ORDER
1. The captioned appeals for the Assessment Year (‘AY’ in short) 2003-04 to AY 2008-09 have been filed by the assessee challenging the order of the Ld. Commissioner of Income Tax (Appeals) – 19, New Delhi (‘Ld. CIT(A) for short), passed u/s.250 of the Income Tax Act, 1961 (‘the Act’). The assessee and the Revenue have also filed appeal for AY 2010-11 challenging the Final Assessment Order passed under section 143(3) read with section 144C (13) of the Act pursuant to the Directions passed by the Ld. Dispute Resolution Panel – 2,New Delhi [“Ld. DRP”].
As majority of the grounds of appeal raised in the captioned appeals are identical, the same are dealt with hereunder in a consolidated manner considering AY 2010-11 (bearing ITA No. 1021/Del/2015 and 1135/Del/2015) as the lead year and the decision rendered there is shall be applied mutatis mutandis to other appeals.
ITA No. 1021/Del/2015 (A.Y. 2010-11) (Assessee Appeal)
2. The brief facts of the case are that the assessee is a cellular mobile telephony service provider. For the year under consideration, the appellant filed its return of income on 05.10.2010 which was thereafter revised on 29.03.2012, declaring 2,31,22,12,779/- income and a book profit of Rs. 3,96,51,69,284. The return filed by the appellant was selected for scrutiny, and statutory notices under section 143(2) and section 142 (1) were issued and served upon the appellant . The Transfer Pricing Officer in terms of the Order dated 27.01.2014 passed u/s. 92CA(3) of the Act made upward adjustments aggregating to Rs. 80,64,73,603/- Vide Draft Assessment Order dated 31.03.2014 passed under section 144C read with section 143(3) of the Act, the Assessing Officer (”Ld. AO”) proposed certain additions and disallowances to the total income declared by the assessee. Being aggrieved, the assessee filed detailed objections before the Ld. DRP, which were disposed off vide Directions dated 18.12.2014 issued under section 144C(5) of the Act, agreeing partially with the assessee, allowing certain objections against the additions/disallowances proposed by the Ld. AO. In conformity, the Ld. AO passed the impugned Final Assessment Order, assessing the total income of the appellant at Rs. 8,17,19,92,546/- on 27.01.2015. Being aggrieved, the appellant has filed the captioned appeal.
3. The assessee has raised the following grounds:
“Ground no. 1: Deduction u/s 80-IA of the Income-tax Act, 1961 [‘the Act’].
Ground no. 2: Deduction u/s. 80-IA on other income
Ground no. 3: Disallowance of license fee u/s. 37(1) of the Act.
Ground no. 4: Disallowance of depreciation on provision for Asset Restoration Cost [‘ARC’] obligation.
Ground no. 5: Disallowance u/s. 40(a)(ia) of the Act with respect to domestic roaming charges paid to other telecom operators.
Ground no. 6: Disallowance u/s. 40(a)(ia) of the Act with respect to discount extended to pre-paid distributors.
Ground no. 7: Disallowance u/s 14A of the Act
Ground no. 8: Disallowance of Penalty paid to DoT.
Ground no. 9: Disallowance of network site rentals.
Ground no. 10: Disallowance u/s 36(1)(iii) in respect of alleged interest free loan to sister concern.
Ground no. 11: Transfer Pricing Adjustment – Disallowance of Brand Royalty Payment. Transfer Pricing Adjustment – Reimbursement of excessive advertisement & marketing spend
Ground no. 12: Non grant of full credit in respect of Tax Deducted at source (‘TDS’) Ground no. 13: Interest u/s 234B and 234C of the Act
Ground no. 14: Non grant of minimum alternative Tax (‘MAT’) credit”
4. The issue arising in Ground No. 1, raised in this appeal, pertains to the disallowance of deduction claimed under section 80-IA of the Act.
5. The Ld. AR submitted that the company is engaged in providing Cellular Mobile Telephony Services and it started its commercial operations in the month of September 1996 after receipt of approval from the Department of Telecommunication (‘DOT’). Since, the Appellant is engaged in providing telecommunication service, it is eligible for deduction u/s 80IA of the Act. As per sub-section (2A) of Section 80IA, an undertaking providing telecommunication services is eligible for deduction u/s. 80IA of the Act at the rate of 100% of the profits and gains of the eligible business for the first five AYs commencing at any time during the specified period of 15 years and thereafter, at the rate of 30% of such profits and gains for further five AYs.
6. During the year AYs 2003-04 to 2005-06, the assessee filed its return of income disclosing ‘Nil’ taxable income under the normal provisions of the Act, after setting off tax losses of the prior years. Accordingly, no claim for deduction u/s. 80IA of the Act was made by the assessee in its return of income filed for these three years. The returns of income for the aforesaid years were selected for scrutiny and Orders u/s. 143(3) of the Act were passed by the Ld. AO, wherein the Ld. AO made certain disallowances/ additions. Owing to such disallowances/ additions, the Ld. AO allowed deduction u/s. 80IA of the Act in the assessment orders for AYs 2003-04 to 2005-06 on the basis of a claim made by the assessee during the course of assessment proceedings of the said years.
7. Subsequently, the Ld. AO also rectified the earlier assessment orders for AY 2003-04 to 2005-06, thereby withdrawing the deduction granted for these three years.
8. The Ld. AR submitted the year-wise details relating to claim for deduction u/s. 80-IA as under:
Re.: AY 2003-04:
In terms of the Order dated 23 September 2013 passed by the Ld. AO giving effect to the CIT(A)’s Order for the AY 2003-04, the assessee has been assessed at Nil income (post set-off of brought forward losses) and thus, no deduction u/s. 80-IA has been granted to it for AY 2003-04.
Re.: AY 2004-05:
In terms of the Order dated 23 September 2013 passed by the AO giving effect to the CIT(A)’s Order for the AY 2004-05, the assessee has been assessed at a positive income and has been granted deduction u/s. 80-IA of the Act).
Subsequently, on a rectification application filed by the assessee, the Ld. AO in terms of the Order dated 05 October 2023 has assessed the assessee’s income as Nil (post set-off of brought forward losses) and thus, no deduction u/s. 80-IA has been granted to it for AY 2004-05 as well.
While the assessee has filed a rectification application dated 29 November 2023 pointing out the errors apparent on record in the said Order dated 05 October 2023, the assessee submits that even on processing the said rectification application, its income for the AY 2004-05 will be Nil and it will be entitled to a higher amount of loss to be carried forward to the subsequent years.
Re.: AY 2005-06:
In terms of the Order dated 12 September 2013 passed by the Ld. AO giving effect to the CIT(A)’s Order for the AY 2005-06, the assessee has been assessed at a positive income and has been granted deduction u/s. 80-IA of the Act).
However, considering the rectification application dated 29 November 2023 filed by the assessee for AY 2004-05 in terms of which it will be entitled to a higher amount of loss to be carried forward to the subsequent years and also considering the fact that most of the issues raised in the appeal filed by it for the said year is covered in the assessee’s favour in its own case, the assessee submits that it will eventually be assessed at a Nil income for the AY 200506 and not be entitled to any deduction u/s. 80-IA of the Act.
9. Accordingly, it was submitted that the AY 2006-07 becomes the first year of claim considering the losses in all the earlier years as mentioned above and hence it was submitted that the captioned year i.e. AY 2010-11 shall be considered as the 5th year for the purpose of claiming deduction u/s. 80IA and hence, deduction of 100% of the eligible profits ought to be allowed to the assessee t as claimed by in its return of income.
10. The Ld. AR further submitted alternatively that in view of the subsequent appellate and rectification proceedings for AYs 2003-04, 2004-05 and 2005-06, this issue ought to be restored back to the files of the Ld. AO with a direction to give consequential order giving effect to the Tribunal orders to be passed in the assessee’s case from AY 2003-04 onwards and accordingly, allow the deduction under section 80-IA of the Act for AY 200607 onwards.
11. The Ld. DR argued that given the fact that the Ld. AO had granted deduction u/s. 80-IA to the Appellant in terms of the Order(s) passed u/s. 143(3) of the Act, then AY 2003-04 ought to be considered as the first year for claim of deduction u/s. 80-IA of the Act, and AY 2010-11 being 8th year of deduction, the assessee should be entitled to only 30% of the deduction from profits u/s. 80-IA of the Act.
12. The assessee submitted that whilst the deduction u/s. 80-IA has been granted to it by the Ld. AO in terms of the assessment orders passed for AYs 2003-04 to 2005-06, the Ld. AO has subsequently also withdrawn the said deduction in terms of the Order(s) passed u/s. 154 for the said years. Also, as pointed out earlier, the Ld. AR also submitted that on giving effect to the Order(s) of the Tribunal for AYs 2003-04 to 2005-06 (which is being dealt with in the later part of this Order), there will be no question of any claim for deduction u/s. 80-IA in the absence of any positive income for the said three years and thus, it was once again prayed by the ld. AR that this issue may be restored back to the files of the AO.
13. The CIT(A) in the order has negated the withdrawal of deduction by the assessee on various reasons, however, in view of the subsequent developments i.e. the order giving effects being passed for those years without any positive income for these years, the question of granting any deduction doesn’t arise and hence to that extent the findings of the CIT(A) would become academic and no specific findings would be required in respect thereof.
14. We have perused the submissions advanced by both sides in light of the record placed before us. We find that the determination of the initial assessment year for claiming deduction u/s. 80-IA cannot be made in isolation from the consequential effect of the appellate and rectification proceedings for A.Ys. 2003-04 to 2005-06. Since the subsisting orders for the said years are stated to have resulted in nil income and no deduction u/s. 80-IA having actually been allowed, the observations of the Ld. CIT(A) on the withdrawal of the claim have become academic. We, therefore, restore this issue to the file of the Ld. AO for the limited purpose of giving effect to the appellate orders for A.Ys. 2003-04 onwards, determining the first assessment year in which deduction u/s. 80-IA was actually admissible and allowed under the subsisting assessment, and thereafter computing the deduction for the year under consideration at the rate prescribed u/s. 80-IA(2A). The Ld. AO shall afford reasonable opportunity of being heard to the assessee. Accordingly, Ground No. 1 is allowed for statistical purposes.
15. The issue arising in Ground No. 2, raised in this appeal, pertains to the disallowance of deduction claimed under section 80-IA of the Act on other incomes.
16. At the outset, the Ld. AR submitted that section 80-IA (2A) of the Act begins with a non-obstante clause and the deduction in computing the total income of an undertaking providing telecommunication services, shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, thirty per cent of such profits and gains for further five assessment years. Accordingly, the concept of ‘derived from’ as appearing in section 80-IA (1) of the Act does not apply in case of an undertaking providing telecommunication services in view of the fact that section 80IA(2A) starts with a non obstante clause treating the same as separate species and hence, all business income of the Company would qualify for deduction under section 80IA of the Act. In this regard, the Ld. AR has placed its reliance on the decision of the Hon’ble Delhi High Court in case of Pr. CIT v. BSNL Ltd. [2016] 381 ITR 371 (Delhi) wherein it was held as under:
“13. In the first place as far as the present appeals are concerned, the above issue as posed by learned counsel for the revenue is purely hypothetical. In any event, section 80-IA(2A) treats an undertaking providing telecommunication services as a separate species warranting a separate treatment as is evident from the non-obstante clause with which it begins. The Court sees no reason why such an undertaking would not be able to take the benefit of deduction in terms of section 80-IA(2A) notwithstanding that the enterprise of which it forms part may have other eligible businesses for which the deduction would have to be calculated in terms of section 80-IA(1) of the Act.
14. The Court finds no reason to differ from the view expressed by the ITAT in the impugned orders as far as the interpretation of section 80-IA(2A) of the Act is concerned.
15. No substantial question of law arises for consideration. The appeals are dismissed.”
17. The Ld. AR also submitted that the Tribunal in the assessee’s group entity’s case i.e. erstwhile Vodafone West Limited for the Assessment Year 2011-12 (ITA No. 443/Ahd/2016) and 2009-10 Dy. CIT (OSD) v. Vodafone West Ltd. [IT Appeal Nos. 909 & 944 (Ahd.) of 2014, dated 17-11-2016] relying on the decision of the Delhi High Court in the case of BSNL Ltd. (supra) reported in (2016) 381 ITR 371 (Delhi) held that the concept of ‘derived from’ does not apply in case of an undertaking providing telecommunication services in view of the fact that section 80IA(2A) starts with a non obstante clause treating the same as separate species and hence, all business income of the Company qualify for deduction under section 80IA of the Act.
18. Similar view has been taken by the Tribunal in the following appellant’s group company’s cases:
| • |
|
Order dated 11 December 2025 in the Appellant’s group entity case i.e. erstwhile Vodafone West Ltd. (ITA No. 1634/Ahd/2015) for the AY 2010-11. |
| • |
|
Order dated 28 November 2022 in the Appellant’s group entity case i.e. erstwhile Dy. CIT v. Vodafone India Ltd. [2023] 152 (Mumbai – Trib.)/(ITA No. 5078/Mum/2017) for the AY 2005-06. |
19. Without prejudice to the above, the Ld. AR also submitted that it should be allowed a deduction under section 80-IA of the Act on the following income as under:
a. Liabilities written back:
| • |
|
This issue has been decided in favour by the Tribunal vide Order dated 11 May 2026 in appellant’s own case viz. for the AY 2011-12 (ITA No. 9160/Del/2019). |
| • |
|
This issue has also been decided in favour by the Tribunal vide Order dated 14 October 2025 in the appellant’s group entity case viz. erstwhile Vodafone Digilink Ltd. for the AY 2010-11 (ITA No. 1073/Del/2015). |
b. Interest income:
| • |
|
During the year under consideration, the assessee earned Interest Income on fixed deposits, interest on loan to group companies, interest on deposit with fixed deposits made with banks for margin money deposit on account of LCs/bank credit/bank guarantee. |
| • |
|
This interest income has been earned in the normal course of business. Since the assessee had earned Interest Income on deposits made by it out of funds arising in the normal course of telecom business, the income generated therefrom should be regarded as receipts arising from the provision of telecommunication services and hence eligible for deduction u/s. 80-IA of the Act. |
| • |
|
This issue is covered in favour of the assessee by decision of the Mumbai Bench of the Tribunal in its own case ITA No. 9160/Del/2019 for AY 2011-12. |
| • |
|
This issue is also covered in favour of the appellant by decision of the Mumbai Bench of the Tribunal in group company’s case of the appellant (erstwhile ‘Vodafone India Ltd.’) vide Order dated 28 November 2022 (Vodafone India Ltd. (supra)) for AY 2005-06. |
c. Realised foreign exchange loss on capital account:
| • |
|
During the year, the appellant has booked a ‘Realised Forex Loss on Capital account’ of Rs. 38,64,287/- in its Profit and Loss Account. This loss has arisen on capital account, hence, the same has been added back while computing taxable income for the subject A Y. |
| • |
|
Since such loss has arisen in the normal course of business of appellant and pertains to normal business transactions of appellant, deduction under section 80IA is allowable on the same. |
d. Foreign exchange gain on revenue account:
| • |
|
The gain (net) of Rs. 3,06,75,347/- has arisen, on revenue account as a result of exchange rate fluctuations on reinstatement of foreign exchange liabilities on balance sheet date and settlement of transactions in foreign exchange. Such transactions like roaming transactions etc. were undertaken by the appellant on revenue account in the course of its business operations. |
| • |
|
The appellant has claimed deduction u/s 80-IA of the Act on the above income on the basis that such income is part and parcel of the telecommunication business of the appellant and has arisen in the normal course of its business. |
e. Cell site sharing revenue:
| • |
|
During the year under consideration, amounts receivable / received by the assessee under such cell site sharing arrangement were recognized by the appellant under the account head ‘cell site sharing’. Since the cell sites arrangements are entered into by the assessee in the ordinary course of its telecommunication business with a view to achieve cost reduction and greater operational efficiencies, revenues arising under such arrangements are business receipts of the telecommunication operations of the appellant. |
| • |
|
This issue has been decided by the Tribunal in the appellant’s own case for AY 2011-12 (ITA No. 9160/Del/2019) |
| • |
|
This issue has also been decided by the Tribunal in the following group company’s case of the Appellant: |
| • |
|
Vodafone West Ltd. for the AY 2011-12 (ITA No. 443/Ahd/2019 dated 02 April 2026). |
| • |
|
Vodafone Essar Digilink Ltd. 170 ITD 430 (Delhi – Trib.); |
| • |
|
Vodafone Digilink Ltd. for the AY 2010-11 (ITA No. 1073/Mum/2015 dated 14 October 2025); |
| • |
|
Vodafone West Ltd. for the AY 2010-11 (ITA No. 1634/Ahd/2015 dated 11 December 2025). |
f. Export incentives:
| • |
|
Income from ‘Service from India Scheme’ (‘SFIS’) is in the nature of incentive and the income arising from the same is in the nature of ‘Export Incentive’ and thus, the same cannot be termed as ‘derived from’ from the business of undertaking for the purpose of computing deduction u/s 80-IA of the Act. |
| • |
|
It is submitted that under the SFIS, services exporters are permitted to use SFIS scripts for import or domestic procurement of capital goods and spares including spares relating to its service sector business. Thus, on receipts of such scripts, the appellant has credited the same to its Profit & Loss A/c. |
| • |
|
While this issue has been decided against the appellant by the Tribunal in its own case for AY 2011-12 (ITA 9160/Del/2019), the Tribunal in the case of Vodafone West Ltd. for the AY 201112 (ITA No. 443/Ahd/2016) dated 02 April 2026 and Vodafone West Ltd. for the AY 2010-11 (ITA No. 1634/Ahd/2015 dated 11 December 2025) has decided this issue in favour of the taxpayer. |
g. Miscellaneous income:
| • |
|
The details of miscellaneous income are as under: |
| Particulars |
Amount (in Rs.) (in lakhs) |
| Bounced cheque charges |
60.30 |
| Full and final settlement from employees |
1.70 |
| Late payment charges |
1,083.10 |
| Written back – others |
17.30 |
| Port and SDH Service Charge |
127.20 |
| Scrap Sale |
2.90 |
| Others |
1.60 |
| Total |
1,294.10 |
| • |
|
The assessee has claimed deduction u/s 80-IA of the Act on the above incomes on the basis that such income is part and parcel of the telecommunication business of the appellant and has arisen in the normal course of its business. |
| • |
|
The Tribunal in appellant’s own case for the A.Y. 2011-12 (ITA No. 9160/Del/2019) has considered the two items in the above table viz. bounced cheque charges and late fee charges and held that the same are in the nature of profits and gains of the eligible business and thus, qualify for deduction u/s. 80-IA of the Act. |
| • |
|
The Tribunal in appellant group company’s case (in the case of erstwhile Vodafone West Ltd. for the A.Y. 2011-12 (ITA No. 443/AHD/2019) has considered the three items in the above table viz. bounced cheque charges, late fee charges and scrap sales and held that the same are in the nature of profits and gains of the eligible business and thus, qualify for deduction u/s. 80-IA of the Act. |
| • |
|
The Tribunal in the case of the assessee group company’s case (in the case of erstwhile Vodafone Digilink Ltd.(supra) has considered the two items in the above table viz. bounced cheque charges and late fee charges and held that the same are in the nature of profits and gains of the eligible business and thus, qualify for deduction u/s. 80-IA of the Act. |
20. We have perused the submissions advanced by both sides in light of the record placed before us. Section 80-IA(2A), which begins with a non-obstante clause, grants deduction with reference to the profits and gains of the eligible telecommunication business. In view of BSNL Ltd. (supra) and the consistent orders of the Coordinate Benches in the assessee’s own and group cases, receipts having an integral nexus with the telecommunication business form part of the eligible profits. Accordingly, liabilities written back, interest earned on business and marginmoney deposits, foreign exchange gain on revenue account, cell-site sharing revenue, bounced-cheque charges, late-payment charges and scrap sale shall be included in the eligible profits. The realised foreign exchange loss on capital account, having been added back by the assessee, shall be dealt with consistently while computing such profits. As regards the remaining components of miscellaneous income, the Ld. AO shall verify their nexus with the eligible business and allow deduction to the extent such nexus is established. However, following the order in the assessee’s own case for A.Y. 2011-12, the claim relating to the SFIS/export incentive is not allowable. Ground No. 2 is, therefore, partly allowed for statistical purposes.
