IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA. Nos. 948 & 2469/Ahd/2011 (Assessment Years: 2005-06 & 2008-09) ACIT, Circle-8, Ahmedabad Appellant Vs. Vodafone Essar Gujarat Limited, Vodafone House , 4th Floor, Corporate Road, Prahladnagar, Off. S.G. Road, Ahmedabad Respondent & ITA. Nos. 775 & 2126/Ahd/2011 (Assessment Years: 2007-08 & 2008-09) Vodafone Essar Gujarat Limited, Vodafone House , 4th Floor, Corporate Road, Prahladnagar, Off. S.G. Road, Ahmedabad Appellant Vs. ACIT, Circle-8, Ahmedabad Respondent PAN No. AAACF1190P ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -2- By Revenue : Shri D. P. Gupta, CIT D.R. with Satish Solanki, Sr. D.R. By Assessee : Shri S. N. Soparkar, A.R. Date of Hearing : 21.07.2016 Date of Pronouncement : 30.09.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER This is batch of four cases. First assessment year 2005-06 involves Revenue s appeal ITA No.948/Ahd/2011 preferred against order dated 19.01.2011 passed by CIT(A)-XIV, Ahmedabad in case no. CIT(A) XIV/ACIT Cir.8/283/2009-10. 2. Next assessment year 2007-08 contains assessee s appeal ITA No.775/Ahd/2011 arising from order of very CIT(A) dated 18.01.2011 in case no. CIT(A) XIV/ACIT Cir.8/284/2009-10. 3. Last assessment year 2008-09 involves assessee s and Revenue s cross appeals ITA Nos. 2126 & 2469/Ahd/2011 filed against order of same CIT(A) dated 13.07.2011 in case no. CIT(A) XIV/ACIT Cir.8/241/2010-11. Relevant proceedings in all case are u/s.143(3) of Income Tax Act, 1961; in short Act . ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -3- 4. Ld. counsel representing assessee files compilation chart summarizing gist of all issues involved in these four appeals. Revenue is fair enough in not disputing correctness thereof. same is taken on record. We proceed assessment year-wise for sake of convenience and brevity. Assessment Year 2005-06 Revenue s appeal ITA No. 948/ Ahd/2011 5. Revenue s first substantive ground pleads that CIT(A) has erred in directing assessing authority to reduce net interest income of Rs.2% only coming to Rs.47,36,986/- for purpose of computing Section 80IA deduction. We come to assessment order dated 29.12.2009. assessee company is cellular service provider in Gujarat state. This is second round of litigation between parties before tribunal. Assessing Officer had framed regular assessment on 31.12.2007. assessee had received interest income of Rs.89,85,504/- from fixed deposits kept with Bank alongwith Rs.2,13,16,438/- of another interest realized from loans given to M/s. Hutchinson Essar South Ltd. Assessing Officer framed regular assessment on 31.12.2007. He excluded this entire interest income for purpose of computing Section 80IA deduction. assessee preferred appeal. CIT(A) upheld Assessing Officer s action. assessee came in appeal before this tribunal. coordinate bench in its order dated 09.01.2009 upheld lower authorities action in principle as per hon ble ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -4- apex court s decision in Pandian Chemicals vs. CIT (2003) 262 ITR 278 (SC). assessee then raised alternative contention seeking to exclude only net amount of above interest income instead of gross sum i.e. difference between interest expenses incurred and interest income earned from its industrial undertaking. Ld. coordinate bench quoted hon ble Delhi high court s decision in CIT vs. Shri Ram Honda Power Equipments (2007) 289 ITR 475 as well as this tribunal s special bench order in Lalson Enterprises vs. DCIT (2004) 82 TTJ 1048 (Delhi) to direct Assessing Officer to ascertain nexus between two interest income as well as interest expenditure to exclude only net component thereof. 6. Assessing Officer took up consequential proceedings. assessee filed letter dated 24.09.2009 inter alia indicating qua its latter interest income that it had availed loan of Rs.140crores from Standard Chartered Bank @7% as advanced to M/s. Hutchinson Essar South (supra) @ 9% yielding impugned interest income. It submitted bank statement as well to buttress same. Assessing Officer followed his earlier reasoning to disallow impugned deduction without even disputing this nexus between interest income earned and its corresponding expenditure. CIT(A) accepts assessee s contention that there exists live nexus between above loan availed @7% as advanced to assessee s subsidiary @9% resulting in surplus interest ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -5- income. He quotes this tribunal s order to allow assessee s netting plea leaving behind Revenue aggrieved. 