DCIT Circle 2(1), New Delhi v. Bharti Mobile Ltd. (Now Bharti Airtel Ltd.)
[Citation -2016-LL-0927-18]

Citation 2016-LL-0927-18
Appellant Name DCIT Circle 2(1), New Delhi
Respondent Name Bharti Mobile Ltd. (Now Bharti Airtel Ltd.)
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 27/09/2016
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags audited profit and loss account • provision for gratuity • contractual liability • contract agreement • audited accounts
Bot Summary: Further, the AO also observed that the assessee had filed the revised return of income claiming deduction of Rs. 69,340,434/- being Wireless Planning Commission charges and liquidated damages paid to the Department of Telecommunication vide their demand note and a sum of Rs. 1,922,296,536/- as interest paid to Department of Telecommunication. 2.2 The assessee preferred an appeal before the First Appellate Authority and the Ld. CIT, on the issue of provision of gratuity, gave a specific finding that the assessee had not claimed the amount of Rs. 598,786/- as a deduction in its return of income as alleged by the AO and the AO was directed to delete the addition. CIT(A) has erred in law and on facts in deleting addition of Rs. 5,98,786/- on account of disallowance of provision for gratuity ignoring the fact that the assessee wrote back excess provision of Rs. 10,78,000/- instead of 16,77,000/- as per Schedule 12 of the PL account thereby claimed excess provision for gratuity of Rs. 5,98,786/-. On the issue of WPC charges and liquidated damages, the Ld. CIT DR submitted that the provisions of Rule 46A were not followed by the Ld. CIT while allowing the assessee s claim. 7, 8, 9 ITA No. 3819/D/2010 Page 6of 11 and 10 were produced before the Ld. CIT on being specifically asked by the Ld. CIT to do so and as such it was not the assessee who had sought to file additional evidences, but it was under the instructions of the Ld. CIT that these documents were filed and as such provisions of Rule 46A will not apply on the facts of the present case. Schedule 12 of audited accounts written back 1,677,000 Punjab provision 599,000 As per Profit Loss Account 1,078,000 ITA No. 3819/D/2010 Page 7of 11 6.1 The figures in the computation produced above also tally with the computation chart provided at page 38 of the Paper Book and a perusal of the same shows that the impugned amount of Rs. 598,786/- has not been claimed by the assessee as a deduction. 6.2 As far as the Department s ground relating to payment of WPC charges and liquidated damages is concerned, it is seen ITA No. 3819/D/2010 Page 8of 11 that the Ld. CIT has considered the following evidences furnished by the assessee while adjudicating in favour of the assessee i. Copy of migration of old mobile telephony license to new telecom policy 99 placed at sl.


IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: NEW DELHI BEFORE SHRI G.D. AGRAWAL, HON BLE VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.-3819/Del/2010 (Assessment Year: 2002-03) DCIT vs Bharti Mobile Ltd. Circle 2(1), Room No. 398D, (Now Bharti Airtel Ltd.) C.R. Building, Plot No. 16, Udyog Vihar, New Delhi. Phase IV, Gurgaon. AAACJ4139Q Assessee by Sh. Amit Bhalla, CA Sh. Gaurav Wadhwa, CA Revenue by Sh. Ravi Jain, CIT DR Date of Hearing 21.09.2016 Date of Pronouncement 27.09.2016 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER: This appeal has been preferred by Department against order dated 04/05/2010 passed by Ld. CIT (A) V, New Delhi for A.Y. 2002-03. 2. assessee is involved in business of providing cellular mobile telephone services. During year under consideration, return of income was filed declaring total ITA No. 3819/D/2010 Page 1of 11 loss of Rs. 820,672,218/-. Subsequent to filing of original return, revised return was filed declaring total loss of Rs. 2,628,860,522/-. total turnover for year was Rs. 444.30 crores. During course of assessment proceedings, AO observed that auditor had shown amount of Rs. 598,786/- as provision for gratuity for Punjab Circle and AO was of opinion that this provision had not been disallowed by assessee in its computation of income. AO accordingly, disallowed this amount. Further, AO also observed that assessee had filed revised return of income claiming deduction of Rs. 69,340,434/- being Wireless Planning Commission (WPC) charges and liquidated damages paid to Department of Telecommunication vide their