21. The issue arising in Ground No. 3,raised in this appeal, pertains to the disallowance made on account of license fees paid by the assessee to the Department of Telecommunication (“DoT”).
22. The brief facts of the case pertaining to this issue, as emanating from the record are: During the year under consideration, the assessee claimed license fees amounting to Rs. 1,43,15,32,083/- paid to DoT as deduction under section 37(1) of the Act. As per the assessee, it entered into a license agreement with the Government of India for obtaining the right to operate and provide the telecom services. Since the license fees paid under the said agreement was for acquiring the telecom license, the assessee claimed that it capitalized the same in its books of account and appropriate deduction was claimed in the return of income in accordance with the provisions of section 35ABB of the Act. Subsequently, the Government announced the New Telecom Policy, 1999, applicable with effect from 01.08.1999, under which it granted an option to the telecom companies to migrate from a fixed license fees to a revenue sharing regime. Accordingly, in terms of the migration package issued by the Ministry of Telecommunication, Government of India, the license fees were bifurcated into two components, i.e., (a) onetime entry fees, which would be the license fees dues payable by the existing licensees upto 31.07.1999, and (b) with effect from 01.08.1999, the license fees were payable as a percentage of gross revenue on an annual recurring basis. Accordingly, the license fees capitalised by the assessee were claimed as a deduction under section 35ABB of the Act and the license fees which were paid not for acquiring the license but to maintain the license for each year on the basis of revenue sharing were claimed as a deduction under section 37(1) of the Act.
23. The Ld. AO,vide Draft Assessment Order, disagreed with the submissions of the assessee and held that the nature of payment clearly indicates that the assessee has acquired an asset or an advantage of enduring benefit. It held the expenditure incurred on account of license fee as capital expenditure incurred for acquisition of intangible assets in the form of license which is for the tenure of 10 to 20 years. Accordingly, the Ld. AO proposed to disallow the treatment of license fees paid during the year as revenue expenditure and, after granting appropriate deduction under section 35ABB of the Act, an amount of Rs. 37,62,51,261/- was proposed to be added to the total income of the assessee. The DRP relying on its directions for the earlier years upheld this disallowance.
24. The ld AR submitted that this issue has been decided against the assessee by the Hon’ble Supreme Court in the case of CIT v/s. Bharati Hexacom Ltd. reported in CIT v. Bharti Hexacom Ltd. 458 ITR 593 (SC). During the hearing, the Ld. AR has filed the working of disallowance to an extent of Rs.32,79,52,230/-in line with the decision of Bharati Hexacom Ltd. (supra).
25. The Ld. AR submitted that the Co-ordinate Bench of the Tribunal in the assessee’s own case for the A.Ys. 2015-16, 2011-12, 2012-13 & 2013-14, after considering the decision of the Hon’ble Supreme Court in Bharati Hexacom Ltd., (supra) has directed the Ld. AO to verify the workings furnished by the assessee and compute the quantum of disallowance/ allowance as per the decision of the Supreme Court in the case of Bharti Hexacom (supra).
26. The relevant extract from the Order dated 30 June 2026 passed in the assessee’s own case for the A.Y. 2015-16 is reproduced below:
“…. Ground No. 10 and its sub-grounds relate to the disallowance of licence fee claimed as revenue expenditure under section 37(1) of the Act by treating the same as capital expenditure eligible for amortisation under section 35ABB of the Act.
12.1. The Ld. AR submitted that though the issue regarding the nature of annual licence fee now stands concluded by the judgment of the Hon’ble Supreme Court in CIT v. Bharti Hexacom Ltd.
458 ITR 593 (SC), the assessee has raised an alternate plea that the consequential deduction under section 35ABB requires re-computation in the peculiar facts of the present case. Drawing our attention to Appendix-C placed in the Paper Book, the Ld. AR submitted that detailed workings have been furnished explaining the impact of the judgment of the Hon’ble Supreme Court after considering the amalgamation of various group entities, transfer of telecom licences, cancellation/extinguishment of licences pursuant to mergers and the balance licence period available for amortisation under section 35ABB of the Act. It was submitted that the judgment of the Hon’ble Supreme Court does not result in a permanent disallowance of the licence fee but merely postpones the deduction over the balance period of the licence. Therefore, the consequential deduction admissible under section 35ABB requires verification and re-computation by the Assessing Officer on the basis of the detailed workings furnished by the assessee.
12.2. The Ld. AR further submitted that an identical issue had arisen before the Coordinate Bench in the assessee’s own case for Assessment Years 2012-13 and 2013-14 in ITA Nos. 8361/Del/2019 and 8362/Del/2019, wherein, after following the judgment of the Hon’ble Supreme Court in Bharti Hexacom Ltd. (supra), the Tribunal restored the matter to the file of the Assessing Officer for verifying the workings furnished by the assessee and allowing consequential deduction under section 35ABB of the Act. Reliance was also placed upon the decision of the Coordinate Bench in the case of the erstwhile Vodafone Digilink Ltd. for Assessment Year 2010-11 in ITA No. 1079/Del/2018, order dated 21.03.2025, wherein similar directions were issued after considering the effect of the decision of the Hon’ble Supreme Court. Further reliance was placed on the order of the Coordinate Bench in the case of the erstwhile Vodafone West Ltd. for Assessment Year 2011-12 in ITA No. 443/Ahd/2022, wherein the matter was restored to the file of the Assessing Officer for working out the consequential deduction under section 35ABB after verification of the assessee’s computations.
12.3. Per contra, the Ld. DR relied upon the orders of the lower authorities.
12.4. We have perused the submissions advanced by both sides in light of the record placed before us. We find that the controversy regarding the allowability of annual licence fee is no longer res integra. The Hon’ble Supreme Court in Bharti Hexacom Ltd. (supra) has categorically held that the annual licence fee payable under the New Telecom Policy is capital in nature and is not allowable as revenue expenditure under section 37(1) of the Act, the deduction being governed by the provisions of section 35ABB of the Act. In view of the aforesaid binding decision, we uphold the action of the lower authorities in disallowing the assessee’s claim of deduction under section 37(1) of the Act.
12.5. However, we find merit in the alternate plea advanced by the assessee that the consequential deduction admissible under section 35ABB requires fresh computation after considering the amalgamation of various group entities, transfer and cancellation of telecom licences and the surviving licence period, as explained in Appendix-C placed before us. The detailed working furnished by the assessee demonstrates that the effect of mergers and transfer of licences has a direct bearing on the period over which amortisation under section 35ABB is to be granted. The verification of such factual workings is required to ensure that the deduction admissible under section 35ABB is correctly computed in accordance with the judgment of the Hon’ble Supreme Court.
12.6. We further notice that an identical issue had come up before the Coordinate Bench in the assessee’s own case for Assessment Years 2012-13 and 2013-14 in ITA Nos. 8361/Del/2019 and 8362/Del/2019, wherein, following the judgment of the Hon’ble Supreme Court in Bharti Hexacom Ltd. (supra), the Tribunal restored the matter to the file of the Assessing Officer for the limited purpose of verifying the workings furnished by the assessee and allowing consequential deduction under section 35ABB of the Act. Similar directions have also been issued by the Coordinate Benches in the case of the erstwhile Vodafone Digilink Ltd. for Assessment Year 201011 in ITA No. 1079/Del/2018, vide order dated 21.03.2025, and in the case of the erstwhile Vodafone West Ltd. for Assessment Year 2011-12 in ITA No. 443/Ahd/2022.
12.7. Respectfully following the aforesaid decisions of the Coordinate Benches in the assessee’s own case as well as in the cases of its group concerns, while upholding the disallowance of the assessee’s claim for deduction under section 37(1) of the Act in view of the binding judgment of the Hon’ble Supreme Court in Bharti Hexacom Ltd. (supra), we restore the matter to the file of the Ld. AO for the limited purpose of verifying the computation and workings furnished by the assessee, including those contained in Appendix-C, and thereafter allowing consequential deduction under section 35ABB of the Act in accordance with law. The Ld. AO shall afford adequate opportunity of being heard to the assessee and decide the issue afresh after due verification of the workings and supporting details. Accordingly, Ground No. 10 and its sub-grounds are partly allowed for statistical purposes.”
27. We have perused the submissions advanced by both sides in light of the record placed before us. The character of the annual licence fee stands concluded by the judgment of the Hon’ble Supreme Court in Bharti Hexacom Ltd. (supra). Accordingly, the claim u/s. 37(1) is not allowable and the deduction is governed by section 35ABB of the Act. At the same time, the assessee’s year-specific working for consequential amortisation requires verification. Consistent with the orders of the Coordinate Benches in the assessee’s own cases, we restore the matter to the file of the Ld. AO for the limited purpose of verifying the working furnished by the assessee and allowing the consequential deduction u/s. 35ABB in accordance with law, after affording reasonable opportunity of being heard. Ground No. 3 is partly allowed for statistical purposes.
28. The issue arising in Ground No. 4 raised in the appeal pertains to disallowance of depreciation claimed on the addition to fixed assets on account of Asset Restoration Cost (‘ARC’) obligation.
29. The brief facts of the case pertaining to this issue are that the assessee entered into lease agreements with various owners of premises for setting up of cell sites (telecom towers) on the said premises. These lease agreements cast an obligation on the assessee to restore the leased premises to their original form at the time of vacating the same. The aforesaid asset reconstruction cost (‘ARC’) is the estimated cost to be incurred at the leased and shared network sites and office premises to restore them to their original condition at the end of the leased period and the same is recognized as per Accounting Standard 29 (‘AS-29’) (Provisions, Contingent Liabilities and Contingent Assets) issued by the ICAI. The assessee claimed depreciation amounting to Rs. 68,94,199/-on ARC obligation capitalized during the year since the provision made is in effect directly attributable to the cost of acquisition of the capital.
30. The Ld. AO disallowed the aforesaid depreciation by alleging that expenses on account of ARC are purely estimated figures and not based on any scientific or logical basis. It is difficult to crystallise the amount of these expenses which the assessee is supposed to incur after a period of 20 years. The lease agreement between does not cast any obligation on the assessee to incur expenses in the nature of ARC. The DRP relying on its directions for the earlier years upheld the said disallowance.
31. The Ld. AR submitted that while the Tribunal has decided this issue against the assessee in the case of Vodafone Digilink Ltd. for AY 2009-10, on a further appeal by the said assessee, the Hon’ble Delhi High Court vide Order dated 11 March 2025 [reported in
Vodafone Mobile Services Ltd. v.
Dy. CIT (Delhi)] has allowed the alternate plea of the assessee’s group company that the entire amount of ARC obligation capitalised during the year should be considered as revenue in nature and ought to be allowed as a deduction while computing its total income. The Tribunal vide Order dated 11 May 2016 passed in the assessee’s own case for the AY 2011-12, following the aforesaid decision of the Delhi High Court has restored this issue to the files of the Ld. AO for verification of expenses u/s. 37 of the Act. Similar view has been taken by the Hon’ble Bench in the assessee’s own case for the AY 201516. It was submitted that the ground of appeal No. 4 of the appeal relating to granting deduction for ARC as a revenue expense u/s. 37(1) of the Act ought to be allowed.
32. The relevant extract from the Order dated 30 June 2026 passed in the assessee’s own case for the A.Y. 2015-16 is reproduced below:
“Ground No. 7 along with its sub-grounds relates to the disallowance of depreciation claimed on the addition to the fixed asset account towards Asset Restoration Cost (“ARC”). Without prejudice thereto, the assessee has also raised an alternate plea seeking deduction of the Asset Restoration Cost as revenue expenditure under section 37(1) of the Act.
9.1. The Ld. AR submitted that the authorities below erred in disallowing depreciation on the Asset Restoration Cost capitalised by the assessee as part of the cost of the relevant assets. Without prejudice, it was contended that even if the capitalization of the Asset Restoration Cost is not accepted, the entire expenditure ought to be allowed as a deduction under section 37(1) of the Act, being wholly and exclusively incurred for the purposes of the business. It was submitted that the issue relating to depreciation on Asset Restoration Cost stood decided against the assessee by the Coordinate Bench in the case of the erstwhile Vodafone Digilink Ltd. for A.Y. 2010-11in DCIT v. Erstwhile Vodafone Digilink Ltd. (NCLT – New Delhi). However, it was pointed out that, in further appeal, the Hon’ble Delhi High Court vide judgment dated 11.03.2025, reported in Vodafone Mobile Services Ltd. v. Dy. CIT (Delhi), while affirming the disallowance of depreciation, accepted the assessee’s alternate contention and held that the Asset Restoration Cost was allowable as revenue expenditure under section 37(1) of the Act. The Ld. AR further submitted that, following the aforesaid judgment, the Coordinate Benches in the assessee’s own case for A.Y. 2012-13 in ITA No. 8361/Del/2019 and for A.Y. 2013-14 in ITA No. 8362/Del/2019 have allowed the alternate claim of deduction under section 37(1) of the Act.
9.2. The Ld. DR, on the other hand, relied upon the orders of the lower authorities.
9.3. We have considered the rival submissions and perused the material available on record. We find that the issue regarding allowability of depreciation on Asset Restoration Cost was earlier decided against the assessee by the Coordinate Bench in the case of the erstwhile Vodafone Digilink Ltd. for A.Y. 2010-11 in DCIT v. Erstwhile Vodafone Digilink Ltd. (NCLT – New Delhi). However, the said decision has since been carried in appeal before the Hon’ble Delhi High Court, which vide judgment dated 11.03.2025 reported in Vodafone Mobile Services Ltd. (supra) has upheld the disallowance of depreciation while simultaneously accepting the alternate plea of the assessee and holding that the Asset Restoration Cost is allowable as revenue expenditure under section 37(1) of the Act.
9.4. We further note that the Coordinate Bench, while deciding the assessee’s own cases for A.Ys. 2012-13 and 2013-14 in ITA Nos. 8361/Del/2019 and 8362/Del/2019, has followed the aforesaid judgment of the Hon’ble Delhi High Court and allowed the alternate claim of deduction under section 37(1) of the Act. Since the facts of the year under consideration are identical and no distinguishing feature has been brought to our notice by the Revenue, we see no reason to take a different view.
9.5. Respectfully following the judgment of the Hon’ble Delhi High Court in Vodafone Mobile Services Ltd. (supra) and the decisions of the Coordinate Benches in the assessee’s own cases for A.Ys. 2012-13 and 2013-14 in ITA Nos. 8361/Del/2019 and 8362/Del/2019, we uphold the disallowance of depreciation on Asset Restoration Cost. However, following the binding judgment of the Hon’ble Delhi High Court, we direct the Ld. AO to allow the assessee’s alternate claim of deduction of the Asset Restoration Cost as revenue expenditure under section 37(1) of the Act. Accordingly, Ground No. 7 is partly allowed in terms indicated hereinabove.”
33. We have perused the submissions advanced by both sides in light of the record placed before us. The Hon’ble Delhi High Court in Vodafone Mobile Services Ltd. (supra) has upheld the disallowance of depreciation on Asset Restoration Cost while accepting the alternate claim that the expenditure is allowable u/s. 37(1). Respectfully following the binding judgment and the orders in the assessee’s own cases, we uphold the disallowance of depreciation. The Ld. AO is, however, directed to allow the alternate claim of Asset Restoration Cost as revenue expenditure u/s. 37(1), after verifying the year-specific quantum and ensuring that no double deduction is granted.