7. Heard both parties reiterating their respective stand. There is no dispute that instant proceedings are consequential ones confined to nexus aspect only qua impugned interest expenses and interest income in question. It has already come on record that assessee availed loan @7% followed by same being advanced to its subsidiary @9%. This crucial fact goes unrebutted in course of hearing. Hon ble jurisdictional high court in case of Nirma Ltd. (2014) 367 ITR 12 reiterates very netting principle. We accordingly see no reason to interfere in lower appellate findings under challenge. This first substantive ground is thus declined. 8. Revenue s second substantive ground pleads that CIT(A) has erred in directing Assessing Officer to grant assessee Section 80IA deduction on interest refund from Telecommunication Department amounting to Rs.1,45,13,974/- as arising from excess payments made in earlier years and offered in nature of business income u/s.41(1) of Act. There is no quarrel between parties about nature of sum in question. Assessing Officer followed derived from principle to conclude that this amount was not eligible for impugned deduction since not derived from assessee s industrial undertaking. ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -6- 9. CIT(A) followed this tribunal s decision in Radha Madhav Industries case 8 taxman.com 63 (Ahd) to hold that even profits taxable u/s.41(1) of Act are to be deemed to have been derived from eligible undertaking for purpose of claiming Section 80IA deduction. 10. We have heard rival submissions. Shri Soparkar brings to our notice coordinate bench decision of tribunal in ITA Nos.3304 & 3386/Del/2010 BSNL Ltd. vs. DCIT holding that Section 80IA subsection 2A is in nature of non obstante clause to main provision wherein it is nowhere necessary that profits in question have to be derived from eligible industrial undertaking. Both parties pointed out very fairly that hon ble Delhi high court has upheld same. Revenue fails to point out any distinction on facts or law. We thus find no reason to disagree with CIT(A) s findings under challenge. This second substantive ground is rejected. 11. Revenue s last substantive ground assails correctness of lower appellate order directing Assessing Officer to allow Section 80IA deduction on assessee s miscellaneous income of Rs.17,50,636/- comprising of cheque bounce charges of Rs.2,97,571/-, recovery for computer usage to call centre agencies of Rs.9,04,222/-, scrap sales of Rs.5,47,083/- and miscellaneous staff recovery of Rs.1760/-; respectively. Assessing Officer again observed that neither these amounts had been derived from assessee s industrial undertaking nor ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -7- did they have any direct nexus with its telecommunication services in question. 12. CIT(A) reverses Assessing Officer s finding as follows: 2.18I have considered facts of case, submission and details filed by AR with respect to nature of miscellaneous expenses carefully and I have also perused case laws as relied upon by AR. Hon'ble ITAT in its order for AY 2005-06 had directed AO to examine nature of miscellaneous income earned by Appellant, to determine if same is derived from industrial undertaking. 2.19 break up of miscellaneous expenses earned by Appellant during AY 2005-06 is given below. Particulars Rs. Cheque bounce charges 297,571 Recovery for computer usage to call centre 904,222 agencies Scrap sale 547,083 Misc staff recovery 1,760 Total 17,50,636 2.20 During course of assessment as well as appellate proceedings, Appellant had submitted that cheque bounce charges are levied on customers whose payment cheques are bounced. Further, Appellant had also relied on judgement of Gujarat High Court in case of Nirma Industries (supra), wherein it is held that interest on late- payment received from customers was eligible for deduction under section 80IA of Act. relevant observations of Gujarat High Court are given below: 30. Tribunal was, therefore, not justified in holding that while computing deduction under s. 80-I of Act, interest received from trade debtors towards late payment of sales consideration is required to be excluded from profits of industrial undertaking as same cannot be stated to have been derived from business of industrial undertaking." 2.21 Cheque bouncing charges are also in nature of trading receipt and hence, respectfully following above judgment of Hon'ble Gujarat High Court, I direct learned AO to ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -8- allow deduction under Section 80IA on cheque bounce charges received by Appellant from its customers. 