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TMI Blog2023 (6) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... e 8D(2)(iii) would fail, as it is not possible to compute the disallowance in absence of average value of investment. This is the view expressed by the coordinate bench while deciding identical issue in assessee s own case in assessment year 2011- 12 In view of the aforesaid, [ 2020 (1) TMI 403 - ITAT DELHI] we direct the AO to delete the disallowance made over and above the suo motu disallowance made by the Assessee. Capitalisation of license fee - revenue v/s capital expenditure - HELD THAT:- Facts of the present case appears to be similar to the facts involved in the case of CIT Vs Bharti Hexacom Ltd. (Delhi) [ 2013 (12) TMI 1115 - DELHI HIGH COURT] we, therefore, restored this issue to the file of the AO to be decided in accordance with the findings given by the Hon'ble Jurisdictional High Court in the case of Bharti Hexacom Ltd. [ 2013 (12) TMI 1115 - DELHI HIGH COURT] and if any expenditure on account of licence fee was payable up to 31.07.1999, it should be treated as capital expenditure and the licence fee on revenue sharing basis after 01.08.1999 should be treated as revenue in nature. Disallowance of TDS credit - whether TDS credit relates to future inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14A of the Act since the assessing officer failed to point out any error in the computation of expenses incurred for earning the tax-free income suo motu disallowed by the assessee. 1.2. That on the facts and circumstances of the case and in law, the CIT(A) erred in not holding that no disallowance could he made under section 14A of the Act without recording satisfaction/ reaching finding as to nexus of any expenditure incurred during the year with exempt income earned. 1.3. Without prejudice , that on the facts and circumstances of the case and in law, the CIT(A) erred in not holding that investments on which no exempt income was earned were not required to be taken into account for computing disallowance under sub-rule (2)(iii) of Rule 8D of the Rules; since the opening and closing value of such investments yielding exempt income was Nil, no disallowance could be made under section 14A of the Act read with Rule 8D of the Rules. 2. That on the facts and circumstances of the case and in law, the CIT(A) erred in not allowing credit of tax deducted at source ( TDS ) amounting to Rs. 15,15,968, on the ground that the same pertained to deferred revenue, not offered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited before him, learned Commissioner (Appeals) held that strategic investments made by the assessee in subsidiary/group companies should be excluded while computing the disallowance under Rule 8D(2)(iii). Thus, on the basis of aforesaid reasoning, learned Commissioner (Appeals) restricted the disallowance to Rs. 9,31,978/-. Aggrieved with the aforesaid decision of ld. Commissioner (Appeals), both the Revenue and assessee are in appeal before us. 5. Learned Departmental Representative submitted, the reasoning based on which learned Commissioner (Appeals) has deleted major part of the disallowance made by the Assessing Officer, is unsustainable in view of the decision of the Hon ble Supreme Court in case of Max Opp Investment Ltd vs. CIT (judgment dated 12,02.2018 in Civil Appeal No. 104-109 of 2015), wherein, Hon ble Supreme Court has held that strategic investment made in group companies would also attract provision of section 14A read with Rule 8D. Thus, he submitted, the disallowance made by the Assessing Officer should be restored. 6. Per contra, learned counsel for the assessee submitted, the exempt income earned by the assessee is from dividend on mutual fund. He submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing balances of mutual fund. Meaning thereby, the investments, on which the assessee had earned exempt income, were not only made during the year under consideration, but also sold during the year under consideration. That being the case, the average value of investment as on the 1st day of the financial year and at the year end is nil. That being the case, the computation mechanism provided in Rule 8D(2)(iii) would fail, as it is not possible to compute the disallowance in absence of average value of investment. This is the view expressed by the coordinate bench while deciding identical issue in assessee s own case in assessment year 2011- 12 vide order dated 31.12.2019 passed in ITA No. 3221/Del/2017. In view of the aforesaid, we direct the Assessing Officer to delete the disallowance made over and above the suo motu disallowance made by the Assessee. This disposes of ground No. 1 of Revenue s appeal and ground No. 1 with its sub-grounds in assessee s cross objection. 9. In ground No. 2 of Revenue s appeal, the issue arising for consideration is deletion of addition made by the Assessing Officer on capitalisation of license fee. 10. Briefly, the facts are, in course of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions, the Assessing Officer himself has observed that similar disallowance was deleted by the Tribunal in Assessment Year 2007-08. Since the Revenue is in the process of filing appeal before the Hon'ble High Court the additions have been made. We are of the considered opinion that since the impugned issue is covered by the decision of the coordinate bench in assessee s own case for Assessment Year 2007-08 ITA No. 4546/DEL/2013 and 5106/DEL/2013, there is no need to burden the first appellate authority on a decided issue. It is not the case of the Revenue that the Hon'ble High Court has stayed the operation of the order of the coordinate bench [supra]. Relevant findings of the coordinate bench read as under: 30. We have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that the issue under consideration is squarely covered by the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs Bharti Hexacom Ltd. 221 Taxman 323 (Del) (supra), wherein it has been held as under: The licence fee was imposed and payable under the Indian Telegraph Act and other statutory provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee would be a capital asset, yet at the same time, the assessee has to make payment on yearly basis on the gross revenue to continue, to be able to operate and run the business, it would also be revenue in nature. Failure to make stipulated revenue sharing payment on yearly basis would result in forfeiting the. right to operate and in turn deny the assessee, right to do business with the aid of the capital asset. Non-payment will prevent and bar an assessee from providing services. In aforesaid circumstances, it would be appropriate and proper to apportion the licence fee as partly revenue and partly capital. The next obvious question is, on what basis apportionment should be done and what could be the proportion of apportionment between capital and revenue expenditure. In this regard it would be appropriate and proper to divide the licence fee into two periods i.e. before and after 31-7-1999. The licence fee paid or payable for the period up to.31-7-1999 i.e. the date set out in the 1999 policy should be treated as capital and the balance amount payable on or after the said date should be treated as revenue. The aforesaid apportionment is necessary bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital. Licence fee payable up to 31- 7-1999 should be treated as capital expenditure and licence fee on revenue sharing basis after 1-8-1999 should be treated as revenue expenditure. (ii) Capital expenditure will qualify for deduction as per section 35ABB. 32. Facts of the present case appears to be similar to the facts involved in the case of CIT Vs Bharti Hexacom Ltd. (Delhi) (supra), we, therefore, restored this issue to the file of the AO to be decided in accordance with the findings given by the Hon'ble Jurisdictional High Court in the case of Bharti Hexacom Ltd. (supra) and if any expenditure on account of licence fee was payable up to 31.07.1999, it should be treated as capital expenditure and the licence fee on revenue sharing basis after 01.08.1999 should be treated as revenue in nature. 16. Respectfully following the decision of the coordinate bench, we direct the Assessing Officer to delete the addition of Rs. 3,29,84,635/-. Ground No. 2 with all its sub grounds is allowed. 13. Identical view was reiterated by the Tribunal while deciding cross appeals for the assessment year 2015-16 vide order dated 11.05.2022 in ITA No. 8168/Del/2018 and 447/Del/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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