Ground No. 4 is partly allowed in the aforesaid terms.
34. The issue arising in Ground No. 5,raised in this appeal, pertains to the disallowance made domestic roaming charges paid to other telecom operators on account of non-deduction of TDS.
35. The brief facts of the case pertaining to this issue, as emanating from the record are: During the assessment proceedings the Ld. AO held that the assessee is required to deduct tax u/s. 194J in respect of roaming charges. The Ld. AR submitted that the AO/DRP was not correct in holding that the appellant was required to deduct tax u/s 194J of the Act on the roaming charges without appreciating that such charges are towards standard automated services, requiring no intervention, which is a sine qua non for a service to qualify as fee for technical services u/s 194J of the Act. The Ld. AR submitted that this issue has also been decided in favour of the Appellant in the following cases:
| (i) |
|
Assessee’s own case for AY 2011-12 (ITA No. 9160/DEL/2019 dated 11.05.2026); |
| (ii) |
|
Assessee’s own case for AY 2012-13 (Vodafone Idea Ltd. ACIT [IT Appeal No. 137 (Del) of 2021, dated 5-6-2024]); |
| (iii) |
|
Other cases of group companies |
36. The relevant extract from the Order dated 11 May 2026 passed in the assessee’s own case for the A.Y. 2011-12 is reproduced below:
“15.2 We have heard both sides and perused the materials on record. We have also carefully gone through the decisions relied upon by the Ld. AR. The issue came up for consideration in appellants own case for AY 2012-13 before the Tribunal in ITA No.884 & 2834/Mum/2016 dated 17.05.2024. The relevant part of the decision is reproduced below for ready reference:
“6.4. We have considered the rival submissions and perused the material on record. 6.5. We note that in the identical facts and circumstances, the Tribunal has, vide order dated 08/11/2023 passed in appeals for the Assessment Year 2009-10 [ITA No 1121/Mum/2014,], decided this issue in the favour of the Assessee and deleted the disallowance of roaming charges under Section 40(a)(ia) of the Act. The relevant extract of the aforesaid decision of the Tribunal reads as under:
10. The next issue urged in Ground no.8 relates to disallowance of roaming charges u/s 40(a)(ia) of the Act for non-deduction of tax at source. We notice that an identical disallowance made in AY 2006-07 and 2007-08 u/s 40(a)(ia) of the Act. The co-ordinate bench has deleted the disallowance with the following observations:-
“27. In ground No.9 of appeal, the assessee has assailed disallowance of roaming cost u/s. 40(a)(ia). The Id. Counsel for the assessee submits that during the year under consideration the assessee incurred expenses on roaming charges. Payments are made to other telecom operators to enable subscribers of the assessee to make or receive calls originating/terminating on other telephone networks. Roaming service is in the nature of automated services and no human intervention for switch over to the network of other telecom operators while in roaming is warranted. The Assessing Officer made disallowance u/s. 40(a)(ia) of the Act on the pretext that the provisions of section 194C and/or section 194] of the Act are attracted on payments made to other telecom operators. The Id. Counsel for the assessee submitted that the issue is squarely covered by the decision of Kolkata Bench of the Tribunal in the case of Vodafone East Ltd. v. Addl. CIT, 156 ITD 337. 18 M/s. Vodafone India Ltd.
28. The Id. Departmental Representative vehemently placed reliance on the assessment order and the observations of DRP on the issue and prays for dismissing ground No.9 of the appeal.
29. We have heard the submissions made by rival sides and have examined the orders of authorities below. One of the issue before Kolkata Bench of Tribunal in the case of Vodafone East Ltd. v. ACIT (supra) was with respect to deduction of tax at source in respect of roaming charges paid by the assessee to other telecom operators. The Co-ordinate Bench after analyzing the facts of the case and various decisions held that the payment of roaming charges does not fail under the ambit of TDS provision either u/s. 194C or 194] of the Act, hence, addition made u/s. 40(a)(ia) of the Act was deleted. We find that the facts and the reason for making disallowance u/s.40(a)(ia) of the Act in the impugned order are similar to the case of Vodafone East Ltd. (supra). No distinction has been pointed by the Revenue in the present case. Thus, for parity of reasons, disallowance u/s. 40(a) (ia) of the Act is directed to be deleted. The assessee succeeds on ground No. 9 of appeal.”
The above said decision has been followed in the assessee’s own case in AY 2008-09 also. Accordingly, following the decision rendered in the earlier years, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance.”
6.6. Respectfully following the above decision of the Tribunal in the case of the Assessee for the preceding Assessment Year 2009-10, which in-turn followed the decision of the Tribunal in the case of the Assessee for the Assessment Year 2006-07 and 2007-08, the disallowance of INR 30,95,03,786/- made under Section 40(a)(ia) of the Act in respect of roaming charges is deleted. Ground No. 3 raised by the Assessee is allowed.”
15.3 Since the facts are similar and nothing contrary, either on fact or law, has been brought on record by the revenue, following the above decision, the ground is allowed.”
37. We have perused the submissions advanced by both sides in light of the record placed before us. The issue is squarely covered in favour of the assessee by the orders of the Coordinate Benches in the assessee’s own cases for the preceding and subsequent assessment years, wherein it has been held that roaming services are standard automated services involving no human intervention and the payments do not attract tax deduction at source u/s. 194C or u/s. 194J. No distinguishing feature has been brought to our notice by the Revenue. Respectfully following the aforesaid decisions, we direct the Ld. AO to delete the disallowance made u/s. 40(a)(ia).
Accordingly, Ground No. 5 is allowed.
38. The issue raised in Ground No. 6 pertains to disallowance discount extended to pre-paid distributors under section 40(a)(ia) of the Act.
39. The Ld. AO held that the assessee is liable to deduct tax u/s. 194H on the discount extended to the pre-paid distributors on recharge coupons. While doing so, the AO has relied on the decisions of the Delhi High Court in the case of
CIT v.
Idea Cellular Ltd. [2010] 189 325 ITR 148 (Delhi) and Kerala High Court in the case of
Vodafone Essar Cellular Ltd. v.
Asstt. CIT [2011] 332 ITR 255 (Kerala). The DRP relying on its own directions for the earlier years upheld this disallowance.
40. The ld AR submitted that this issue is no longer res integra as this issue has been decided by the Apex Court in favour of the taxpayer in the case of Bharti Cellular Ltd. v. Asstt. CIT 462 ITR 247 (SC) wherein it has been held that the assessee is not required to deduct tax at source on the discount extended to prepaid distributors. It was also submitted that this issue has been decided in favour of the assessee in its own case and relied on the following decisions:
| • |
|
Order dated 30 June 2026 for the A.Y. 2015-16 (ITA No.8971/Del/2019); |
| • |
|
Order dated 11 May 2026 for the A.Y. 2011-12 (ITA No.9160/Del/2019); |
| • |
|
Order dated 24 October 2025 for the A.Y. 2012-13 (Vodafone Idea Ltd. v. ACIT [2026] 137 ITR(T) 598 (Delhi – Trib.)/ITA No. 8361/Del/2019); and |
| • |
|
Order dated 18 March 2026 for the A.Y. 2013-14 (Vodafone Idea Ltd. v. Asstt. CIT, Circel-26(2) (Delhi – Trib.)/ITA No. 8362/Del/2019) |
41. The relevant extract from the Order dated 30 June 2026 passed in the assessee’s own case for the A.Y. 2015-16 is reproduced below:
11.3. We have considered the rival submissions and perused the material available on record. We find that the controversy involved in the present ground stands concluded in favour of the assessee by the judgment of the Hon’ble Supreme Court in Bharti Cellular Ltd. v. ACIT [
462 ITR 247 (SC)], wherein it has been categorically held that the discount extended to pre-paid distributors does not constitute commission within the meaning of section 194H of the Act and, consequently, no disallowance under section 40(
a)(ia) is warranted for non-deduction of tax at source. We further note that the Coordinate Benches, while deciding the assessee’s own cases for A.Ys. 2012-13 and 2013-14 in ITA Nos. 8361/Del/2019 and 8362/Del/2019, as well as in the subsequent orders dated 05.06.2024 in ITA No. 37/Del/2023, dated 14.10.2025 in the case of the erstwhile Vodafone Digilink Ltd., dated 18.02.2025 in the case of the erstwhile Vodafone India Ltd., consolidated order dated 17.05.2024 in the case of the erstwhile Vodafone India Ltd. and order dated 22.10.2024 in the case of the erstwhile Vodafone India Ltd., have consistently followed the aforesaid judgment of the Hon’ble Supreme Court and deleted identical disallowances.
11.4. The Revenue has not brought on record any distinguishing feature in the facts of the year under consideration nor has it pointed out any subsequent change in law warranting a departure from the settled position. Judicial discipline, therefore, requires us to follow the binding precedent of the Hon’ble Supreme Court as consistently applied by the Coordinate Benches in the assessee’s own cases.
11.5. Respectfully following the judgment of the Hon’ble Supreme Court in Bharti Cellular Ltd. v. ACIT 462 ITR 247 (SC)] and the decisions of the Coordinate Benches in the assessee’s own cases referred to hereinabove, we direct the Ld. AO to delete the disallowance made under section 40(a)(ia) of the Act. Accordingly, Ground No. 9 along with all its subgrounds is allowed.”
42. We have perused the submissions advanced by both sides in light of the record placed before us. The controversy stands concluded by the judgment of the Hon’ble Supreme Court in Bharti Cellular Ltd. (supra), holding that the discount extended to prepaid distributors does not constitute commission within the meaning of section 194H. The same view has consistently been followed in the assessee’s own cases. The Revenue has not pointed out any distinguishing fact or change in law. We, therefore, direct the Ld. AO to delete the disallowance made u/s. 40(a)(ia).
Ground No. 6 is allowed.
43. The issue arising in Ground No. 7, raised in this appeal, pertains to the disallowance made under section 14A of the Act.
44. The brief facts of the case pertaining to this issue, as emanating from the record are: During the assessment proceedings, it was noted that the assessee has an investment in shares of a group company, which stands at Rs. 2782 million, however the assessee has not disallowed any expenditure incurred for earning exempt income under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (“the Rules”). The assessee submitted that no disallowance is called for under section 14A of the Act, read with rule 8D of the Rules, as the assessee has not earned any exempt income and the investment is from its own funds.
45. The AO, vide Draft Assessment Order, proposed disallowance of Rs. 1,39,10,000/-under section 14A read with Rule 8D(2) (iii) of the Rules. The Ld. DRP, vide its Directions, rejected the objections filed by the assessee on this issue. In conformity, the AO passed the impugned Final Assessment Order making a disallowance under section 14A of the Act.
46. The ld. AR submitted that during the year under consideration, the Appellant had not received any dividend income from its investments and therefore no exemption under section 10(34) of the Act was claimed while filing the return of income. It was thus contended that in the absence of any exempt income, no disallowance under section 14A of the Act read with Rule 8D of the Rules could be made.
47. The ld. AR submitted the Co-ordinate Bench of the Tribunal in the assessee’s group company’s case for the A.Ys. 2011-12 has directed the AO to delete the disallowance made under section 14A.
48. The relevant extract from the Order dated 02 April 2026 passed in the assessee’s group company’s case namely, Vodafone West Ltd. (ITA No. 443/AHD/2016) for the A.Y. 2011-12 is reproduced below:
” 36. We find that an identical issue has been considered by the Co-ordinate Bench in the assessee’s own case for Assessment Year 2009-10 in ITA Nos. 909 & 944/Ahd/2014 vide order dated 17.11.2016, as well as in Assessment Year 2010-11 in ITA Nos. 671 & 1634/Ahd/2015 vide order dated 11.12.2025. In those decisions, the Co-ordinate Bench, following the judgment of the Hon’ble Gujarat High Court in CIT v. Corrtech Energy Pvt. Ltd. (Guj.), held that no disallowance under section 14A can be made in a year in which the assessee has not earned any exempt income.
37. Since the facts of the present year are identical and no distinguishing feature has been brought on record by the Revenue, respectfully following the decisions of the Co-ordinate Bench in the assessee’s own case as well as the binding judgment of the Hon’ble jurisdictional High Court, we hold that the disallowance made under section 14A read with Rule 8D of the Rules is not sustainable.
38. Accordingly, the disallowance of Rs. 92,75,000/- is directed to be deleted and Ground No. 3 raised by the assessee is allowed”
49. The Ld. AR also submitted that the issue is also decided in favour of the assessee in the following cases:
| • |
|
Order dated 11 December 2025 in case of erstwhile Vodafone West Ltd. for the AY 2010-11 (ITA No. 671/Ahd/2015) |
| • |
|
Vodafone West Ltd. (supra) |
| • |
|
Consolidated Order dated 17 May 2024 in the case of erstwhile ‘Vodafone India Limited’ in ITA No. 884/Mum/2016 and 2834/Mum/2017 for AY 2011-12 and 2012-13] |
| • |
|
Order dated 08 November 2023 in the case of Vodafone India Ltd. v. DCIT [IT Appeal No. 1121 (Mum) of 2014, dated 8-11-2023]. |
| • |
|
CIT, Central 1, Chennai v. Chettinad Logistics (P.) Ltd. (Madras) [SLP dismissed – CIT, (Central) 1 v. Chettinad Logistics (P.) Ltd. (SC)] |
| • |
|
Pr. CIT v. GVK Project & Technical Services Ltd. (Delhi) [SLP dismissed – Pr. CIT v. GVK Project and Technical Services Ltd. [2019] (SC)] |
| • |
|
Pr. CIT v. Oil Industries Development Board. (Delhi) [SLP dismissed – Pr. CIT v. Oil Industry Development Board [2019] 103 (SC)] |
50. We have perused the submissions advanced by both sides in light of the record placed before us. It is undisputed that the assessee did not earn any exempt income during the year under consideration. In the absence of exempt income, no disallowance u/s. 14A read with Rule 8D can be made. This position is also supported by the decisions relied upon by the assessee and has consistently been followed in the group cases referred to hereinabove. We, therefore, direct the Ld. AO to delete the disallowance of Rs. 1,39,10,000/-. Accordingly, Ground No. 7 is allowed.
51. The issue arising in Ground No. 8 pertains to disallowance of penalty paid to Department of Telecommunication (‘DoT’).
52. The brief facts of the case pertaining to this issue, as emanating from the record are: During the year under consideration, a penalty of Rs. 28,72,000/- was levied on the assessee by the DoT for non- compliance of various guidelines prescribed by DoT.The AO has disallowed penalty imposed by DoT by relying on Explanation 1 to section 37 of the Act and by holding that the penalty imposed by DoT is an infringement of law and hence cannot be allowed as a deduction. The DRP relying on its decision for the earlier years upheld the said disallowance.
53. The Ld. AR submitted that the penalty/ fines levied by DoT are contractual in nature and are flowing through the license agreement and thus, the Explanation 1 to section 37 does not apply and that this issue has been decided by the Tribunal in its own case and relied on the following decisions:
| • |
|
Order dated 30 June 2026 for the A.Y. 2015-16 (ITA No. 8971/Del/2019); |
| • |
|
Order dated 11 May 2026 for the A.Y. 2011-12 (ITA No. 9160/Del/2019); |
| • |
|
Order dated 24 October 2025 for the A.Y. 2012-13 (Vodafone Idea Ltd. (supra)); and |
| • |
|
Order dated 18 March 2026 for the A.Y. 2013-14 (Vodafone Idea Ltd. (supra)); |
It was also submitted by the ld. AR that similar issue has been decided by the Tribunal in the assessee group company’s case :
| • |
|
Order dated 14 October 2025 passed in the case of erstwhile Vodafone Digilink Ltd. for AY 2010-11; |
| • |
|
Vodafone East Ltd. v. Addl. CIT [2016] 156 ITD 337 (Kolkata – Trib.); |
| •Erstwhile |
|
Vodafone Digilink Ltd. (supra) |
| • |
|
Dy. CIT v. Vodafone India Ltd. [IT Appeal No. 1919 (Mum.) of 2016, dated 17-5-2024]. |
54. The relevant extract from the Order dated 30 June 2026 passed in the assessee’s own case for the A.Y. 2015-16 is reproduced below:
“… Ground No. 6 along with its sub-grounds relates to the disallowance of penalty paid by the assessee to the Department of Telecommunication (DoT).
8.1. The Ld. AR submitted that the authorities below erred in treating the amount paid by the assessee to the Department of Telecommunication as penal in nature and consequently disallowing the same. It was contended that the payment was compensatory and incidental to the carrying on of the assessee’s telecom business and did not represent any expenditure incurred for an offence or for any act prohibited by law. The Ld. AR submitted that the issue is no longer res integra and stands concluded in favour of the assessee by the decisions of the Coordinate Benches in the assessee’s own cases.
8.2. Reliance was placed on the orders of the Tribunal in the assessee’s own case for A.Y. 2012-13 in ITA No. 8361/Del/2019 and for A.Y. 2013-14
in Vodafone Idea Ltd. v.
Asstt. CIT (Delhi –
Trib.)/ITA No. 8362/Del/2019, wherein the disallowance of similar payments made to the Department of Telecommunication was deleted. The Ld. AR further relied upon the order dated 14.10.2025 passed in the case of the erstwhile Vodafone Digilink Ltd. for A.Y. 2010-11, the decision of the Kolkata Bench in
Vodafone East Ltd. v.
Addl. CIT [2016] 156 ITD 337 (Kolkata –
Trib.), the decision of the Delhi Bench in Dy. CIT v. Vodafone Essar Digilink Ltd.