2.22 With regard to scrap sale, I find that as Appellant is in nature of telecom business, it launches various schemes from time to time to create as well as retain existing customers. Further, Appellant occasionally or seasonally also launches various schemes and creates propaganda by various modes of communications. Once period of scheme gets over, promotional material is not of any use to Appellant and hence, same is sold as scrap by Appellant. Thus, scrap is directly related to telecom business of Appellant and hence, income from scrap sales being derived from business of undertaking is eligible for deduction under Section 80IA of Act. 2.23 Appellant has also placed reliance on various judgments of Hon'ble Ahmedabad ITAT and Hon'ble Gujarat High Court which have specifically held that income earned from sale of scrap which is generated out of business activity of assessee is eligible for deduction under section 80IA of Act. 2.24 As income from sale of scrap is directly derived from business activity of Appellant, respectfully following above judgments of Hon'ble Gujarat High Court in case of DCIT vs. Harjivandas Juthabhai Zaveri and Another (supra) and Hon'ble bad ITAT in case of Arvind Fashions Ltd. (supra) and Mira Industries (supra), I hold that income from sale of scrap being derived from business activity of Appellant is eligible for deduction under Section 80IA. 2.25 With regard to recovery for computer usage ,by call centre agencies and other miscellaneous staff recovery, I find that these charges recovered by Appellant are in nature of recovery of cost incurred in providing help desk services and expenses recovered from staff members respectively and hence, same are directly related to telecommunication business. 2.26 Appellant in course of providing telecommunication services provides help desk services to its subscribers and potential customers through in-house call centre. Appellant had provided its own computers and other equipments on lease to outside agencies for managing its in- house call centre and received -rent from these outside agencies in return. Thus, recovery of computer usage charges is only recovery of cost incurred in providing help desk services by Appellant to its subscribers and potential ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) -9- customers. Hence, as recovery of computer usage charges are directly incurred in providing telecommunication services by Appellant, same is eligible for deduction under Section 80I A. Similarly, other miscellaneous recovery from staff members is also recovery of expenses and is directly related to providing telecommunication services. Hence applying principles of recoupment explained in above judicial precedents of P Industries and Metro Tyres (supra), income from miscellaneous staff recovery is also eligible deduction under Section 80IA. 2.27 In view of findings given in para 2.18 to 2.26 above, I find that miscellaneous income is directly related to telecommunication activities of Appellant and accordingly are derived from telecommunication undertaking and hence respectfully following judgments of Hon'ble Gujarat High Court and Hon'ble ITAT, entire miscellaneous income is eligible for deduction under Section 80IA. Accordingly, I direct Assessing Officer to allow deduction under section 80IA of Act in respect of miscellaneous income of Rs.17,50,636. 2.28 In result, appeal is partly allowed. 13. We have heard both sides. This is undisputedly second round of consequential proceedings. Ld. coordinate bench in earlier round (supra) directed Assessing Officer to examine all miscellaneous income as to whether same has been derived from industrial undertaking or not. assessee s contentions failed to impress upon assessing authority in consequential proceedings. CIT(A) hereinabove deals with each and every head of income to conclude that there exists nexus between these miscellaneous income and industrial undertaking in question in manner extracted hereinabove. There is no material on record to rebut same. It has already been observed in preceding paragraphs that this derived from concept no more applies in case of telecommunication ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 10 - business entity. Ld. counsel at same time points out very fairly that hon ble jurisdictional high court in Nirma Ltd. case (supra) has adopted netting formula qua such kind of incomes. We appreciate this fair stand and direct Assessing Officer to confine impugned deduction to extent of net amount of miscellaneous income only. This Revenue s ground as well as its main appeal ITA No.948/Ahd/2011 partly succeed for statistical purposes. Assessment Year 2007-08 Assessee s appeal ITA No. 775/ Ahd/2011 14. assessee raises following substantive grounds in its appeal. 1. On facts and circumstances of case and in law, CIT(A) erred in confirming action of Assistant Commissioner of Income-tax, Circle 8, Ahmedabad in disallowing trade discount of Rs.10,15,41,664 offered to pre-paid distributors during period January to March 2007 by applying provisions of section 40(a)(ia) of Income-tax Act, 1961 (Act). 