of these documents, we are of the view that the CIT(A) was justified in coming to the conclusion that the exchange loss claimed by the assessee in P&L Account relates to loan availed for the purpose of meeting revenue expenditure In the light of the decision of Special Bench in the case of ONGC Ltd. (Supra), we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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