170 ITD 430 (Delhi –
Trib.) and the consolidated order dated 17.05.2024
inDy. CIT v.
Vodafone India Ltd. [IT Appeal No. 1919 (Mum.) of 2016, dated 17.05.2024], wherein identical disallowances were deleted.
8.3. Per contra, the Ld. DR relied upon the orders of the lower authorities and submitted that the payment represented penalty for violation of the terms of the licence granted by the Department of Telecommunication and was, therefore, hit by the provisions of Explanation 1 to section 37(1) of the Act.
8.4. We have considered the rival submissions and perused the material available on record. We find that the issue involved in the present ground stands squarely covered in favour of the assessee by a consistent line of decisions rendered by the Coordinate Benches in the assessee’s own cases as well as in the cases of the erstwhile group entities. The Coordinate Bench in the assessee’s own case for A.Y. 2012-13 in ITA No. 8361/Del/2019 and for A.Y. 2013-14 in ITA No. 8362/Del/2019, after examining the nature of the payments made to the Department of Telecommunication, held that such payments were compensatory in character and allowable as business expenditure under section 37(1) of the Act. The said view has also been consistently followed in the order dated 14.10.2025 passed in the case of the erstwhile Vodafone Digilink Ltd. for A.Y. 2010-11, as well as in Vodafone East Ltd. (supra),Vodafone Digilink Ltd. (supra) and the consolidated order dated 17.05.2024 passedinVodafone India Ltd. (supra).
8.5. The Revenue has not placed before us any material to demonstrate that the facts for the year under consideration are distinguishable from those considered in the aforesaid decisions or that the legal position has undergone any change. Judicial propriety, therefore, requires us to follow the consistent view adopted by the Coordinate Benches.
8.6. Respectfully following the decisions of the Coordinate Benches in the assessee’s own case for A.Ys. 2012-13 and 2013-14 in ITA Nos. 8361/Del/2019 and 8362/Del/2019, as consistently followed in the subsequent decisions referred to hereinabove, we direct the Ld. AO to delete the disallowance made in respect of the penalty paid to the Department of Telecommunication. Accordingly, Ground No. 6 along with all its sub-grounds is allowed.”
55. We have perused the submissions advanced by both sides in light of the record placed before us. The Coordinate Benches, after examining identical payments made to the DoT, have consistently held that the charges arise from the contractual terms of the telecom licence and are compensatory in character, rather than expenditure incurred for an offence or an act prohibited by law. The Revenue has not brought any distinguishing material on record. Respectfully following the consistent view taken in the assessee’s own cases, we direct the Ld. AO to delete the impugned disallowance. Accordingly, Ground No. 8 is allowed.
56. The issue arising in Ground No. 9, raised in this appeal, pertains to the disallowance made on account of network site rentals paid by the assessee for passive infrastructure asset.
57. The brief facts of the case pertaining to this issue, as emanating from the record are: During the year under consideration the AO disallowed the amount of Rs.1,12,01,00,000/-, pertaining to rental site networks by holding the same to be excessive and not incurred “wholly an exclusively for the purpose of its business.” The DRP directed the AO to delete the addition and allow the expenses, if the same has crystalized in the subject year. In the final order the AO sustained the disallowance by alleging that the Appellant has failed to substantiate crystallisation of the expenses in the captioned year
58. The Ld. AR submitted that with respect to the crystallisation of the expenses, the assessee inter-alia furnished details w.r.t. network site charges such as (page Nos. 369 to 373 of the paperbook – Volume 1):
| • |
|
certificate issued by Indus confirming that it has billed service charges to the Appellant for the captioned year towards rendition of passive infrastructure services; |
| • |
|
Indicative list of sites in Delhi circle-enclosed in CD due to large file size. |
| • |
|
Master Service Agreement entered into between Indus and the Appellant (alongwith supplementary agreements) documenting the arrangement between Indus and the Appellant for rendition of the passive infrastructure services |
Thus, it was submitted that the assessee had also furnished evidence substantiating the crystallisation of the expenses during the captioned year and hence the same ought to be allowed as a deduction while computing the total income of the captioned year.
59. The ld. AR submitted the Co-ordinate Bench of the Tribunal in the assessee’s own case for the A.Ys. 2011-12 has directed the AO to verify if the expense have been crystalized, then to grant the deduction to the extent claimed.
60. The relevant extract from the Order dated 11 May 2026 passed in the assessee’s own case for the A.Y. 2011-12 is reproduced below:
“18.2 We have heard both sides and perused the materials on record. We havealso carefully gone through the decisions relied upon by the Ld. AR. The issuecame up for consideration in appellant’s group case i.e. Vodafone Digilink Ltd. for AY 2010-11 before the Tribunal in ITA No.1073/DEL/2015 and ITA No.1158/DEL/2015 (supra). The relevant part of the decision is reproduced below for ready reference and clarity:
“17.1. Ground No. 7 raised by the Revenue pertains to disallowance of Network Site Rentals. We have heard both the sides on this issue and have perused the material on record.
………..
17.4. In this regard, we note that the Assessee had made following submission in this regard before the Assessing Officer vide 23/01/2015. “Crystallisation of Site Network Charges:
| • |
|
At the outset, we wish to submit that out of the total network site expenses of Rs 396.25 crores debited to the profit and loss account of VDL during the subject AY, a significant portion pertains to charges paid to Indus, which should have in fact been disallowed by your office instead of disallowing the entire expense as appearing in the books. |
| • |
|
Without prejudice to the above, as regards the issue of crystallization/ accrual of network site charges amounting of Rs 396.25 crores, we wish to submit that the very fact that the same are appearing under schedule 13 of the audited Financial Statements of the subject AY, and as there is no qualification in the Tax Audit Report under clause 17(k)’ amount debited in profit and loss account which is of contingent in nature, establishes that the aforesaid expense have indeed crystallised/accrued during the subject AY. Copy of the audited Financial Statements and the tax audit report for the subject AY has already been filed before your office on 19 December 2013 and 28th January 2014. However, for your ready reference the same is again attached as Annexure 2 and 3 respectively. |
| • |
|
Therefore, the aforesaid information is sufficient for your office to determine that such expenses indeed crystallized/ accrued in the subject AY. However, without prejudice to our contention that exercise undertaken and information sought by your office is patently illegal, in the interest of justice and to eliminate any doubt which your office may have on the question of crystallization of such charges, we wish to submit the following information/documents with your office |
| • |
|
Certificate issued by Indus confirming that Indus billed service charges amounting to Rs 418.71 crores to VDL during the subject AY towards rendition of Passive Infrastructure services to VDL. Certificate enclosed as Annexure 6. |
| • |
|
Indicative list of sites in the Rajasthan, UP (East) and Hariyana circlesenclosedin CD due to large file size. |
| • |
|
Master Services Agreement dated March 7, 2008 between Indus and VDI (together with supplementary agreements) documenting the arrangement between Indus and VDL for rendition of the Passive Infrastructure services-enclosed in CD due to large file size. |
In view of the above discussion and the abovementioned direction of the Hon’ble DRP, we request your office to provide relief of Rs 396.25 crores incurred on site network charges paid by VDL during the subject AY and thereby delete the disallowance made under section 40A(2)(b) of the Act by your office in the draft assessment order passed for the subject AY.”
17.5. The Assessing Officer is directed to consider afresh the above submissions made by the Assessee and examine the documents relied upon by the Assessee for the purpose of implementing directions of the DRP to verify if the expenses have been crystalized during the year and grant deduction for the expenses so verified. Since we have directed the Assessing Officer to implement the directions given by the DRP, the Assessee is granted liberty to place before the Assessing Officer such supporting documents/details as the Assessee may deem fit to establish crystallization of expenses during the relevant previous year. In terms of aforesaid, Ground No.7 raised by the Assessee is allowed for statistical purposes.”
18.3 Since the facts are similar, following the above decision, the matter is set aside to the file of AO for fresh consideration in the light of the documents and evidences as to whether the expenses have crystalized during the year. If the expenses have crystalized, the AO shall grant the deduction to such extent as claimed by the assessee. This ground is allowed for statistical purpose.”
61. We have perused the submissions advanced by both sides in light of the record placed before us. The DRP had directed allowance of the networksite rental expenditure upon verification of its crystallisation, whereas the Ld. AO sustained the disallowance for want of substantiation. The assessee has placed on record the certificate issued by Indus, the indicative site list and the governing Master Service Agreement. Consistent with the order in the assessee’s own case for A.Y. 2011-12, we restore the matter to the file of the Ld. AO for fresh verification of the aforesaid material. To the extent the expenditure is found to have crystallised during the relevant previous year, the same shall be allowed. The assessee shall be afforded reasonable opportunity to furnish supporting material.
Ground No. 9 is allowed for statistical purposes.
62. The issue arising in Ground No. 10, raised in this appeal, pertains to the disallowance made on account of alleged interest free loan to sister concern.
63. The Ld. AR submitted that the assessee did not grant any interest-free to any of its sister concerns. It was also submitted that the company has charged interest at 13.25% (from 15 June 2009 to 31 January 2010) and 11.75% (from 01 February 2010 to 31 March 2010) on the loan extended to Vodafone Spacetel Limited (‘VSPL’) and interest income of Rs. 59.78 crores had been earned from VSPL, on the loan issued on 15 June 2009.
64. However, during the course of assessment the AO proposed to disallow notional interest of Rs. 59.78 crores by applying interest rate of 7.7% on account of alleged interest free loans extended to VSPL during the year under consideration on the basis of a similar disallowance made in the appellant’s own case for AY 2009-10. Further, the DRP directed the Ld. AO to delete the proposed addition of Rs. 59.78 crore after verification. However, in the final order the Ld. AO sustained the disallowance by alleging that the Appellant has failed to substantiate proper documents.
65. The Ld. AR submitted that the action of the DRP in directing the Assessing Officer to verify is in contravention of the provisions of section 144C(8) of the Act. The Ld. AR placed reliance on the decision of the Mumbai Bench of the Tribunal in the case of Celio Future Fashion (P.) Ltd. v. Addl. CIT (Mumbai – Trib.) wherein it has been held that the Directions issued by DRP to the Assessing Officer in respect of verification on various aspects are contrary to the provisions of section 144C(8) of the Act.
66. The Ld. AR, without prejudice to the above, also submitted that it has been clearly provided that interest income of Rs. 59.78 crores has been earned from VSPL which is also evident from Note 8 of Schedule 20 of the Financial Statements pertaining to related party transactions and no interest free loans were provided by the assessee to any of its group entities. Pursuant to the DRP Directions, the assessee in response to the notice issued by the AO, submitted details w.r.t. interest income earned from VSPL vide letter dated 23 January 2015 (page Nos. 369 to 372 of the paperbook -Volume 1). Accordingly, it was argued that the said disallowance ought to be deleted while computing the total income of the captioned year. Reliance was also placed on the decision of the Hon’ble Bench in the assessee’s own case for AY 1990-2000 (ITA No. 1752/Mds/2004) wherein it has been held that where there are mixed funds and funds available with the assessee are much more than the advances made no disallowance can be made on account of notional interest computed by Assessing Officer. It was also held that the amount has been advanced to its sister concern/ subsidiary, which are doing business and it has been clearly stated that the same has been advanced for commercial expediency, therefore, in view of the decision of the Apex Court in the case of S.A. Builders Ltd. v. CIT (Appeals) 288 ITR 1 (SC), no disallowance is to be made.
67. We have perused the submissions advanced by both sides in light of the record placed before us. The assessee’s specific case is that the loan advanced to VSPL was not interest-free and that interest of Rs. 59.78 crores was charged and offered to tax, as reflected in Note 8 of Schedule 20 to the financial statements and in the details furnished on 23/01/2015. If so, a disallowance of the very same amount on the premise of an interest-free advance cannot survive. Further, the Ld. AO was bound to give effect to the directions of the DRP u/s. 144C(10). We, therefore, restore this limited factual verification to the Ld. AO. Upon verification that interest was charged at the stated rates and offered to tax, the impugned disallowance shall be deleted. The assessee shall be afforded reasonable opportunity of being heard. Ground No. 10 is allowed for statistical purposes.
68. The issue arising in Ground No. 11 pertains to the transfer pricing adjustment amounting to Rs. 80,64,73,603/-.
69. In respect the adjustment of Rs. 15,04,78,864/- pertaining to international transaction of payment of royalty (ground Nos. 11.2 to 11.4), the brief facts of the case pertaining to this issue, as emanating from the records, are: The assessee, pursuant to an agreement entered into with ‘Vodafone Ireland Marketing Ltd.’ (‘VIML’) and ‘Rising Groups Limited’ (‘RGL’) for the use of the brand name and trademarks/ trade name “Vodafone” and “Essar” respectively, agreed to pay a royalty @0.50% of net revenue and 0.25% of net service revenues respectively. Accordingly, during the year under consideration, the assessee paid brand royalty fees amounting to Rs. 15,04,78,864/-. As this royalty was paid to an associated enterprise, the assessee benchmarked the international transaction of payment of brand royalty by considering the Comparable Uncontrolled Price (“CUP”) method as the most appropriate method. Since the royalty paid by the assessee was lower than the royalty payment being made under a comparable third-party agreement with arithmetic mean of 1.25% of the net service revenue, for the usage of trademarks or trade names, corporate endorsement or brand or logo, the assessee claimed the same to be at arms’ length.
70. Pursuant to the reference by the AO under section 92CA(1) of the Act, the Transfer Pricing Officer (“TPO”), vide order dated 27.01.2014, passed under section 92CA(3) of the Act, rejected the comparable instances selected by the assessee by adopting CUP as the most appropriate method. The TPO alleged that none of the comparable selected by the assessee are comparable in true sense and the search conducted by the assessee has not yielded correct results and concluded the ALP of payment of royalty to be Nil.
71. The DRP relying on its directions for the earlier year sustained the transfer pricing adjustment made by the TPO. Inconformity, the Ld. AO, interalia, passed the impugned Final Assessment Order on this issue.
72. The Ld AR submitted that issue is covered in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal in the assessee’s group company’s case viz. erstwhile Vodafone Digilink Ltd. for the AY 2009-10.The Coordinate Bench of the Tribunal, while considering the transfer pricing adjustment in respect of similar royalty payment made by the assessee for the AY 2009-10, observed as follows:
“……………Alternatively, the mean arm’s length royalty rate of 5.20%, derived from external CUP agreements through a fresh search, is also treated as an appropriate ALP.
Respectfully reliance is placed on the judgment in EKL Appliances Ltd. (supra), which establishes that Rule 10B(1)(a) of the Rules does not permit the disallowance of any expenditure on the grounds of necessity or prudence. Additionally, we respectfully rely on the Third Member decision in Technimont ICB Pvt. Ltd. (supra), wherein it was held that the ALP of an international transaction must be determined exclusively by comparing it with comparable uncontrolled transactions and not with a controlled transaction. The determination of ALP at ‘Nil’ without applying any of the prescribed methods is unjustified. Accordingly, the adjustments aggregating to Rs.11,47,16,908/-made by the Ld. AO are deleted.
In light of the above, the order of the DRP is set aside, and the assessee’s ground of appeal is allowed…………..'”
73. Similar view has been taken by the Hon’ble Tribunal in the assessee’s own case for the A.Ys. 2011-12, 2012-13, 2013-14 and 2015-16 wherein the transfer pricing adjustment on payment of brand royalty have been deleted.
74. Also, this issue has also been decided in favour of the assessee by the following decisions of the Tribunal passed in the assessee’s group company’s cases:
| • |
|
DCIT v/s. Vodafone West Ltd. (ITA No. 443/Ahd/2016) (A.Y. 2011-12) |
| • |
|
DCIT v/s. Vodafone West Ltd. (ITA No. 1634/Ahd/2015) (A.Y. 2010-11) |
| •Vodafone |
|
West Ltd. (supra) |
| • |
|
Vodafone Digilink Ltd. v/s. DCIT (ITA No. 1073/Del/2015) (A.Y. 201011) |
75. We have perused the submissions advanced by both sides in light of the record placed before us. The TPO determined the arm’s-length price of the brand royalty at nil without applying any of the prescribed methods and principally questioned the commercial necessity of the payment. Such an approach is contrary to the settled transfer-pricing principles and the consistent orders of the Coordinate Benches in the assessee’s own and group cases on an identical arrangement. No distinguishing fact has been brought on record by the Revenue. Respectfully following the aforesaid decisions, we direct the Ld. AO/TPO to delete the adjustment of Rs. 15,04,78,864/-. Ground Nos. 11.2 to 11.4 are allowed.
76. In respect of adjustment of Rs. 65,59,94,739/- pertaining to international transaction of reimbursement of AMP expenses (Ground Nos. 11.5 to 11.10), the brief facts of the case pertaining to this issue, as emanating from the records, are: The assessee incurred certain distribution and advertisement/sales promotion during the year as part of its roles and responsibilities as a service provider.
77. The TPO has determined that said expenses are in the nature of advertisement, marketing and promotion (‘AMP’) expenditure which is incurred on behalf of the AEs and thus considered it as a separate reimbursement transaction. The TPO also applied the ‘bright line limit’ while holding that the AMP expenses incurred by the assessee are excessive.
78. The Ld. DRP, following directions of the previous year, rejected the objections raised by the assessee on this issue. In conformity, the Ld.AO, interalia, passed the impugned Final Assessment Order on this issue.