2. On facts and circumstances of case and in law, CIT(A) erred in holding that trade discount given is in nature of commission and hence subject to applicability of provisions of section 194H of Act. 3. On facts and in circumstances of case and in law, CIT(A) erred holding that interest income of Rs 6,04,36,534 is not derived from business of Appellant's industrial undertaking and hence not eligible for deduction under section 80IA of Act. 15. Both parties agree that this tribunal in assessee s case itself for A.Y.2008-09 ITA No.386/Ahd/2011 decided on 07.07.2015 has adjudicated very issue in its favour. It holds that hon ble Karnataka high court in Bharti Airtel Ltd. ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 11 - vs. DCIT (2015) 372 ITR 33 (Karnataka) decides very issue against revenue that Section 194H TDS liability does not arise in case assessee sells prepaid cards of Rs.100/- value at Rs.80/- to be sale price treated and balance Rs.20/- are not reflected in accounts to distributor. This coordinate bench further holds that various hon ble high courts i.e. Vodafone Essar Cellular Ltd. vs. ACIT 332 ITR 255 (Kerla), CIT vs. Idea Cellular Ltd. 325 ITR 148 (Delhi) and Bharti Cellular Ltd. vs. ACIT 200 Taxman 254 (Kolkata) decide issue against assessee. It however concludes that hon ble jurisdictional high court has not adjudicated this issue either way and therefore, judicial opinion favouring assessee has to be adopted. Ld. Departmental Representative at this stage states that hon ble Kolkata high court in Hutchinson East Ltd. s case 59 Taxman.com 176 further supports its cause. legal position however remains same that hon ble jurisdictional high court has not decided issue till date. Shri Soparkar invites our attention to above tribunals decision remitting issue back to Assessing Officer for factual verification as follows: 24. In light of above discussions, and particularly as there is no dispute that factual matrix of all cases before Hon'ble non jurisdictional High Courts were materially same as in this case, in conformity with esteemed views of Hon'ble Karnataka High Court in Bharti Airtel's case (supra), and hold as follows: (a) On facts of case, and as is evident from reading of agreements before us, assessee has sold, by way of prepaid vouchers, e-top ups and prepaid SIM cards, 'right to service' on principal to principal basis to its distributors. As evident from terms and conditions for sale, placed at page 136 of paper- ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 12 - book, not only that sale was final and assessee was not responsible for any post-delivery defects in services, it was specifically agreed that "no request of refund of any money shall be entertained by VEGL (i.e. assessee) under any circumstances". (b) fact that there are certain conditions and stipulations attached to sale of this right of service by assessee to his distributors does not affect character of sale on principal to principal basis. (c) Section 194 H comes into play only in situation in which "any person, ........responsible for paying..... to resident, any income by way of commission" pays or credits such "income by way of commission" . However, since at time of assessee selling these rights for consideration to distributor, distributor does not earn any income, provisions of Section 194 H donot come into play on transaction of sale of right to service by assessee to his distributors. condition precedent for attracting Section 194H of Act is that there should be income payable by assessee to distributor (d) So far as transaction of sale of 'right to service' by assessee to his distributor is concerned, while it has income potential at future points of time (i.e. when this right to service is sold at profit by distributor), rather than earning income, distributors incur expenditure for purchase of prepaid cards. Therefore, at time of assessee selling these pre-paid cards, he is not in possession of any income belonging to distributor. Accordingly, question of any income accruing or arising to distributor at point of time of sale of prepaid card by assessee to distributor does not arise. (e) In situation in which assessee has credited sale proceeds at transaction value (in contrast with transaction being shown at face value and difference between face value and transaction value credited to distributor), tax deduction liability under section 194H does not arise. While learned counsel for assessee has stated at bar that sale proceeds are credited at transaction value, this aspect of matter is to be verified by Assessing Officer, and in case sales is accounted for at face value, to that extent, tax withholding liability is to be sustained, 16. We follow suit in impugned assessment year as well in absence of distinction on facts or law in assessee s case of preceding assessment year and impugned assessment year on very issue. This assessee s substantive ground is ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 13 - however remitted back to assessing authority for factual verification in above terms. It shall be appreciated if ld. Assessing Officer finalizes both assessment years proceedings together as per law. This ground is taken as accepted for statistical purposes. 