Civil Appeal No. 8041 of 2019 Vodafone Idea Ltd. vs. Deputy Commissioner of Income Tax Circle 17(1) 1 IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.8041 OF 2019 (Arising out of SLP (C) No.246/2019 VODAFONE IDEA LTD. Petitioner(s) VERSUS DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 17 (1) Respondent(s) ORDER Leave granted. Heard Mr. Arvind P. Datar, learned Senior Advocate in support of appeal and Mr. Sanjay Jain, learned ASG for respondent. judgment under appeal was passed by High Court in Income Tax Appeal No.660 of 2018. For sake of facility, questions which were raised Signature Not Verified in appeal memo are set-out as under: Digitally signed by MUKESH KUMAR Date: 2019.10.22 19:35:26 IST Reason: A. Whether on facts and in circumstances of case and in law, Tribunal erred in upholding disallowance of depreciation to tune of Civil Appeal No. 8041 of 2019 Vodafone Idea Ltd. vs. Deputy Commissioner of Income Tax Circle 17(1) 2 Rs.5,10,79,752/- claimed on account of Asset Reconstruction Cost ( ARC ) being ascertained liability, or alternatively allowing deduction for such expenditure in year of execution of lease agreements or over period of lease? B. Whether on facts and in circumstances of case and in law, Tribunal erred in holding that installation of cell site towers amounted to extension of existing business as stipulated in proviso to Section 36(1)(iii) of Act and, thereby warranting proportionate disallowance of interest under that provision? C. Whether on facts and in circumstances of case and in law, Tribunal erred in misbranding discount offered by Appellant to pre-paid sim card distributors as commission and hence upholding disallowance made by AO under section 40(a)(ia) of Act? D. Whether Tribunal erred in rejecting comparable i.e. payment by Forward Industries Inc., USA to Motorola Inc. USA used by Appellant in benchmarking its international transaction of payment of royalty by holding that said agreement is transaction between two foreign parties and same is not functionally comparable with transaction entered into by Appellant? E. Whether on facts and in circumstances of case and I law, Tribunal erred in remanding issue pertaining to advertising, marketing and promotion ( AMP ) expenses for fresh consideration, despite fact that all relevant materials in this regard were already placed on record by Appellant? F. Whether on facts and in circumstances of case and in law, findings of fact arrived at by ITAT in Impugned Order are vitiated inasmuch as they are unreasonable and perverse in nature, having been arrived at by improper rejection of evidence/material available on record of proceedings or having been based substantial on conjectures, surmises and suspicious? Civil Appeal No. 8041 of 2019 Vodafone Idea Ltd. vs. Deputy Commissioner of Income Tax Circle 17(1) 3 It must be mentioned that said appeal stands admitted as regards Questions & C while as regards Question D onwards, matter stands remitted to Income Tax Appellate Tribunal. We are thus left with issue regarding refusal of High Court to consider Question B as substantial question of law. discussion in Order under appeal regarding Question B was as under: assessee has urged other questions. He submits that installation of cell-site towers did not amount to extension of existing business and ITAT had disallowed proportionate interest claimed, on account of Section 36(1)(iii) in circumstances of case. Court is of opinion that assessee s argument that improved efficiency within circle if it was allowed for operation of its licences, did not amount to extension of business, is unpersuasive. facts are that assessee is licence holder in respect of three telecom circles. At relevant time, it sought to install cell-site towers claiming that they would merely improve its efficiency. lower authorities discerned that materials on record clearly show that object of such exercise was to reach greater number of customers and thus increase subscriber base. In these circumstances, finding of lower authorities cannot be faulted. No substantial question of law arises. This, however, will not preclude lower authorities from deciding issues which have been remitted by ITAT, in accordance with law. appellant has licence for extending telecom services in certain Circles and present issue arises from its activities in relation to Circle of Rajasthan, Civil Appeal No. 8041 of 2019 Vodafone Idea Ltd. vs. Deputy Commissioner of Income Tax Circle 17(1) 4 Haryana, U.P.(East). As result of view taken by High Court, decision of Tribunal rejecting claim of appellant would be final with respect to said Circle. However, as regards its activities pertaining to Mumbai Circle, very same issue was answered by Dispute Resolution Panel in favour of appellant s group companies. decision rendered by Dispute Resolution Panel-2, Mumbai on 21.09.2017 in respect of Objection No.101 has been placed on record. We had adjourned matter on few occasions to enable respondent to place material indicating whether decision of Dispute Resolution Panel was under challenge before any of authorities but no such affidavit has been filed. In any case, in our considered view, Question B raised by Appellant is substantial question meriting consideration and High Court ought to have admitted appeal even with respect to Question B . appeal is therefore allowed and order passed by High Court is modified to effect that in addition to questions framed by High Court for its consideration, Civil Appeal No. 8041 of 2019 Vodafone Idea Ltd. vs. Deputy Commissioner of Income Tax Circle 17(1) 5 Question B shall also be considered by High Court while considering Income Tax Appeal No.660 of 2018. We have considered matter only from perspective whether Question B ought to be considered or not and we shall not be taken to have expressed any opinion on merits of submissions pertaining to said Question, which will be gone into independently. .................................J. [UDAY UMESH LALIT] .................................J. [INDU MALHOTRA] .................................J. [KRISHNA MURARI] NEW DELHI; OCTOBER 16, 2019 Civil Appeal No. 8041 of 2019 Vodafone Idea Ltd. vs. Deputy Commissioner of Income Tax Circle 17(1) 6 ITEM NO.24 COURT NO.7 SECTION XIV S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Petition for Special Leave to Appeal (C) No.246/2019 (Arising out of impugned final judgment and order dated 01-06-2018 in ITA No.660/2018 passed by High Court Of Delhi At New Delhi) VODAFONE IDEA LTD. Petitioner(s) VERSUS DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 17 (1) Respondent(s) Date : 16-10-2019 This petition was called on for hearing today. CORAM : HON'BLE MR. JUSTICE UDAY UMESH LALIT HON'BLE MS. JUSTICE INDU MALHOTRA HON'BLE MR. JUSTICE KRISHNA MURARI For Petitioner(s) Mr. Arvind P. Datar, Sr. Adv. Mr. Sachit Jolly, Adv. Ms. Anuradha Dutt, Adv. Ms. Fereshte D. Sethna, Adv. Mr. Siddharth Joshi, Adv. Ms. B. Vijayalakshmi Menon, AOR For Respondent(s) Mr. Sanjay Jain, ASG Mr. Zoheb Hossain, Adv. Mr. Rupesh Kumar, Adv. Mr. Ashok Panigrahi, Adv. Mr. Padmesh Mishra, Adv. Mrs. Anil Katiyar, AOR UPON hearing counsel Court made following ORDER Leave granted. appeal is allowed, in terms of signed order. Pending application(s), if any, shall stand disposed of. (MUKESH NASA) (SUMAN JAIN) COURT MASTER BRANCH OFFICER (Signed Order is placed on File) Vodafone Idea Ltd. v. Deputy Commissioner of Income-tax Circle 17(1)