79. The Ld AR submitted that issue is covered in favour of the assessee by the following decisions:
| • |
|
Delhi High Court in the case of CIT v. Whirlpool of India Ltd. 381 ITR 154 (Delhi). |
| • |
|
Delhi High Court in the case of Maruti Suzuki India Ltd. v. CIT 381 ITR 117 (Delhi) |
80. It was also submitted by the ld AR that this issue is covered in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal in its own case for AY 2011-12 vide Order dated 11 May 2026 (ITA No. 9160/Del/2019) and deleted the transfer pricing adjustment. The relevant extract of the said decision is reproduced below:
“..We have heard both sides and perused the materials on record. We have also carefully gone through the decisions of the Tribunal relied upon by the Ld. AR. We find that the co-ordinate Bench of the Tribunal in case of Vodafone Digilink Ltd. v. DCIT (ITA No. 1073/Del/2015) for AY 2010-11 has decided the issue in favour of the appellant by discussing as under:
“19/15. Ground No.9 read with Ground No.9.5 to 9.10 raised by the Assessee pertain to the transfer pricing adjustment made in respect of Advertisement, Market and Promotion (AMP) Expenses incurred by Assessee. As was the case with the transfer pricing adjustment made in case of the brand royalty payments, the transfer pricing adjustments in relation to AMP Expenses was deleted by the Tribunal in the case of the Assessee for the Assessment Year 2009-2010 holding as under:
“11. Ground of appeal No. 10 (Transfer Pricing adjustment relating to AMP expenditure):
11.1. During the alleged previous year, the assessee had incurred the following expenses aggregating Rs. 282.24 crores under the expense heads of ‘distribution expenses’ and ‘advertisement/sales promotion expense. These expenses were incurred in relation to the provision of the telecommunication services:
11.2. The TPO in terms of the Order dated 20/01/2013 alleged that the aforesaid expenses of Rs. 282.24 crores result in creating a marketing tangible for the ‘Vodafone’ and ‘Essar’ trademark/trade name and, thus, the assessee ought to have been reimbursed by its foreign AEs for such expenses. While doing so, the TPO also held that distribution expenses like commission paid to distributors, payments for subscriber verification, payment collection, etc. are also in the nature of brand promotion. The TPO also alleged that the assessee has incurred excessive AMP expenditure which has benefitted the brand owned by the AEs of the assessee and hence the assessee should be reimbursed by its foreign AEs. The TPO applied the ‘bright line limit’ while holding that the AMP expenses incurred by the assessee are excessive. The TPO also applied a mark-up of 15.46% on the assessee’s alleged excessive AMP expenses.
11.3. The DRP vide its directions dated 18/12/2013, relying on the decision of the Special Bench of the Tribunal in the case of LG Electronics India Pvt. Ltd. v. ACIT (2013) 140 ITD 41 (Delhi) (SB), upheld the applicability of the bight line test while computing the ALP of the AMP expenditure. It further upheld the TPO’s stand of adding a markup of 15.46% on the ALP of the AMP expenditure. Pursuant to the DRP Directions, the Ld. AO in terms of the Final Assessment Order dated 30/01/2014 inter-alia made an addition of Rs. 2,84,68,27,994/- to the income of the assessee being the transfer pricing adjustment made by the TPO on the transaction of AMP expenditure.
11.4. Mr. Pardiwalla submits that the revenue has not discharged the onus cast on it by bringing any material on record to prove that there is an understanding / arrangement or an action in concert between the assessee and the AEs for promotion of trademark/trade name owned by the AEs. The AMP expenses have been incurred as a function as part of the assessee’s roles and responsibilities as a service provider and not under a separate arrangement/ agreement with the AEs to promote brands owned by such AEs. The assessee has the license to provide telecommunication services in India and the AEs cannot provide such services in India since it does not have such license and, hence, the AMP expenses have been incurred as a function by the assessee. 11.5. The assessee further submits that no cost/ income can be attributed only to ‘brand promotion’. The entire advertisement expenditure incurred by the assessee was intended to reach out to the subscriber base in order to inform them about the different services rendered by it. The advertisement agencies do not charge different rates for advertisements for unbranded services vis-a-vis advertisements for branded services. Thus, it is evident that there is no expenditure incurred towards trademark/trade name. It is further submitted that basis the functions performed, and risks assumed, it has been characterized as a full-fledged telecom service provider engaged in the provision of telecommunication services. However, while determining the appropriateness of AMP expenses, the TPO has characterised the assessee as a distributor without providing any reasons for the same, thereby, leading to an inaccurate transfer pricing analysis. It is submitted that it a long-settled jurisprudence that the business model chosen by the assessee has to be respected and it is not open to the revenue to dictate any other model to the assessee. The application of bright line method does not take into consideration the impact of various factors on deciding the appropriateness of the level of AMP expenses incurred by an assessee. The TPO has not established functional similarities between the assessee and the comparable chosen by him for application of bright line method and, thus, bright line method cannot be applied.
11.6. In this connection, the Ld. AR submits that this issue is covered in its favour by the decision of the coordinate Bench ITAT-Mumbai in the case of ‘Vodafone India Ltd. bearing ITA No. 884/Mum/2016 dated 17/05/2024 wherein the Hon’ble Bench relying on the judgement of the Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd. v/s. CIT 381 ITR 117 (Delhi) deleted the transfer pricing adjustment made by the TPO in respect of AMP expenditure.
The facts of the aforesaid case before the Bench are detailed in para Nos. 12.4 to 12.5 on page Nos. 40 to 42 of its Order, the said findings are extracted hereunder for ready reference:
.12.4. We have considered the rival submission and perused the material on record including the chart of issues filed by the Assessee.
12.5. We note that in the present case the TPO has arrived at a conclusion that there existed international transaction solely on the basis of the fact that the Assessee has incurred high AMP Expenditure at the rate of 6.2% of sales. While AMP Expenses may constitute an International transaction, the existence of an arrangement and consequently, an international transaction cannot be presumed on the basis of bright line test only. In the case of Maruti Suzuki India Limited v. Commissioner of Income Tax: [2016] 381 ITR 117 (Delhi) it has been held by the Hon’ble Delhi High Court that the existence of AMP Expenditure, being an international transaction, will have to be established de hors the bright line test. In absence of any written agreement, whether any arrangement existed or the Assessee along with its AE acted in concert would depend upon the facts and circumstances of each case. Where an assessee denies existence of international transaction in case of AMP Expenditure, as is the case in the present appeal, the onus would be on the Assessing Officer to bring out facts, circumstances, policy or conduct to support existence of an international transaction. In the present case, there is nothing on record to show or infer the existence of international transaction. We also note that in the subsequent assessment years (ie. Assessment Year 2012-13, 2013-14 & 2014-15) no adverse inference was drawn and no transfer pricing adjustment has been made in relation to advertisement, marketing and promotion expenses incurred during the relevant previous years. In the aforesaid facts and circumstances the transfer pricing addition made by the Assessing Officer in respect AMP Expenditure of INR 22,01,14,350/- cannot be sustained and is, therefore, deleted. Ground No. 7.3 raised by the Assessee is allowed and Ground No. 7.4 to 7.8 are dismissed as being infructuous.'”
11.7. Attention is also invited to the judgement of the Hon’ble Delhi High Court in the case of CIT v/s. Whirlpool of India Ltd. [2015] 64 381 ITR 154 (Delhi) wherein too the Hon’ble High Court held that the TPO cannot proceed to determine the ALP of AMP expenditure by inferring the existence of an international transaction based on bright line test if he has not been able to demonstrate with tangible material if there is an international transaction involving AMP expenditure between the assessee and its AE. It is further submitted that the SLP filed by the Revenue challenging the aforesaid decision of the Hon’ble High Court stands dismissed by the Supreme Court vide in recent order dated 20/11/2024 reported in (2024 (SC).
11.8. The Ld. Dr argued and stated that with respect to the adjustment relating to AMP argued that the incurrence of the said expenses by the assessee has resulted in an indirect benefit to the AE and hence the assessee ought to be compensated for the same.
“4. TP adjustment of AMP transaction –
The Ld. Counsel has submitted that the TPO has not brought any material on record to prove that there is an understanding/arrangement or an action in concert between the appellant and the AEs for promotion of trademark/tradename owned by the AEs and therefore any existence of any international transaction of AMP is not established.
The Ld. Counsel further submits that adoption of bright line test for holding the excessive AMP expenses compared to the third party comparables is erroneous as the TPO has not established functional similarities between the appellant and the comparables chosen by him for the application of bright line method.
Further, the Ld. Counsel submits that the AMP issue is already covered in its favor by the decision of the Hon’ble Mumbai ITAT in the case of Vodafone India Ltd. in ITA No.884/Mum/2016 dated 17.05.2024.
In this regard, I rely on the order of the Transfer Pricing Officer and of the Ld. DRP wherein the TPO has discussed elaborately the details of the AMP transaction and the reasons for holding it as an international transaction and benchmarking it by adopting the most appropriate method.”
11.9. This issue too, as was argued during the course of the hearing, has been addressed by the Hon’ble Delhi High Court in the case of Maruti Suzuki India Limited (supra) relevant portion of the same is extracted hereunder for ready reference:
“73. The argument of the Revenue, however, is that while such AMP expense may be wholly and exclusively for the benefit of the Indian entity, it also enures to building the brand of the foreign AE for which the foreign AE is obliged to compensate the Indian entity. The burden of the Revenue’s song is this: an Indian entity, whose AMP expense is extraordinary (or ‘nonroutine’) ought to be compensated by the foreign AE to whose benefit also such expense ensures. The ‘non-routine’ AMP spend is taken to have ‘subsumed’ the portion constituting ‘compensation’ owed to the Indian entity by the foreign AE. In such a scenario what will be required to be benchmarked is not the AMP expense itself but to what extent the Indian entity must be compensated. That is not within the realm of the provisions of Chapter X. 37 ITA No.1169/Mum/2014 Vodafone Digilink Limited the 74. The problem with the Revenue’s approach is that it wants every instance of an AMP spend by an Indian entity which happens to use the brand of a foreign AE to be presumed to involve an international transaction.
75.
76. As explained by the Supreme Court in CIT v. B.C. Srinivasa Sett (SC) in the absence of any machinery provision, bringing an imagined international transaction to tax is fraught with the danger of invalidation. In the present case, in the absence of there being an international transaction involving AMP spend with an ascertainable price, neither the substantive nor the machinery provision of Chapter X are applicable to the transfer pricing adjustment exercise ”
11.10. We heard the rival submission and considered the documents available record. The revenue has not demonstrated, through any material or tangible evidence, that there exists an understanding, arrangement, or concerted action between the assessee and its AEs for promoting trademarks or trade names owned by the AEs. This failure to establish an international transaction de hors the bright line test invalidates the adjustment. We respectfully consider the decisions of higher judicial authorities, including the Hon’ble Delhi High Court in Maruti Suzuki India Ltd (supra). and Whirlpool of India Ltd (supra)., have categorically held that the bright line test cannot be used to presume the existence of an international transaction in the absence of evidence. The Hon’ble Supreme Court’s dismissal of the revenue’s SLP further reinforces this position. The AMP expenses incurred by the assessee were essential to its business functions as a telecom service provider and were aimed at expanding its subscriber base, not at promoting the brand of its AEs. These expenses were inextricably linked to the assessee’s business operations and cannot be arbitrarily segregated as brand promotion for the AEs. The TPO’s characterization of the assessee as a mere distributor, without any substantive reasoning, contradicts the assessee’s established role as a full-fledged telecom service provider. The business model chosen by the assessee is to be respected, as per settled jurisprudence, and cannot be recharacterized arbitrarily by the revenue. The application of the bright line test without ensuring functional comparability of the selected comparable and without considering business-specific factors renders the adjustment methodologically flawed. In subsequent assessment years, no adverse inference has been drawn, and no transfer pricing adjustments have been made concerning AMP expenses. This consistency further weakens the revenue’s case for the disputed year.
In light of these observations, it is respectfully submitted that the transfer pricing adjustment of Rs. 2,84,68,27,994/- made in respect of AMP expenditure is devoid of merit and should be deleted. Therefore, the adjustment is set aside, and the assessee’s appeal is allowed.” (Emphasis Supplied).
19.16. There is nothing on record to distinguish the above decision of the Tribunal for the Assessment Year 2009-2010 either on facts or in law. We note that the Tribunal has taken a view in favour of the Assessee and had deleted the transfer pricing addition in respect of AMP Expenses after taking into consideration identical submission made by both the sides.
19.17. In view of the above, we are not persuaded to take a view different from the view taken by the Tribunal in the case of the Assessee/Vodafone Digilink Limited (supra) for the Assessment Year 2009-2010. Accordingly, we delete the transfer pricing addition of 167,83,26,579/- made in the hands of Assessee.”
11.1 Since the facts are similar and the revenue has not brought anything contrary on facts or law on the subject issue, following the above decision, we direct the AO to delete the addition of Rs.65,02,00,000/-. Accordingly, ground No.3 of the assessee is allowed whereas ground Nos. 2 to 4 of the revenue are dismissed..'”
81. Similar view has been taken by the Hon’ble Bench in the assessee’s own case for AY 2015-16/ Further, it was submitted that this issue has also been decided in favour of the assessee by the following decisions of the Tribunal passed in the assessee’s group company’s cases:
| • |
|
Vodafone Digilink Ltd. v. Dy. CIT [IT Appeal No. 1169 (Mum.) of 2014, dated 12-2-2025] (A.Y. 200910) |
| • |
|
Vodafone Digilink Ltd. v/s. DCIT (ITA No. 1073/Del/2015) (A.Y. 201011) |
| • |
|
Vodafone India Limited v/s. DCIT (ITA No. 884/MUM/2016) (AY 201112) |
82. We have perused the submissions advanced by both sides in light of the record placed before us. The Revenue has not demonstrated, by any agreement, arrangement, conduct or other tangible material, the existence of an international transaction requiring the assessee’s associated enterprises to reimburse the AMP expenditure. The existence of such a transaction cannot be presumed merely by applying the bright-line test. The issue is also squarely covered by the orders in the assessee’s own and group cases referred to hereinabove. We, therefore, direct the Ld. AO/TPO to delete the transfer-pricing adjustment of Rs. 65,59,94,739/-.
Ground Nos. 11.5 to 11.10 are allowed.
83. The issue arising in Ground No. 12 pertains to short grant of credit for TDS.
84. The Ld. AO is directed to verify the assessee’s claim for TDS credit with reference to the certificates and the corresponding income offered to tax and to grant due credit in accordance with section 199 read with Rule 37BA. The assessee shall be afforded reasonable opportunity to furnish the requisite details.
Accordingly, Ground No. 12 is allowed for statistical purposes.
85. The issue arising in Ground No. 13 pertains to erroneous levy of interest u/s. 234B and 234C of the Act.
86. The levy of interest u/s. 234B and u/s. 234C is mandatory and consequential in nature. The Ld. AO shall recompute the same, if any, while giving effect to this order in accordance with law.
Accordingly, Ground No. 13 does not require separate adjudication.
87. The issue arising in Ground No. 14 pertains to non-grant ofminimum alternative Tax (‘MAT’) credit.
88. The Ld. AO is directed to verify the assessee’s claim for MAT credit from the assessment record and grant the credit admissible u/s. 115JAA in accordance with law while giving effect to this order. The assessee shall be afforded reasonable opportunity to furnish the requisite particulars.
Ground No. 14 is allowed for statistical purposes.
ITA No. 1135/Del/2015 (A.Y. 2010-11) (Department Appeal)
89. TheDepartment has raisedthefollowinggrounds:
“Ground no. 1: Ad-hoc disallowance of 10% of commission expenses.
Ground no. 2: Capitalization of Royalty – WPC expenses payable to DoT.
Ground no. 3: Amortization of advertisement expenses
Ground no. 4: Addition of interest cost incurred on capital work in progress.
Ground no. 5: Disallowance of addition on account of subscriber based fraud.
Ground no. 6: Disallowance of depreciation on passive infrastructure assets.”
90. The issue arising in Ground No. 1, raised in this appeal, pertains to ad-hoc disallowance of 10% commission expense claimed by the assessee.
91. The brief facts of the case, pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee had incurred an expenditure of Rs. 56,13,00,000/- in respect of commission, paid to Top 25 distributors. The Ld. AO, vide Draft Assessment Order, disagreed with the submissions of the assessee and questioned the genuineness of the claimed expenditure. While doing so, the AO also granted deduction towards 90% and disallowed a sum of Rs. 5,61,30,000/-. The DRP following its directions for the earlier year AY 2009-10 deleted the said disallowance.
92. In respect of ad hoc disallowance of 10% of commission expenses, the Ld. AR of the assessee submitted that this issue has also been decided in favour of the assessee’s own case for AY 2011-12 (ITA No. 1042/Del/2016). The relevant extract of the said order is as under:
“34. Ground No.9 is in respect of ad hoc disallowance of 10% of commission expenses. The Ld. AR of the appellant submitted that this issue has also been decided in favour of the appellant’s group entity namely Vodafone Digilink Ltd. for AY 2009-10 and 2010-11 (supra). Since facts are similar, the findings are applicable to the case of the appellant. The relevant part of the decision is reproduced below:
“3.5. We find that the DRP had followed the decision of the Tribunal in the case of the Assessee for the immediate preceding Assessment Year 2009-2010 [ITA No. 1950/Del/2014, dated 14/03/2018] (supra). We have perused the aforesaid decision of the Tribunal and we find that in identical facts and circumstances, the ad-hoc disallowance of 10% of commission paid to agents proposed by the Assessing Officer for the Assessment Year 20092010 was not accepted by the DRP and the DRP had allowed the objection raised by the Assessee by following the decision of Tribunal in the case of Vodafone Mobile Services Ltd. (a sister concern of the Assessee) for the Assessment Years 2000-2001 to 2008-2009 whereby similar disallowances were deleted by the Tribunal. The relevant extract of the decision of the Co-ordinate Tribunal passed in the case of the Assessee for the Assessment Year 2009-2010 [ITA No.1950/Del/2014, dated 14/03/2018] (supra) reads as under:
“3. First ground of the Revenue’s appeal is against the deletion of addition of Rs. 14,23,29,976/-on account of commission
4. Briefly stated, the facts of the case are that the assessee is engaged in the business of providing cellular mobile telephony services in the telecom circles of Rajasthan, Haryana and Uttar Pradesh (East). It claimed expenditure of Rs. 1,42,32,99,755/-as commission in its Profit & Loss Account. On being called upon to furnish details of commission paid to top 25 distributors, the assessee submitted such details. In support of the deduction, it was submitted that it was providing telecommunication services through two models viz., pre-paid model and post-paid model. The assessee claimed to have paid commission to its agents only under the post-paid model. The assessee furnished Form No. 16As in support of payment of commission to top 25 parties. Following the view taken in the preceding years, the AO disallowed 10% of the commission expense on ad hoc basis, which resulted into disallowance amounting to 14,23,29,976/- The assessee approached the Dispute Resolution Panel (DRP) against the addition in the draft order. The DRP got convinced with the assessee’s contention and, relying on the order passed for the A.Ys. 2000-01 to 2008-09 deleting similar disallowance in the case of Vodafone Mobile Services Ltd., a sister concern of the assessee, deleted the addition. The Revenue is aggrieved against the deletion.