17. This leaves us with issue of interest income of Rs.6,04,36,534/- and its eligibility for Section 80IA deduction. Assessing Officer once again invoked derived from reasoning to deny same. He quoted case law of Pandian Chemicals (supra) and that of Sterling Foods 237 ITR 579 (SC) in support. CIT(A) upholds Assessing Officer s action. 18. We have heard both parties arguing in favour of their respective stands. There is no dispute that this interest income arises on short term advances and fix deposits out of funds in normal course of business. corresponding figures are stated to be assessee s surplus funds for conducting its telecommunication business. This crucial plea has nowhere been rebutted by both lower authorities in their respective orders. Hon ble jurisdictional high court in (2015) 54 taxmann.com 317 Empire Pumps Pvt. Ltd. vs. ACIT holds that such interest income having direct nexus has to be considered as to have been derived from business. We further reiterate that Delhi bench of this tribunal in BSNL s case (supra) has already held that this derived from concept does not apply in case of telecommunication service provider u/s.80IA (2A) nonobstant clause envisaging only ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 14 - profits and gain of eligible business as allowable for impugned deduction. We follow very reasoning herein as well to accept this assessee s latter ground as well. Its appeal ITA No.775/Ahd/2011 is partly allowed. Assessment Year 2008-09 Assessee s and Revenue s Cross Appeals ITA Nos.2126 & 2469/Ahd/2011 19. We come to assessee s appeal ITA No.2126/Ahd/2011 raising following substantive grounds: 1. On facts and circumstances of case and in law, CIT(A) erred in confirming action of Assistant Commissioner of Income-tax, Circle 8, Ahmedabad in making addition of trade discount of Rs.51,68,27,814 offered to pre-paid distributors by applying provisions of section 40(a)(ia) of Income-tax Act, 1961 (Act). 1.1. On facts and circumstances of case and in law, CIT(A) erred in holding that trade discount given is in nature of commission and hence subject to applicability of provisions of section 194H of Act. 1.2 On facts and circumstances of case and in law, CIT(A) erred in not appreciating fact that in given case trade discount given to prepaid distributors has not been claimed as deduction and hence, provisions of section 40(a)(ia) of Act are not applicable. 2. On facts and in circumstances of case and in law, CIT(A) erred in holding that interest income of Rs 13,17,00,000 is not derived from business of Appellant's industrial undertaking and hence not eligible for deduction under section 80IA of Act. Both parties state at outset these two substantive grounds raised in instant appeal stand covered in view of our findings in assessee s appeal for 2007-08 decided hereinabove. We appreciate this fair stand towards bench. Both these grounds are accepted in light of our ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 15 - discussion hereinabove in preceding paragraphs. Needless to say, Assessing Officer shall verify necessary facts relevant to first substantive ground. ITA No.2126/Ahd/2011 partly succeeds. 20. We come to Revenue s appeal ITA No.2469/Ahd/2011 now raising following substantive pleadings: 1) Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting disallowance of Rs.117,05,76,000/- made by Assessing Officer on account of licence fees (after allowing deduction u/s.35ABB of Act) paid to "Department of Telecommunication". 2) Ld. Commissioner of Income-Tax (Appeals)-XIV; Ahmedabad has erred in law and on facts in deleting disallowance of Rs.1,08,00,000/- made by Assessing Officer on account of proportionate expenditure incurred in relation to earning advance income. 3) Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing Assessing Officer to consider A.Y.1997-98 instead of A.Y. 1996-97 as first year for purpose of claiming allowance u/s.80IA of Act. 4) Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in allowing deduction u/s.80IA of Act, AND in directing Assessing Officer to apply amended provisions applicable from A.Y.2000-2001 to Appellant as per law. 5) Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing Assessing Officer to allow deduction u/s.80IA of Act on income earned from sharing fibre cables and cell sites to assessee. 6) Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in directing to allow claim for deduction u/s.80IA of Act from revenue of Rs.5,90,000/- from sharing fibre cables and Rs.9,63,000/- for sharing cell sites and i.e., towers etc., with other service providers. ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 16 - 7) Ld. Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting disallowance of claim for deduction u/s.80IA of Act on late payment charges and cheque bounce charges received from customer. 21. Ld. counsel representing both parties inform bench that CIT(A) in lower appellate findings under challenge has adjudicated first issue of license fee in assessee s favour by placing reliance on this Tribunal s decision in its own case for assessment year 2006-07 decided on 29.01.2010 holding same as revenue expenditure. We find no reason to adopt different view in absence of any distinction on facts and law being pointed out. first substantive ground is rejected. 22. Reveneue s second substantive ground posses challenge to CIT(A) s findings deleting disallowance of proportionate expenses of Rs.1,08,00,000/- incurred in relation to advance income as under: 3.6 Decision I have carefully perused assessment order and written submission filed by ld.AR of appellant, A.O. has made disallowance of expenditure with respect to advance income by holding that marketing, sales and distribution expenses should also be allocated to year in which revenue is recognized. It is claim of appellant that these expenses are not directly related to earning of revenue, and therefore, should not be apportioned in year of recognition of revenue. I am inclined to accept submission made by appellant. appellant has been consistently following system of accounting income on basis of services rendered. expenses that are directly related to uses of talk time in SIM card such as 1UC charges, license fee, roaming charges etc. are charged to profit and loss account on proportionate basis whereas fixed expenses such as business and sales promotion, cost of goods sold and other selling and 'distribution expenses have not been charged in proportion to revenue but has been charged fully. It is generally accepted principle of accounting that fixed costs are ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 17 - not linked to revenue and would be incurred whether or not appellant undertakes any sale or render any service. Similarly, variable expenses are directly linked to level of activities i.e. usage of talk time by customer. appellant has correctly followed accounting principles, He has been maintaining its accounts for earlier years by following this accounting principle. decision relied on by AO in case of Taparia Tools Limited (260 ITR 102) is rendered in respect of allowability of deferred Revenue expenses which is not facts in present case and cannot be applied. Considering above mentioned facts and circumstances, A.O. was, therefore, not justified in making addition by rejecting consistent and regular method of accounting by appellant without any sound basis. Accordingly, ground of appeal is allowed and disallowance made by A.O. is deleted. 23. Heard both parties. It has come on record that assessee is following very accounting system on basis of services rendered since earlier assessment years. Assessing Officer in his order places reliance on hon ble Bombay high court decision in case of Taparia Tools Ltd. (2003) 260 ITR 102 to invoke matching concept. Hon ble apex court reverses same in its decision reported at (2015) 372 ITR 605 (SC). Revenue s arguments supporting Assessing Officer s stand are accordingly declined. This second substantive ground fails. 24. Revenue s third substantive ground seeks to treat assessment year 1996-1997 instead of 1997-98 as initial assessment year for purpose of Section 80IA deduction. This tribunal in assessment years 2006-07 & 2007-08 has already held later assessment year to be initial assessment year. We follow same herein as well in absence of any distinction being pointed out at Revenue s behest. This third substantive ground is thus rejected. ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 18 - 25. Revenue s fourth substantive ground pleads that CIT(A) has wrongly held that assesse is eligible for Section 80IA deduction thereby directing Assessing Officer to apply amended provisions from assessment year 2000-01 in its case. We notice that this tribunal in A.Y. 2006-07 has already adjudicated very issue in assessee s favour on similar line. This substantive ground is thus declined. 26. Revenue s next substantive ground avers that CIT(A) has wrongly directed Assessing Officer to allow Section 80IA deduction on assessee s income from sharing fibre cables and cell sides. We find that CIT(A) follows tribunal s order for A.Ys. 2005-06 & 2006-07 in assessee s cases itself. We place reliance on same to affirm CIT(A) findings under challenge. This Revenue s ground is accordingly rejected. 27. Revenue s next substantive ground pleads that lower appellate authority has wrong directed Assessing Officer to allow Section 80IA deduction to assessee on its income of Rs.5.9lacs and 9.63lacs from sharing of fibre cables and cell sides; respectively. Herein also we find that CIT(A) places reliance upon tribunal s order indicated in preceding paragraph. This Revenue s ground also meets same outcome accordingly. 