demand note and sum of Rs. 1,922,296,536/- as interest paid to Department of Telecommunication. AO observed that these two amounts were not debited to audited profit and loss account of assessee and were included in revised return only on basis of demand note raised by Department of Telecommunication. It was assessee s ITA No. 3819/D/2010 Page 2of 11 claim before AO that Department of telecommunication had raised demand of Rs. 2,278,940,996/- as interest and amount was paid on 19th September, 2001. assessee also submitted that amount of Rs. 856,644,460/- was refunded to assessee by Department of Telecommunication and, therefore, net amount of Rs. 1,922,296,536/- was claimed as interest. assessee had further submitted before AO that both these claims by Department of Telecommunication have been challenged in Court of Law and pending final decision, these deductions have been claimed in computation of total loss. AO was of opinion that liquidated damages were result of violation of some terms of contract agreement by assessee with Departmental Telecommunication and assessee would be entitled to claim deduction only when contractual liability was crystallized and ascertained. AO further observed that since assessee had not accepted liability and had not debited same to profit and loss account and matter was pending in Court, amounts were not ITA No. 3819/D/2010 Page 3of 11 deductible in Assessment Year under consideration and accordingly, these two amounts were also disallowed and assessment was completed at total loss of Rs. 636,624,766/-. 2.2 assessee preferred appeal before First Appellate Authority and Ld. CIT (A), on issue of provision of gratuity, gave specific finding that assessee had not claimed amount of Rs. 598,786/- as deduction in its return of income as alleged by AO and AO was directed to delete addition. On issue of WPC charges and liquidated damages, Ld. CIT (A) held that amount claimed in computation of income had become due and was hence allowable respective of fact that no entries were passed in books of accounts. These two disallowances were also deleted. 3. Aggrieved, Department has now approached ITAT and raised following grounds of appeal: 1. On facts and circumstances of case and in law, order of ld. CIT (A) is wrong, perverse, illegal and against provisions of law which is ITA No. 3819/D/2010 Page 4of 11 liable to be set aside. 2. ld. CIT(A) has erred in law and on facts in deleting addition of Rs. 5,98,786/- on account of disallowance of provision for gratuity ignoring fact that assessee wrote back excess provision of Rs. 10,78,000/- instead of 16,77,000/- as per Schedule 12 of P&L account thereby claimed excess provision for gratuity of Rs. 5,98,786/-. 3. ld. CIT(A) has erred in law and on facts in deleting additions of Rs. 1,92,22,96,536/- and Rs. 6,93,40,434/- on account of payment made to DOT in respect of interest & WPC charges & liquidated damages, respectively ignoring fact that liability in respect of interest & WPC charges & liquidated damages arising out of contract with DOT had not crystallized or ascertained during previous year relevant to this assessment year as assessee disputed liability arising out of contract. 4. appellant craves leave for reserving right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during hearing of this appeal. 4. Ld. CIT DR, on issue of provision of gratuity, relied on assessment order and submitted that ITA No. 3819/D/2010 Page 5of 11 calculations made by AO were correct. On issue of WPC charges and liquidated damages, Ld. CIT DR submitted that provisions of Rule 46A were not followed by Ld. CIT (A) while allowing assessee s claim. He drew attention to Paper Book filed by assessee in regard to evidences which were filed before Ld. CIT (A) (and available in assessee s paper book) in support of its claim and submitted that item nos. 6, 7, 8, 9 and 10 were never produced before AO but were considered by Ld. CIT (A) while adjudicating issue and as such AO did not have any opportunity to examine these documents. Ld. CIT DR submitted that this action of Ld. CIT (A) was not legally tenable. 