5. We have heard both the sides and perused the relevant material on record. It is observed that the assessee paid commission of Rs. 142.32 crore to the agents in the post-paid segment of its business. The assessee furnished necessary details and also Form no. 16As in respect of major payments. Despite this, the AO chose to make an ad hoc disallowance of 10% of the total commission payment. It is observed that the Id. DRP deleted the addition by relying on the order passed for the A.Ys. 2000-01 to 2008-09 in the case of sister concern of the assessee. The Revenue assailed the said order passed by the first appellate authority before the Tribunal. In Dy. CIT v. Vodafone Mobile Services Ltd. (Delhi Trib.), the Tribunal has upheld the deletion of addition. Relevant discussion has been made and the conclusion drawn by the Tribunal in para 9 of its order, in which deletion of such ad hoc disallowance has been upheld. No distinguishing factual feature of the assessee vis-a-vis its sister concern, namely, Vodafone Mobile Services Ltd, was placed on record by the Id. DR. Respectfully following the precedent, we uphold the impugned order in deleting the disallowance of commission amounting to Rs. 14.23 crore.”
3.6. The Revenue has failed to bring any material on record to distinguish the above decision of the Tribunal either on facts or in law. Therefore, respectfully following the above decision of the Tribunal, we decline to interfere with the directions issued by the DRP and the Final Assessment Order passed by the Assessing Officer on this issue. Accordingly, Ground No. I raised by the Revenue is dismissed.”
34.1 The facts of the instant appeal are similar. The revenue has not been able to bring on record anything contrary, either on fact or on law. Hence, following the above decision, the ground of revenue is dismissed.”
93. The Ld. AR also submitted that this issue is also decided in favour of the assessee in the following group company’s cases:
| • |
|
Vodafone Digilink Ltd. for AY 2010-11 |
| • |
|
Vodafone Digilink Ltd. for AY 2009-10 |
94. We have perused the submissions advanced by both sides in light of the record placed before us. The Ld. AO made an ad hoc disallowance of 10% despite the assessee having furnished the particulars of the major distributors and the corresponding TDS certificates, without identifying any specific defect or non-genuine payment. Identical disallowances have been deleted in the assessee’s own and group cases. The Revenue has not brought any distinguishing material on record. We, therefore, find no infirmity in the directions of the DRP deleting the disallowance of Rs. 5,61,30,000/-.
Ground No. 1 raised by the revenue is dismissed.
95. The issue arising in Ground No. 2, raised in this appeal, pertains to the disallowance made on account of royalty paid to Wireless Planning Commission (“WPC”).
96. The brief facts of the case, pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee incurred an expenditure of Rs. 83,74,46,268/- in respect of license fees payable to WPC, a wing of Department of Telecommunication towards use of spectrum availed by the assessee. Since the amount paid to WPC was on a quarterly basis as a percentage of revenue and was incurred for carrying on the telecommunication operations, the assessee claimed the expenditure to be revenue in nature. Accordingly, the assessee claimed the expenditure under section37(1) of the Act. The Ld. AO, vide Draft Assessment Order, disagreed with the submissions of the assessee and held this payment to be capital in nature. While doing so, the AO also granted deduction towards depreciation at the rate of 25% and disallowed a sum of Rs. 63,05,70,433/-. The DRP following its directions for the earlier year AY 2009-10 deleted the said disallowance.
97. The Ld. AR also submitted that this issue has been decided in favour of the assessee by the Tribunal in its own case vide:
| • |
|
Order dated 30 June 2026 for the A.Y. 2015-16 (ITA No. 8971/Del/2019); |
| • |
|
Order dated 11 May 2026 for the A.Y. 2011-12 (ITA No. 1042/Del/2016); |
| • |
|
Order dated 24 October 2025 for the A.Y. 2012-13 (Vodafone Idea Ltd. (supra)); |
| • |
|
Order dated 18 March 2026 for the A.Y. 2013-14 (ITA No. 8362/Del/2019) |
98. The relevant extract of the order dated 30 June 2026 for the A.Y. 2015-16 (ITA No. 8971/Del/2019) is as under:
“15. We have perused the submissions advanced by both sides in light of the record placed before us. We find that the issue arising in the present ground is squarely covered in favour of the assessee by the decisions of the Coordinate Bench in the assessee’s own case for Assessment Years 2011-12 in ITA No. 1042/Del/2016 vide order dated 11/05/
2026, Assessment Year 2012-13 in ITA No. 8361/Del/2019 vide order dated 24/10/2025 and Assessment Year 201314 in ITA No. 8362/Del/2019 vide order dated 18/03/
2026. We further note that an identical issue has also been decided in favour of the assessee’s group concern, Vodafone West Ltd., for Assessment Year 2011-12 vide order dated 02/04/
2026. In the aforesaid decisions, after considering the judgment of the Hon’ble Delhi High Court in CIT v. Fascel Ltd.
(2009) 221 CTR 305 (Del.), it has consistently been held that the royalty/WPC charges paid to the Department of Telecommunications are revenue expenditure allowable under section 37(1) of the Act. The Revenue has not brought on record any distinguishing feature in
facts or any change in law warranting a different view for the year under consideration. Respectfully following the aforesaid decisions, we direct the Ld. AO to delete the impugned disallowance. Accordingly, Ground No. 12 and its sub-grounds are allowed.”
99. Also, similar issue has been decided by the Tribunal in favour of the assessee’s group company viz. Vodafone West Ltd for the A.Y. 2011-12 vide Order dated 02 April 2026.
100. We have perused the submissions advanced by both sides in light of the record placed before us. The WPC/spectrum charges were payable periodically as a percentage of revenue for the continued use of spectrum in carrying on the existing telecommunication business. Identical payments have consistently been held to be revenue expenditure allowable u/s. 37(1)
in the assessee’s own cases, after consideringCIT v.
Fascel Ltd. [2009] 221 CTR 305 (Delhi). No distinguishing feature has been brought on record by the Revenue. We, therefore, uphold the directions of the DRP deleting the disallowance.
Ground No. 2 raised by the revenue is dismissed.
101. The issue arising in Ground No. 3, raised in this appeal, pertains to the amortization of advertisement expense.
102. The brief facts of the case, pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee incurred an expenditure of Rs. 10,38,263/- in respect of advertisement expenses of schemes with respect to existing products. Since the amount paid for advertisement expenses is routinely incurred out of business necessity, the same was claimed as revenue expenses. Accordingly, the assessee claimed the expenditure under section 37(1) of the Act. The Ld. AO, vide Draft Assessment Order, disagreed with the submissions of the assessee and held this payment to be capital in nature. While doing so, the AO amortized the expense over a period of 4 years and allowed deduction of Rs 2,59,566/-. The DRP following its directions for the earlier year AY 2009-10 deleted the said disallowance.
103. The Ld. AR submitted that this issue has already been decided in favour of the assessee in its own case by the decision of the Tribunal for AY 2011-12 (ITA No. 1042/Del/2016). Relevant extract of the same is reproduced as under:
“The Ld. AR also submitted that this issue has been decided in favour of the assessee by the decision of the Tribunal in cases of the group entity, namely Vodafone Digilink Ltd. for AY 2009-10 and 2010-11 (supra). The Ld. CIT DR has not been able to controvert the assertion of the Ld. AR and has not brought anything on record to the contrary. The Tribunal in case of Vodafone Digilink Ltd. for AY 2010-11 decided the issue in favour of the assessee by way of the following discussion:
5.4. We have heard the rival submissions and perused the material on record on this issue. It emerges that identical issue had come up for consideration before the Delhi Bench of the Tribunal in the Assessee for the immediate preceding Assessment Year 2009-2010 [ITA Nos.1169&1950/Del/2014, dated 14/03/2018, titled Deputy Commissioner of Income Tax, Circle-17(1), New Delhi v. Vodafone Essar Digilink Ltd. reported in (Delhi)). Dismissing identical ground raised by the Revenue, the Co-ordinate Bench of the Tribunal held as under:
“9 Ground No. 3 of the Revenue’s appeal is against the deletion of addition of Rs. 2,52,28,036/ on account of ‘Advertisement expenses. The assessee claimed deduction for advertisement expenses amounting to Rs. 97.63 lac on product launches and Rs. 14.81 crore on granty signs. The AO opined that since the benefit of this expenditure would be reaped in subsequent years as well, he treated the said amount of advertisement expenses as capital. After allowing deduction @ 25%, he made an addition of Rs. 2,52,28,03,617/- The DRP got convinced with the assessee’s submissions and ordered to delete the addition.
10. Having considered the arguments from both the sides and perused the relevant material on record, we find that this issue is no more res integra in view of the judgment of the Hon’ble Delhi High Court in CIT v. Citi Financial Consumer Finance Ltd. [2011] 335 ITR 29/[2012] in which advertisement expenditure has been treated as revenue. In view of the judgment of the Hon’ble jurisdictional High Court, which has been relied by the DRP, we are of the considered opinion that no interference is warranted in the impugned order on this score. This ground is dismissed.” (Emphasis Supplied)
5.5. The Revenue has failed to bring any material on record to distinguish the above decision of the Tribunal either on facts or in law. Therefore, respectfully following the above decision of the Tribunal, we decline to interfere with the directions issued by the DRP in relation to the advertisement expenditure incurred on granty signs and hoardings; and the Final Assessment Order passed by the Assessing Officer allowing deduction for the same. Accordingly Ground No.III raised by the Revenue is dismissed.”
32.1 The facts of the instant appeal are similar. Hence, following the above decision, the ground of revenue is dismissed.”
104. We have perused the submissions advanced by both sides in light of the record placed before us. The advertisement expenditure was incurred in the ordinary course for promoting the assessee’s existing products and business. The mere possibility that some benefit may endure beyond the year does not convert the expenditure into capital expenditure or justify its deferment. The issue is covered by the orders in the assessee’s own and group cases and by CIT v. Citi Financial Consumer Fin. Ltd. [2011] 335 ITR 29 (Delhi). We find no infirmity in the directions of the DRP
Ground No. 3 raised by the revenue is dismissed.
105. The issue arising in Ground No. 4, raised in this appeal, pertains to addition of interest cost incurred on capital work in progress (“CWIP”).
106. The brief facts of the case, pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee stated that it had made certain addition in fixed assets amounting to Rs. 466 millions as CWIP. The acquisition of such fixed assets by the assessee was from borrowed capital as well as from interest free funds and is for the purpose of assisting the assessee in carrying on its existing operations and not for the purpose of extension of its business. The Ld. AO vide draft assessment order proposed an addition of approx. 7.7% on the monthly closing balance of the CWIP amounting to Rs. 3,75,59,529/-.
107. The DRP relied on case of Madhav Prasad Jatia v. CIT 118 ITR 200 (SC), wherein the Apex Court has held that the expression “for the purpose of business” occurring in section 36(1)(iii) is wider in scope than the expression “for the purpose of making or earning income”. The Hon’ble Court has also laid down the basic requirements for claiming deduction u/s 36(1)(iii), as below:
| (a) |
|
The money i.e. capital must have been borrowed by the assessee. |
| (b) |
|
It must have been borrowed by the assessee for his business, profession or vocation and |
| (c) |
|
The assessee must have paid interest on the amount and claimed it as an allowance. |
Further, the DRP also relied on case of
Seth Banarsi Das Gupa v.
CIT [1977] 106 ITR 559 (Allahabad), wherein it has been held that the purpose may be to acquire a capital asset or stock in trade, as also to pay off a trading debt or loss. Capital borrowed to pay off such a debt is capital borrowed for the purpose of the business. Accordingly, the DRP has taken a view that the interest on investment in network assets that is incurred by the assessee on a regular basis should be allowed u/s 36(1)(
iii) of the Act. The AO is therefore, directed to delete the said disallowance.
108. The Ld. AR submitted that the said investment in CWIP was not for extension of business, instead it is an investment in network asset made by the assessee on regular basis to meet the demand for the service and as a part of continuous process to quality and reach of its service.
109. The Ld. AR also submitted that similar issue has been decided by the Tribunal in favour of the assessee’s group company Vodafone West Ltd. for AY 2010-11 (ITA No. 1634/Ahd/2015) and Vodafone West Ltd. (supra)
110. The relevant extract of the decision of Mumbai Tribunal in case of Vodafone West Ltd. for AY 2010-11 (ITA No. 1634/Ahd/2015) is as under:
“78. Having considered the submissions of both sites and perused the material available on record, we find that the Co-ordinate Bench of the Tribunal in assessee’s own case for the assessment year 2009-10 cited supra upheld the similar findings of the learned DRP on this issue, and observed as follows: –
“28. Heard both sides. The Revenue strongly contends that the Assessing Officer had rightly invoked the impugned disallowance in the above draft assessment by quoting Section 43(1) explanation 8 of the Act. It however fails to dispute that hon’ble apex court decision in Core Healthcare case (supra) categorically holds that the said explanation does not apply in case of 36(1)(iii) deduction. The assessee at this stage states to have incurred the impugned interest expenditure in respect of various external corporate borrowings obtained for acquisition of capital assets for continuing its existing telecom business only and not for extension thereof. Its further case is that the interest in question paid on borrowed funds for acquisition of a capital asset is allowable even for a period to dated of its being put to use. As per hon’ble apex court’s
decision hereinabove holding that there is no distinction u/s.36(1)(iii) between interest incurred on capital borrowed for revenue or capital purposes provided the same is used for business purposes irrespective of the result of use of such capital. We afforded ample rebuttal opportunity to Revenue. Ld. Departmental Representative fails to take us to any material in the case file so as to prove that assesee’s interest in question is covered u/s.36(1)(iii) proviso as amended by the Finance Act, 2015 w.e.f. 01.04.2016 since it is a case wherein the impugned interest is in respect of capital borrowed for the purpose of business already attracting the main limb of statutory provision instead of the above proviso. This Revenue’s ground is accordingly declined.”
79. In the absence of any allegation in change of facts or law in the year under consideration, respectfully following the decision of the Co-ordinate Bench of the Tribunal cited supra, the impugned order on this issue is upheld, and Ground No. 12 raised in Revenue’s appeal is dismissed.”
111. We have perused the submissions advanced by both sides in light of the record placed before us. The DRP recorded a factual finding that the investment in CWIP represented regular network assets acquired in the course of the assessee’s existing telecommunication business and not an extension of business. The Revenue has not placed any material before us to dislodge this finding. An identical issue has also been decided against the revenue in the group cases cited hereinabove. Respectfully following the same, we uphold the directions of the DRP deleting the disallowance.
Ground No. 4 raised by the revenue is dismissed.
112. The issue arising in Ground No. 5, raised in this appeal, pertains to addition on account of subscriber based fraud.
113. The brief facts of the case, pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee has submitted that it has debited a sum of Rs 48 million in the P/L account on account of customer/employee fraud and it is accounted same way as “Bad Debts” since the same is inextricably linked to the business of the assessee. The AO in the draft order proposed to disallow the said amount on the ground that the same cannot be said to be incurred wholly and exclusively for the purpose of the business. The DRP following its directions for the earlier year AY 2009-10 deleted the said disallowance.
114. The Ld. AR submitted that this issue has already been decided in favour of the assessee in its own case by the decision of the Tribunal for AY 2011-12 (ITA No. 1042/Del/2016). Relevant extract of the same is reproduced as under:
“Ground No.8 pertains to disallowance of subscriber based fraud. The Ld. AR submitted that this issue has also been decided in favour of the appellant by the decision of the Tribunal in the case of Vodafone Digilink Ltd. for AY 200910 and 2010-11 (supra). The relevant part of the decision is reproduced below:
7.2. We have heard both the sides on this issue. It is admitted position that identical issue arising from identical set of facts had come up for consideration before the Delhi Bench of the Tribunal in appeals pertaining to the Assessment Year i.e. 2009-2010. Vide Order, dated 14/03/2018, passed in ITA No. 1950/Del/2015, the Tribunal had decided the issue infavour of the Assessee holding as under:
“11. The last ground of the Revenue’s appeal is against the deletion of addition of Rs.31 lac. The facts apropos this ground are that the assessee claimed deduction of Rs.31 lac towards frauds committed by its customers. The AO treated this amount as not deductible u/s 37(1) and, accordingly, made an addition. The DRP directed to delete the addition 12 Having heard both the sides and perused the relevant material on record, we find that the deduction of Rs. 31 lac is not on account of embezzlement by employees, but, for the loss incurred due to frauds committed by the assessee’s customers who did not make payments for the bills raised on them by the assessee. This loss, being incidental to carrying on business, cannot be treated as an item of non-revenue nature. We, therefore, uphold the impugned order in deleting the disallowance. This ground is dismissed.” (Emphasis Supplied)
From the above it is clear that the deduction claimed by the Assessee was allowed by the Tribunal observing that the loss incurred by the Assessee on account of frauds committed by the customers and/or non-payment by the customers was incidental to running business. Therefore, deduction for the same was allowable under Section 37(1) of the Act.