28. Revenue s last substantive ground states that CIT(A) has wrongly deleted disallowance of Section 80IA ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 19 - deduction claim on late payment charges/cheque bounce charges received from customers. Deem it appropriate to extract CIT(A) s findings under challenge reading as follows: 8.5 Decision I have carefully perused assessment order and written submission filed by ld.AR of appellant. There are two components of this ground of appeal. One is related to cheque bounce charges and other is late payment charges received by appellant. For sake of convenience, both components are discussed separately hereunder: 8.6.1. Cheque bounce charges: cheque bouncing charges are charges which bank levies from appellant after cheque, received from customers, bounces after depositing same in bank account of appellant. These charges are than recovered from customer by appellant. Therefore, these charges ate in nature of reimbursement or replenishment of penal charges paid by appellant to bank. These charges are not linked to business of telecommunication of appellant: Therefore, cheque bounce charges recovered from customers cannot be said to be derived from telecommunication business of appellant. judgment of jurisdictional Gujarat High Court in case of Nirma Industries Limited v DCIT (supra) is not applicable in present case as facts are different and issue involved in that case was late payment charges received from customers. However, appellant has pointed out that he has incurred bank charges of Rs. 32.2 million during assessment year as against which cheque bouncing charges recovered from customer were Rs. 7.22 million and, therefore, cheque bounce charges should be adjusted from bank charges paid by customers. I am inclined to accept this, argument of appellant as cheque bouncing charges recovered from customers are infact charges that has been paid to bank as penal charges. A. O. is, therefore, directed to work out deduction u/s. 80IA after reducing cheque bounce charges from bank charges. . 8.6.2.Late payment charges: late payment charges are recovered from customers for delay in payment of telephone bills. These charges ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 20 - are in inextricably linked to business of appellant and are collected at time of billing. These are, therefore, in nature of trading receipt which is derived by Appellant while rendering telecommunication services. I am, therefore, inclined to agree with submissions made by appellant. appellant has rightly relied on decision of jurisdictional Gujarat High Court in case of Nirma Industries Limited V/s. DCIT [283 ITR 402]. It was held that interest charged on late payment by customers are in nature of trading receipt and hence eligible for deduction under section 80I of Act, nature of charges received by appellant are similar to charges in Nirma's case, Accordingly, it is held that income, in respect of Late payment charges are in nature of trading receipt and hence eligible for deduction under section 80IA of Act. 8.6.3. Accordingly, this ground of Appellant is partly allowed. 29. It is apparent qua first head of cheque bounce charges that CIT(A) had directed Assessing Officer to work out net figure thereof with those paid to Bank. assessee s case was that its cheque bounce charges received are already less than those paid to bank. Assessing Officer has admittedly not rejected this factual position. He further find that CIT(A) followed hon ble jurisdictional high court s decision in case of Nirma Industries Ltd. (supra) to conclude that assessee s late payment charges are in fact trading receipts collated at time of billing. Revenue fails to point out any illegality or irregularity therein qua both these sides. We reiterate that CIT(A) has already held former sum as not derived from eligible undertaking. We find no reason in this factual backdrop to interfere with same. This Revenue s ground is also rejected. So, is its appeal ITA No.2469/Ahd/2011. ITA Nos. 948, 775, 2126 & 2469/Ahd/2011 (Vodafone Essar Gujarat Ltd.) - 21 - 30. Revenue s appeal ITA No.948/Ahd/2011 is partly allowed for statistical purposes whereas ITA No.2469/Ahd/2011 is dismissed. assessee s both appeals i.e. ITA No.775/Ahd/2011 and ITA No.2126/Ahd/2011 are partly allowed. [Pronounced in open Court on this 30th day of September, 2016.] Sd/- Sd/- (PRAMOD KUMAR) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 30/09/2016 True Copy S.K.SINHA Copy of Order Forwarded to:- 1. Revenue 2. Assessee 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order ACIT, Circle-8, Ahmedabad v. Vodafone Essar Gujarat Limited