5. Ld. AR relied on findings of Ld. CIT (A) on issue of provision for gratuity. As regards submission of Ld. CIT DR on issue of not calling for remand report from AO on evidences as appearing at sl. nos. 6, 7, 8, 9 and 10, Ld. AR submitted that evidence at sl. no. 6 was already before AO, whereas evidences at sl. nos. 7, 8, 9 ITA No. 3819/D/2010 Page 6of 11 and 10 were produced before Ld. CIT (A) on being specifically asked by Ld. CIT (A) to do so and as such it was not assessee who had sought to file additional evidences, but it was under instructions of Ld. CIT (A) that these documents were filed and as such provisions of Rule 46A will not apply on facts of present case. 6. We have heard rival submissions and perused material on record. It is seen that provision for gratuity has been dealt in computation of income filed by assessee (reproduced at page no. 40 of Paper Book filed by assessee) as under: BHARTI MOBILE LIMITED Annexure 3 AASSESSMENT YEAR 2002-03 Gratuity 40A (7) Amount (Rs.) Opening balance 5,112,000 Add: Provision provided at Punjab circle 599.000 5,711.000 Written back as excess provision Less: (Refer Schedule 12 of P&L A/c) 1,677,000 Amount paid at AP & KK 4,034,000 which has not been routed through P&L A/c but now it is allowable exp. Schedule 12 of audited accounts written back 1,677,000 Punjab provision 599,000 As per Profit & Loss Account 1,078,000 ITA No. 3819/D/2010 Page 7of 11 6.1 figures in computation produced above also tally with computation chart provided at page 38 of Paper Book and perusal of same shows that impugned amount of Rs. 598,786/- (rounded off to Rs. 599,000/-) has not been claimed by assessee as deduction. It is seen that claim of gratuity of Rs. 4,034,000/-has been made by assessee on payment basis. It is further seen that excess provision amounting to Rs. 1,677,000/-, which has been written back to profit and loss account, had not been claimed in earlier years and hence, cannot be taxable in year under consideration. It is further seen that assessee has reduced only Rs. 1,078,000/- instead of Rs. 1,677,000/- in its computation of income and thus, amount of Rs. 599,000/- has in effect not been claimed as deduction. Therefore, we have no reason to interfere with findings of Ld. CIT (A) on this issue. This ground of Department s appeal is dismissed. 6.2 As far as Department s ground relating to payment of WPC charges and liquidated damages is concerned, it is seen ITA No. 3819/D/2010 Page 8of 11 that Ld. CIT (A) has considered following evidences furnished by assessee while adjudicating in favour of assessee i. Copy of migration of old mobile telephony license to new telecom policy 99 placed at sl. no. 6 of Paper Book at pages 133 to 135. ii. Copy of letter of Department of Communication for outstanding dues, due to NTP 99 placed at sl. no. 7 of Paper Book at pages 136 to 137. iii. Copy of details of License Fee paid and outstanding placed at sl. no. 8 of Paper Book at pages 138 to 139. iv. Copy of order of arbitration matter passed by Hon ble High Court of Delhi in case of Bharti Mobile Ltd. placed at sl. no. 9 of Paper Book at pages 140 to 399. v. Copy of letters to Department of Telecommunication for restoration of terminated Cellular Circle License and simultaneous migration to NTP 99 placed at sl. no. 10 of Paper Book at pages 400 to 405. ITA No. 3819/D/2010 Page 9of 11 6.3 It is Department s contention that these evidences were filed for first time before Ld. CIT (A) and that AO was not afforded opportunity to examine these documents. certificate furnished by assessee in Paper Book also supports Department stand that above mentioned evidences were not before AO at any stage of proceedings. Although it is assesse s contention that evidences were furnished in response to requisition by Ld. CIT (A), same is not discernable from impugned order. Hence, in light of these facts, it is our considered opinion that interest of justice would be served, if issue is restored to file of Ld. CIT (A) for re- adjudication after inviting comments of AO on all these evidences in form of remand report. Needless to say, assessee shall also be given opportunity to submit its rejoinder on remand report so obtained. This ground of Department is allowed for statistical purposes. ITA No. 3819/D/2010 Page 10of 11 7. In final result, appeal of Department is partly allowed. Order is pronounced in open court on 27.09.2016 Sd/- Sd/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER Dated: 27.09.2016 *Kavita Arora Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA No. 3819/D/2010 Page 11of 11 DCIT Circle 2(1), New Delhi v. Bharti Mobile Ltd. (Now Bharti Airtel Ltd.)
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