7.3. Respectfully following the above decision of the Tribunal, we decline to interfere with the Final Assessment Order passed by the Assessing Officer as per directions issued by the DRP on this issue whereby identical loss of INR.33,00,000/- was allowed as deduction under Section 37(1) of the Act. Accordingly, Ground No.V raised by the Revenue is dismissed.
33.1 The facts of the instant appeal are similar. Hence, following the above decision, the ground of revenue is dismissed.”
115. We have perused the submissions advanced by both sides in light of the record placed before us. The loss arose from subscriber/customer fraud and non-recovery of bills in the ordinary course of the assessee’s telecommunication business. Such loss is incidental to carrying on the business and is allowable as a business deduction. The issue is squarely covered by the orders in the assessee’s own and group cases. We, therefore, uphold the directions of the DRP deleting the disallowance.
Ground No. 5 raised by the revenue is dismissed.
116. The issue arising in Ground No. 6, raised in this appeal, pertains to Disallowance of depreciation on passive infrastructure assets.
117. The Ld. AR submitted that in terms of the Scheme of Demerger transferred certain PI assets owned by it to Vodafone Infrastructure Ltd. (‘VInFL’) without any consideration. This Scheme of Demerger was approved by the Delhi High Court vide Order dated 29 March 2011. No loss, either capital or otherwise has been claimed by the assessee in relation to the above transfer of PI assets. The loss on transfer of PI Assets of Rs. 168.84 crores debited to the Profit & Loss A/c. have also been added while computing its total income. In the absence of any consideration, the assessee is not required to adjust any amounts from the tax WDV of the block of assets where the PI assets were capitalized. Nonetheless, the assessee in line with its motive of not claiming any tax advantage from this transaction, it voluntarily reduced the tax WDV of the PI assets transferred by it to VInFL from the said block of assets.
118. The Ld. AO has treated this transfer of PI assets to VInFL as a sham transaction and held that this transfer without consideration does not qualify as gift and hence not exempt u/s. 47(iii) of the Act. The Ld. AO held that market value of such PI assets should be deemed sales consideration which is Rs. 216.63 crores. He further held that since PI assets are depreciable assets, WDV of Plant & Machinery block should be reduced by such deemed consideration and since the Respondent itself has suo-moto reduced an amount of Rs. 168.83 crores from the WDV, an additional amount of Rs. 47.80 crores (i.e. 216.63 less 168.83 crores) should be reduced from the WDV thereby resulting in disallowance of depreciation of Rs. 7.17 crores (i.e. 15% of 47.80 crores).
119. The Ld. AR submitted that the Scheme of Demerger in terms of the PI assets were transferred to VInFL without any consideration has been approved by the Delhi High Court. In the absence of any consideration, the AO cannot impute sales consideration and reduce the same from the WDV of depreciable assets. The aspect of the aforesaid transaction as ‘gift’ has been confirmed by the Gujarat High Court in the case of Respondent’s group Company viz. erstwhile Vodafone West Ltd. wherein a similar scheme has been filed which has been approved by the Gujarat High Court.
120. It was also submitted that no deduction of the loss arising from the transfer of PI assets to VInFL was claimed by the assessee. Even though in the absence of any sale consideration where the assessee was not required to adjust its WDV, it has suo-moto reduced the tax WDV of such PI assets from its Plant and Machinery block. Thus, as correctly held by the DRP, it cannot be stated that the assessee transferred the PI assets to VInFL with a view to evade taxes but the transaction is solely driven by commercial expediency and the transaction was duly approved by the High Court. Relying on above the DRP has deleted the disallowance of depreciation which was proposed by the Assessing Officer.
121. The Ld AR also submitted that similar issue has been decided by the Tribunal in favour of the assessee’s group company as under:
| • |
|
Order dated 14 October 2025 Vodafone Digilink Ltd. for assessment year 2010-11 bearing ITA No. 1158/Del/2015. |
| • |
|
Order dated 11 December 2025 Vodafone West Ltd. for assessment year 2010-11 bearing ITA No. 1643/Ahd/2015. |
122. The relevant extract of the decision of the Mumbai Tribunal in case of Vodafone West Ltd. for assessment year 2010-11 bearing ITA No. 1643/Ahd/2015 is as under:
“7. We have considered the submission of both sides and perused the material available on record. During the hearing, the learned Authorised Representative (“learned AR”) by referring to the recent decision passed by the Co-ordinate Bench of the Tribunal in the case of assessee’s sister concern submitted that a similar addition on account of disallowance of depreciation due to transfer of PI assets from one of the entities of the Vodafone Group to Vodafone Infrastructure Ltd. has been deleted. From the perusal of the decision in Vodafone Digilink Ltd. v. DCIT, in ITA No. 1073 and 1158/Del./2015, vide order dated 14.10.2025, for the assessment year 2010-11, we find that the Co-ordinate Bench of the Tribunal, while deciding a similar issue, observed as follows: –
“8.5. On perusal of the order passed by the DRP, we find that the DRP has made following observations while deciding the issue in favour of the Assessee:
“18.3 The panel has carefully considered the submission of the assessee in this regard. The assessee has tried to justify the aforesaid transaction to be a purely
business decision based on commercial consideration. On the other hand, the AO is of the view that VDL is camouflaging the demerger scheme and getting it legalized by obtaining sanction from the Hon’ble High Court, which too by misrepresenting facts. In fact the assessee has transferred its Pl assets just to evade taxes in a manner to benefit Its ultimate holding company, for which it has claimed a loss. However, section 47(iii) of the Act provides that any transfer of a capital asset under a will or an irrevocable trust or as gift will not be regarded as a transfer. In the instant case. the transaction under reference is by way of gift duly approved by the High Court & hence a legitimate transaction and the Act itself recognizes such Gift by corporate. Further, clause 40 of the Memorandum of Association specifically permits the assessee to grant gift to any person. This is in consonance with the decision of Hon’ble Supreme Court in the case of LaksmanswamiMudaliar V. L.I.C (33 Com Cases 420), where it was observed that a company can make a gift provided that the Memorandum of Association/Charter documents of the company permit such a transaction. Further, the fact that the transaction in the present case is in the nature of gift has been affirmed by the Hon’ble Delhi High Court while approving such scheme, where the Hon’ble Court has observed as below.
“45. For all of the above reasons, and since the objector has not been able to place any direct authority, precedent or Rule before this Court to support his contention, and in view of the authorities relied on by the petitioners, counsel for the Income Tax has failed to persuade this Court that a transfer by way of gift was not permissible under Section 391 of the Companies Act, 1956, or that the Scheme in question was confiscatory, this objection does not survive this objection does not survive”.
Further, the aspect that the aforesaid transaction is a “gift” was also confirmed by the Hon’ble Gujarat High Court in the case of VWL (ie. a group company of the assessee), where in a similar scheme was filed. The Hon’ble High Court specifically observed as under.
“The objection raised by the Income Tax Department that the Appellant should not be permitted to argue that for the purpose of Income Tax Act, the transfer is by way of a gift and that for the purpose of the Companies Act, the same is with consideration is completely misplaced”
It has been further contended by the assessee that it has merely transferred its PI assets to Vinfl, without any consideration. The loss to VDL (assessee) on such transfer was duly added back by VDL in its return of income. Further, even though in absence of any sale consideration, the assessee was not required to adjust its tax block, the assessee Suo-moto reduced the tax WDV of such PI assets from its P&M block. Therefore, it cannot be stated that the assessee transferred Pl assets to Vinfl in order to evade taxes but the aforesaid transfer of Pl assets was driven solely by business expediency. On careful consideration of the facts of the case, it is amply clear that the business purpose and commercial expediency were the only factors that led to the transfer of the Pl assets, as duly approved by the Hon’ble High Court of Delhi. Even otherwise a company is an artificial juridical person with a separate legal entity of its own, unless the Corporate Veil is lifted by court orders. The case of the assessee is that of a real gift and not deemed gift as in the case of CIT V. Tibruz Mustafa Bilgen (1986) 157 ITR 723 (Mad), the Hon’ble Medras High Court has held that section 47(iii) applies only to real gift and not deemed gift. Therefore, the action of the AO in disallowing depreciation on passive Infrastructure Assets (PI) is held by the panel to be not tenable and the AO is therefore directed to delete
the said addition.” (Emphasis Supplied)
8.6 We are in agreement with the view taken by the DRP. The Scheme of Demerger which clearly provided that the Assessee shall gift PI Assets to Vodafone Infrastructure Ltd. Before the Hon’ble Delhi High Court the Revenue had filed objection to the Scheme of Demerger contending, inter alla, that a transfer by way of gift was not permissible under Section 391 of the Companies Act, 1956. However, the aforesaid objection was rejected by the Hon’ble Delhi High Court observing that the Revenue had failed to place any direct authority, precedent or Rule before the Hon’ble Court in support its contention. The aforesaid was taken note of by the DRP while allowing the objections raised by the Assessee. Therefore, we concur with the view taken by the DRP that the transaction of transfer of PI Assets by the Assessee to Vodafone Infrastructure Ltd as gift cannot be regarded as sham transaction having been accepted and approved by the Hon’ble Delhi High Court as part of the Scheme of Demerger after due consideration of the objections raised by the Revenue. DRP has correctly concluded that transaction of transfer of PI Assets by the Assessee to Vodafone Infrastructure Ltd qualified as ‘gift’ and the same could not be regarded as transfer for the purpose of Section 2(47) of the Act in terms of Section 47(III) of the Act. It was not disputed by the Revenue that the Assessee had not claimed deduction for loss arising from the transfer of PI Assets to Vodafone Infrastructure Ltd. In view of the aforesaid we are not persuaded to interfere with the Final Assessment Order and the directions issued by the DRP on this issue and therefore, Ground No. VI raised by the Revenue is dismissed.”
8. In the absence of any allegation of a change in facts or law in the instant appeal, respectfully following the decision of the Coordinate Bench of the Tribunal cited supra, the disallowance of depreciation on account of the transfer of PI assets is deleted. As a result, Ground No. 1 raised in assessee’s appeal is allowed.
123. We have perused the submissions advanced by both sides in light of the record placed before us. The transfer of passive-infrastructure assets to VInFL without consideration formed part of a Scheme approved by the Hon’ble Delhi High Court after considering the objections of the Revenue. The assessee did not claim the loss arising from the transfer and had, in fact, reduced the corresponding tax WDV suo motu. In the absence of consideration, the Ld. AO could not impute a notional sale value and further reduce the block of assets. Identical additions have been deleted in the group cases referred to hereinabove. We, therefore, uphold the directions of the DRP and dismiss Ground No. 6 raised by the revenue.
Assessee’s appeal, ITA No 4216/Del/2013 (A.Y. 2003-04):
124. The issue arising in Ground No. 1 pertains to disallowance of license fees u/s 37(1) of the Act.
125. The issue raised in this appeal is identical to Ground no. 3 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
126. The Ld. AR has also furnished the working of disallowance to an extent of Rs.44,16,81,140/-in line with the decision of Bharati Hexacom Ltd. (supra).
127. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11, adjudicated by us at para 27 here in above. Our findings and directions therein shall apply mutatis mutandis. The Ld. AO shall verify the year-specific working of Rs. 44,16,81,140/- and allow the consequential deduction u/s. 35ABB in accordance with law.
Ground No. 1 is partly allowed for statistical purposes.
128. The issue arising in Ground No. 2 pertains to treating of interest income from deposits as income under the head ‘other sources.
129. The brief facts of the case, pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee had earned interest income of Rs. 2,57,61,120/- which was credited to the Profit & Loss Account and offered to tax under the head “Profits and Gains of Business or Profession”. The said interest arose from fixed deposits and other deposits maintained either out of business funds generated from telecom operations or as margin money/security deposits placed with banks and financial institutions for availing credit facilities, bank guarantees and other financing arrangements in the ordinary course of business.
130. The Ld. AR submitted that since these deposits were in extricably linked with and formed an integral part of the assessee’s business operations and financing structure, the interest income constituted business income. However, the AO assessed the same under the head “Income from Other Sources”, denied the benefit of netting off against interest expenditure, and consequently reduced the profits eligible for deduction under section 80-IA of the Act. The CIT(A) had erroneously upheld the order of AO.
131. The Ld. AR also submitted that the impugned interest income, having arisen for the purposes of its telecommunication business, ought to be assessed as business income and not as “Income from Other Sources”.
132. We have perused the submissions advanced by both sides in light of the record placed before us. The fixed deposits and other deposits were maintained out of business funds and as margin money/security for credit facilities, bank guarantees and other financing arrangements required for the assessee’s telecommunication operations. The resulting interest, therefore, has a direct and proximate nexus with the business and is assessable under the head ‘Profits and gains of business or profession’. The Ld. AO is directed to assess the interest income accordingly and grant all consequential benefits in accordance with law. Ground No. 2 is allowed.
133. The issue arising in Ground No. 3 pertains to Deduction u/s 80-IA of the Act.
134. The issue raised in this appeal is identical to Ground No. 1 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
135. This issue stands adjudicated at para 14 hereinabove while deciding Ground No. 1 of the assessee’s appeal for A.Y. 2010-11. The findings and directions contained therein shall apply mutatis mutandis to the year under consideration, and the Ld. AO shall give consequential effect after determining the subsisting assessed income and the deduction, if any, actually admissible. Ground No. 3 is allowed for statistical purposes.
136. The issue arising in Ground No. 4 pertains to Deduction u/s 80-IA of the Act on other income.
137. The issue raised in this appeal is identical to Ground no. 2 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
138. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 20 here in above. Our findings and directions therein shall apply mutatis mutandis while computing the eligible profits for the year under consideration. Ground No. 4 is partly allowed for statistical purposes.
139. The issue arising in Ground No. 5 pertains to enhancement of income by Ld. CIT(A).
140. The brief facts of the case, pertaining to this issue, as emanating from the record, are: During the course of the appellate proceedings, the CIT(A) raised additional queries with respect to applicability of provisions of Section 14A of the Act to the assessee which are neither a subject matter of appeal nor apparent from the assessment records.
141. The Ld. AR submitted that section 251 of the Act empowers the Commissioner of Income-tax (Appeals) to confirm, reduce, enhance or annul assessment. However, the power enshrined in the aforesaid section is not boundless power and has to be read with certain limitations. The same is evident from the plain reading of Section 251 of the Act, which provides that the appellate proceedings will be restricted to the matters arising from the assessment proceedings. Hence, roving enquiries or discovering new source of income / disallowance, which are not a subject matter of the assessment proceedings cannot be made part of the appellate proceedings.
142. The Ld. AR also submitted that in any case, the issue of disallowance under section 14A of the Act on which the Ld. CIT(A) has made enhancement on merits, is identical to the Ground no. 7 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
143. If the issue on which the CIT(A) has made enhancement is decided in favour of the assessee, this ground of appeal relating to action of the CIT(A) in making enhancement of income would become academic.
144. Since the enhancement made by the Ld. CIT(A) relates to the disallowance u/s. 14A, which is decided on merits in favour of the assessee at para 147 hereunder by following para 50 hereinabove, the challenge to the jurisdiction assumed for enhancement has become academic.
Ground No. 5 is, therefore, dismissed as infructuous.
145. The issue arising in Ground No. 6 pertains to disallowance u/s 14A of the Act made by the CIT(A) by making enhancement in terms of section 251 of the Act.
146. The Ld. AR submitted that the said ground of appeal is identical to Ground no. 7 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
147. The issue is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 50 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 14A by way of enhancement is directed to be deleted. Ground No. 6 is allowed.
148. The issue arising in Ground No. 7 pertains to initiation of penalty proceedings u/s. 271(1)(c) of the Act.
149. The Ground challenging initiation of penalty proceedings u/s. 271(1)(c) is premature at this stage and does not call for adjudication in the quantum appeal. Ground No. 7 is dismissed as premature.
Assessee’s appeal, ITA No. 4220/Del/2013 (A.Y. 2004-05)
150. The issue arising in Ground No. 1 pertains to disallowance of license fees u/s 37(1) of the Act.
151. This ground of appeal is identical to Ground No. 3 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
152. The Ld. AR has also furnished the working of disallowance to an extent of Rs.53,07,32,186/-in line with the decision of Bharati Hexacom Ltd. (supra).
153. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 27 hereinabove. Our findings and directions therein shall apply mutatis mutandis. The Ld. AO shall verify the year-specific working of Rs. 53,07,32,186/- and allow the consequential deduction u/s. 35ABB in accordance with law.
Ground No. 1 is partly allowed for statistical purposes.
154. The issue arising in Ground No. 2 pertains to treating interest income as income under the head ‘other sources’.
155. This Ground of appeal is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2003-04 (ITA No. 4216/Del/2013).
156. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2003-04, adjudicated at para 132 hereinabove. Our findings and directions therein shall apply mutatis mutandis. Ground No. 2 is allowed.
157. The issue arising in Ground No. 3 pertains to deduction under section 80-IA of the Act
158. This ground of appeal is identical to Ground No. 1 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
159. This issue stands adjudicated at para 14 hereinabove while deciding Ground No. 1 of the assessee’s appeal for A.Y. 2010-11. The findings and directions contained therein shall apply mutatis mutandis to the year under consideration, and the Ld. AO shall give consequential effect after determining the subsisting assessed income and the deduction, if any, actually admissible. Ground No. 3 is allowed for statistical purposes.
