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TMI Blog2023 (7) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... be visited with penalty of various amounts. As discussed, such penalty is imposed as a deterrent measure and not for any offense or due to prohibition of law. It is further necessary to observe, the penalty arises because of breach of certain terms and conditions of the license agreement, hence, in regular course of business. Pertinently, in case of Mangal Keshav Securities Ltd. [ 2015 (11) TMI 111 - ITAT MUMBAI] while dealing with more or less identical issue of penalty levied by Stock Exchange for violation of KYC norms, has held that payment made towards penalty for violation of KYC norms would not fall within the ambit of Explanation 1 to section 37(1) of the Act. Thus exceptions provided under Explanation 1 to section 37(1) of the Act will not get attracted. Thus, we do not find any infirmity in the decision of learned Commissioner (Appeals) in deleting the disallowance. Decided against revenue. TDS u/s 194H - Disallowance u/s. 40(a)(ia) - assessee has provided discounts to pre-paid card distributors - HELD THAT:- While dealing with identical issue in assessee s own case for earlier assessment years, various Benches of the Tribunal have held that the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me on 26.11.2015 declaring income of Rs. 1644,58,64,360/-. Subsequently, the assessee filed revised return of income on 23.03.2017 declaring income of Rs. 1619,58,64,360/-. In course of assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of Rs. 532,20,27,414/- to the profit and loss account towards payment of license fee and spectrum charges. Being of the view that such payment does not partake the character of revenue expenditure, the Assessing Officer issued a show cause notice to the assessee to explain why the deduction claimed should not be disallowed. In response, the assessee submitted that in the earlier assessment years, the Tribunal and Hon ble Delhi High Court has decided the issue in favour of the assessee. However, stating that the issue has not reached finality, as the Revenue has filed Special Leave Petition before the Hon ble supreme Court, which is pending, the Assessing Officer disallowed assessee s claim of deduction of the payment made as a revenue expenditure. However, he allowed amortisation of expenses. Thus, the disallowance was restricted to Rs. 332,57,37,119/-. Assessee contested the disallowance before learned fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in the impugned assessment order. 8. Before us, learned Departmental Representative submitted that the penalty paid to the Department of Communication is not due to violation of any contractual obligation but is for an offense committed in not following the Rules and Regulations issued by the Department of Communication, Govt. of India. She submitted, Know Your Customer (KYC) process was introduced by various government authorities including Reserve Bank of India mandatorily to preventing subversive activities including anti-national activities. She submitted, KYC is an important tool to check illegal activities. She submitted, in the telecom sector, Telecom Regulatory Authority and Department of Telecommunication take the issue of KYC documentation very seriously. She submitted, the Ministry has set up a specific agency for collation of customer data, its analysis and audit. In this context, she drew our attention to guidelines dated 24.12.2008 issued by the Department of Telecommunication, Government of India regarding financial penalty for violation of terms and conditions of the license agreement. She submitted, various instructions issued by the Department of Telecommun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arves out an exception by providing that any expenditure incurred by an assessee for a purpose, which is an offense or which is prohibited by law, shall not be allowed as deduction. Therefore, it needs to be examined whether penalty paid for violation of KYC norms falls within the purview of expenditure incurred towards an offense or is prohibited by law. 11. Before us, learned Departmental Representative has furnished certain circulars/guidelines issued by the Department of Telecommunication, Government of India. As could be seen from the documents furnished before us, one of the conditions of the license agreement between the Department of Telecommunication and the service provider/licensee, is that the licensee shall ensure adequate verification of each and every customer before enrolling him as a subscriber and instructions issued by the licensor in this regard, from time to time, shall be scrupulously followed by the licensee. One more condition of the license agreement is, the licensor may also impose financial penalty for violation of terms and conditions of license agreement. 12. The communication dated 24.12.2008 issued by the Department of Communication, Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coupons etc. According to the Assessing Officer, such discount/margin given to the distributors is in the nature of commission. Hence, the assessee was obligated to deduct tax at source in terms of section 194H of the Act. Since, the assessee had not deducted tax at source while allowing such discounts/margins to the distributors, the Assessing Officer disallowed an amount of Rs. 14,37,08,678/- by invoking provisions of section 40(a)(ia) of the Act. Assessee contested the aforesaid disallowance by filing an appeal before ld. Commissioner (Appeals). Noticing that identical issue has been decided in favour of the assessee by the Hon ble Gauhati High Court, learned Commissioner (Appeals) deleted the disallowance. 16. Before us, it is a common point between the parties that the issue stands squarely covered in favour of the assessee by decisions of various Benches of the Tribunal as well as Hon ble Gauhati High Court. 17. Having considered rival submissions, we find, while dealing with identical issue in assessee s own case for earlier assessment years, various Benches of the Tribunal have held that the provisions of section 194H are not attracted to the discounts given to distri ..... 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