160. The issue arising in Ground No. 4 pertains to deduction under section 80-IA of the Act on other income.
161. This Ground of appeal is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
162. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 20 hereinabove. Our findings and directions therein shall apply mutatis mutandis while computing the eligible profits for the year under consideration. Ground No. 4 is partly allowed for statistical purposes.
163. The issue arising in Ground No. 5 pertains to enhancement of income by the Ld. CIT(A).
164. This Ground of appeal is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04 (ITA No. 4216/Del/2013).
165. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04, adjudicated at para 144 hereinabove. For the reasons recorded therein, Ground No. 5 is dismissed as infructuous.
166. The issue arising in Ground No. 6 pertains to disallowance under section 14A of the Act.
167. This Ground of appeal is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
168. The issue is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 50 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 14A is directed to be deleted. Ground No. 6 is allowed.
169. The issue arising in Ground No. 7 pertains to initiation of penalty proceedings u/s. 271(1)(c) of the Act.
170. The ground challenging initiation of penalty proceedings u/s. 271(1)(c) is premature at this stage and does not call for adjudication in the quantum appeal. Ground No. 7 is dismissed as premature.
ITA No. 4221/Del/2013 (A.Y. 2005-06):
171. The issue arising in ground No. 1 pertains to disallowance of license fees u/s 37(1) of the Act.
172. This ground of appeal is identical to ground no. 3 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
173. The ld. AR has also furnished the working of disallowance toanextentofRs.56,27,44,189/-in line with the decision of Bharati Hexacom Ltd. (supra).
174. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 27 hereinabove. Our findings and directions therein shall apply mutatis mutandis. The Ld. AO shall verify the yearspecific working of Rs. 56,27,44,189/- and allow the consequential deduction u/s. 35ABB in accordance with law. Ground No. 1 is partly allowed for statistical purposes.
175. The issue arising in ground No. 2 pertains to treating interest income as income under the head ‘other sources’.
176. This ground of appeal is identical to ground no. 2 of the Appellant’s appeal for A.Y. 2003-04 (ITA No. 4216/Del/2013).
177. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2003-04, adjudicated at para 132 hereinabove. Our findings and directions therein shall apply mutatis mutandis. Ground No. 2 is allowed.
178. The issue arising in ground No. 3 pertains to Disallowance of depreciation on provision for asset restoration cost (‘ARC’) obligation.
179. This ground of appeal is identical to ground no. 4 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
180. The issue is identical to Ground No. 4 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 33 hereinabove. Our findings and directions therein shall apply mutatis mutandis. Ground No. 3 is partly allowed in the terms indicated therein.
181. The issue arising in ground No. 4 pertains to deduction under section 80-IA of the Act.
182. This ground of appeal is identical to ground no. 1 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
183. This issue stands adjudicated at para 14 hereinabove while deciding Ground No. 1 of the assessee’s appeal for A.Y. 2010-11. The findings and directions contained therein shall apply mutatis mutandis to the year under consideration, and the Ld. AO shall give consequential effect after determining the subsisting assessed income and the deduction, if any, actually admissible. Ground No. 4 is allowed for statistical purposes.
184. The issue arising in ground No. 5 pertains to deduction under section 80-IA of the Act on other income.
185. This ground of appeal is identical to ground no. 2 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
186. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 20 hereinabove. Our findings and directions therein shall apply mutatis mutandis while computing the eligible profits for the year under consideration. Ground No. 5 is partly allowed for statistical purposes.
187. The issue arising in ground No. 6 pertains to enhancement of income by the Ld. CIT(A).
188. This ground of appeal is identical to ground no. 5 of the Appellant’s appeal for A.Y. 2003-04 (ITA No. 4216/Del/2013).
189. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04, adjudicated at para 144 hereinabove. For the reasons recorded therein, Ground No. 6 is dismissed as infructuous.
190. The issue arising in ground No. 7 pertains to disallowance u/s 40(a)(ia) of the Act on account of non- deduction of taxes at source on domestic roaming charges paid to other telecom operator.
191. This ground of appeal is identical to ground no. 5 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
192. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 37 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 40(a)(ia) in respect of domestic roaming charges is directed to be deleted. Ground No. 7 is allowed.
193. The issue arising in ground No. 8 pertains to disallowance under section 14A of the Act.
194. This ground of appeal is identical to ground no. 7 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
195. The issue is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 50 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 14A is directed to be deleted. Ground No. 8 is allowed.
196. The issue arising in ground No. 9 pertains to initiation of penalty proceedings u/s. 271(1)(c) of the Act.
197. The ground challenging initiation of penalty proceedings u/s. 271(1)(c) is premature at this stage and does not call for adjudication in the quantum appeal. Ground No. 9 is dismissed as premature.
Assessee’s appeal, ITA No. 4223/Del/2013 (A.Y. 2006-07):
198. The issue arising in Ground No. 1 pertains to disallowance of license fees u/s 37(1) of the Act.
199. This Ground of appeal is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
200. The Ld. AR has also furnished the working of disallowance to an extent of Rs.55,89,81,822/-in line with the decision of Bharati Hexacom Ltd. (supra).
201. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 27 hereinabove. Our findings and directions therein shall apply mutatis mutandis. The Ld. AO shall verify the year-specific working of Rs. 55,89,81,822/- and allow the consequential deduction u/s. 35ABB in accordance with law. Ground No. 1 is partly allowed for statistical purposes.
202. The issue arising in Ground No. 2 pertains to Disallowance of depreciation on provision for asset restoration cost (‘ARC’) obligation.
203. This ground of appeal is identical to Ground No. 4 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
204. The issue is identical to Ground No. 4 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 33 here in above. Our findings and directions therein shall apply mutatis mutandis. Ground No. 2 is partly allowed in the terms indicated therein.
205. The issue arising in Ground No. 3 pertains to addition on customer security deposit.
206. The brief facts of the case, pertaining to this issue, as emanating from the record, are:
During the assessment proceedings, it was noted that the appellant received ‘security deposits’ which were taken from the customers as a security against the outstanding dues of the customers. During the year under consideration, an amount of Rs. 1,34,31,635/- has been included in the ‘Other Income’ in Schedule 12 of the Profit & Loss A/c. which pertains to ‘Security deposit from customers written back’.
207. The Ld. AR submitted that the security deposits received from the customers are in the nature of loans and hence take the character of ‘Capital Receipts’. Hence, when they are written back on the basis that the same has not been claimed back by the customers, its nature does not change from a capital receipt to revenue receipt.
208. The Ld. AR placed reliance on the following decisions:
| • |
|
Mahindra & Mahindra Ltd. v. CIT 261 ITR 501 (Bombay) which has been affirmed by the Supreme Court in Commissioner v. Mahindra And Mahindra Ltd. 404 ITR 1 (SC). |
| • |
|
CIT v. Tosha International Ltd. [2011] 331 ITR 440 (Delhi) |
| • |
|
K.M.S. Lakshmanier and Sons v. CIT and Excess Profits-tax [1953] 23 ITR 202 (SC) |
209. The Ld. AR further submitted that the reversal of a capital liability cannot be said to have arisen from the business or exercise of the profession by the Appellant and thus, it is submitted that such reversal cannot be brought to tax. The Ld. AR also argued that, without prejudice to the above, if the said amount is held as taxable as arising during the course of its business, then the same should be considered while computing eligible profits for the purpose of claiming deduction u/s. 80-IA of the Act.
210. We have perused the submissions advanced by both sides in light of the record placed before us. The customer security deposits were refundable amounts received as security against outstanding dues and were capital receipts at inception. No deduction in respect of the principal amount was claimed or allowed in any earlier year. Their unilateral write-back, therefore, does not attract section 41(1), nor does it alter the original character of the receipts merely because the customers did not claim repayment. The Revenue has not brought any material to show that the deposits were appropriated as trading receipts at the time of receipt. Respectfully following CIT v. Mahindra & Mahindra Ltd. (supra) and the other decisions cited hereinabove, we direct the Ld. AO to delete the addition of Rs. 1,34,31,635/-. The alternate claim u/s. 80-IA consequently becomes academic. Ground No. 3 is allowed.
211. The issue arising in Ground No. 4 pertains to disallowance of deduction u/s 80G of the Act.
212. The Ld. AR submitted that the appellant during the year under consideration has while computing the total income has claimed deduction of Rs 7,00,000/- under section 80G of the Act.
213. However, the Ld. AO in the Assessment Order while computing the total income of the assessee has not allowed the deduction of the amount of Rs. 7,00,000/- under section 80G of the Act without assigning any reason.
214. The assessee’s claim for deduction of Rs. 7,00,000/- u/s. 80G has not been dealt with by the Ld. AO by a speaking finding. We, therefore, restore the issue to the file of the Ld. AO for the limited purpose of verifying the donation receipts, approval of the donee institution and fulfilment of the statutory conditions and, thereafter, allowing the deduction admissible in accordance with law. The assessee shall be afforded reasonable opportunity of being heard. Ground No. 4 is allowed for statistical purposes.
215. The issue arising in Ground No. 5 pertains to deduction under section 80-IA of the Act on other income.
216. This ground of appeal is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
217. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 20 hereinabove. Our findings and directions therein shall apply mutatis mutandis while computing the eligible profits for the year under consideration. Ground No. 5 is partly allowed for statistical purposes.
218. The issue arising in Ground No. 6 pertains to enhancement of income by the Ld. CIT(A).
219. This Ground of appeal is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04 (ITA No. 4216/Del/2013).
220. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04, adjudicated at para 144 hereinabove. For the reasons recorded therein, Ground No. 6 is dismissed as infructuous.
221. The issue arising in Ground No. 7 pertains to disallowance u/s 40(a)(ia) of the Act on account of non- deduction of taxes at source on domestic roaming charges paid to other telecom operator.
222. This Ground of appeal is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
223. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 37 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 40(a)(ia) in respect of domestic roaming charges is directed to be deleted. Ground No. 7 is allowed.
224. The issue arising in Ground No. 8 pertains to disallowance under section 14A of the Act.
225. This Ground of appeal is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
226. The issue is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 50 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 14A is directed to be deleted. Ground No. 8 is allowed.
227. The issue arising in Ground No. 9 pertains to interest under section 234B of the Act.
228. The levy of interest u/s. 234B is mandatory and consequential in nature. The Ld. AO shall recompute the same, if any, while giving effect to this order in accordance with law. Ground No. 9 does not require separate adjudication.
229. The issue arising in Ground No. 10 pertains to initiation of penalty proceedings u/s. 271(1)(c) of the Act.
230. The Ground challenging initiation of penalty proceedings u/s. 271(1)(c) is premature at this stage and does not call for adjudication in the quantum appeal. Ground No. 10 is dismissed as premature.
Assessee’s appeal, ITA No. 4225/Del/2013 (A.Y. 2007-08):
231. The issue arising in Ground No. 1 pertains to disallowance of license fees u/s 37(1) of the Act.
232. This Ground of appeal is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
233. The Ld. AR has also furnished the working of disallowance to an extent of Rs.64,72,45,065/-in line with the decision of Bharati Hexacom Ltd. (supra).
234. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 27 hereinabove. Our findings and directions therein shall apply mutatis mutandis. The Ld. AO shall verify the year-specific working of Rs. 64,72,45,065/- and allow the consequential deduction u/s. 35ABB in accordance with law. Ground No. 1 is partly allowed for statistical purposes.
235. The issue arising in Ground No. 2 pertains to disallowance u/s 40(a)(ia) of the Act on account of non-deduction of taxes at source on the discount extended to prepaid distributor.
236. This ground of appeal is identical to Ground no. 6 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
237. The issue is identical to Ground No. 6 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 42 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 40(a)(ia) in respect of discount extended to prepaid distributors is directed to be deleted. Ground No. 2 is allowed.
238. The issue arising in Ground No. 3 pertains to Disallowance of depreciation on provision for asset restoration cost (‘ARC’) obligation.
239. This Ground of appeal is identical to Ground No. 4 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
240. The issue is identical to Ground No. 4 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 33 hereinabove. Our findings and directions therein shall apply mutatis mutandis. Ground No. 3 is partly allowed in the terms indicated therein.
241. The issue arising in Ground No. 4 pertains to addition on customer security deposit.
242. This ground of appeal is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2006-07 (ITA No. 4223/Del/2013).
243. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2006-07, adjudicated at para 210 hereinabove. Our findings therein shall apply mutatis mutandis, and the impugned addition on account of customer security deposits is directed to be deleted. Ground No. 4 is allowed.
244. The issue arising in Ground No. 5 pertains to deduction under section 80-IA of the Act on other income.
245. This Ground of appeal is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
246. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 20 hereinabove. Our findings and directions therein shall apply mutatis mutandis while computing the eligible profits for the year under consideration. Ground No. 5 is partly allowed for statistical purposes.
247. The issue arising in Ground No. 6 pertains to enhancement of income by the Ld. CIT(A).
248. This Ground of appeal is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04 (ITA No. 4216/Del/2013).
249. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04, adjudicated at para 144 hereinabove. For the reasons recorded therein, Ground No. 6 is dismissed as infructuous.
250. The issue arising in Ground No. 7 pertains to disallowance u/s 40(a)(ia) of the Act on account of non- deduction of taxes at source on domestic roaming charges paid to other telecom operator.
251. This Ground of appeal is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
252. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 37 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 40(a)(ia) in respect of domestic roaming charges is directed to be deleted. Ground No. 7 is allowed.
253. The issue arising in Ground No. 8 pertains to disallowance under section 14A of the Act.
254. This Ground of appeal is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
255. The issue is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 50 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 14A is directed to be deleted. Ground No. 8 is allowed.
256. The issue arising in Ground No. 9 pertains to initiation of penalty proceedings u/s. 271(1)(c) of the Act.
257. The Ground challenging initiation of penalty proceedings u/s. 271(1)(c) is premature at this stage and does not call for adjudication in the quantum appeal. Ground No. 9 is dismissed as premature.
Assessee’s appeal, ITA No. 4227/Del/2013 (A.Y. 2008-09):
258. The issue arising in Ground No. 1 pertains to disallowance of license fees u/s 37(1) of the Act.
259. This Ground of appeal is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
260. The Ld. AR has also furnished the working of disallowance to an extent of Rs.76,49,63,080/-in line with the decision of Bharati Hexacom Ltd. (supra).
261. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 27 hereinabove. Our findings and directions therein shall apply mutatis mutandis. The Ld. AO shall verify the year-specific working of Rs. 76,49,63,080/- and allow the consequential deduction u/s. 35ABB in accordance with law. Ground No. 1 is partly allowed for statistical purposes.
262. The issue arising in Ground No. 2 pertains to Disallowance of depreciation on provision for asset restoration cost (‘ARC’) obligation.
263. This Ground of appeal is identical to Ground No. 4 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
264. The issue is identical to Ground No. 4 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 33 hereinabove. Our findings and directions therein shall apply mutatis mutandis. Ground No. 2 is partly allowed in the terms indicated therein.
265. The issue arising in Ground No. 3 pertains to addition on customer security deposit.
266. This Ground of appeal is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2006-07 (ITA No. 4223/Del/2013).
267. The issue is identical to Ground No. 3 of the assessee’s appeal for A.Y. 2006-07, adjudicated at para 210 hereinabove. Our findings therein shall apply mutatis mutandis, and the impugned addition on account of customer security deposits is directed to be deleted. Ground No. 3 is allowed.
268. The issue arising in Ground No. 4 pertains to disallowance u/s 40(a)(ia) of the Act on account of non-deduction of taxes at source on the discount extended to prepaid distributor.
269. This Ground of appeal is identical to Ground No. 6 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
270. The issue is identical to Ground No. 6 of the assessee’s appeal for A.Y. mutatis mutandis. The disallowance made u/s. 40(a)(ia) in respect of discount extended to prepaid distributors is directed to be deleted. Ground No. 4 is allowed.
271. The issue arising in Ground No. 5 pertains to enhancement of income by the Ld. CIT(A).
272. This Ground of appeal is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04 (ITA No. 4216/Del/2013).
273. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2003-04, adjudicated at para 144 here in above. For the reasons recorded therein, Ground No. 5 is dismissed as infructuous.
274. The issue arising in Ground No. 6 pertains to disallowance u/s 40(a)(ia) of the Act on account of non- deduction of taxes at source on domestic roaming charges paid to other telecom operator.
275. This Ground of appeal is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
276. The issue is identical to Ground No. 5 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 37 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 40(a)(ia) in respect of domestic roaming charges is directed to be deleted. Ground No. 6 is allowed.
277. The issue arising in Ground No. 7 pertains to disallowance under section 14A of the Act.
278. This Ground of appeal is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
279. The issue is identical to Ground No. 7 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 50 hereinabove. Our findings therein shall apply mutatis mutandis. The disallowance made u/s. 14A is directed to be deleted.
Ground No. 7 is allowed.
280. The issue arising in Ground No. 8 pertains to deduction under section 80-IA of the Act.
281. This Ground of appeal is identical to Ground No. 1 of the assessee’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
282. This issue stands adjudicated at para 14 hereinabove while deciding Ground No. 1 of the assessee’s appeal for A.Y. 2010-11. The findings and directions contained therein shall apply mutatis mutandis to the year under consideration, and the Ld. AO shall give consequential effect after determining the subsisting assessed income and the deduction actually admissible. Ground No. 8 is allowed for statistical purposes.
283. The issue arising in Ground No. 9 pertains to deduction under section 80-IA of the Act on other income.
284. This ground of appeal is identical to ground no. 2 of the Appellant’s appeal for A.Y. 2010-11 (ITA No. 1021/Del/2015).
285. The issue is identical to Ground No. 2 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 20 here in above. Our findings and directions therein shall apply mutatis mutandis while computing the eligible profits for the year under consideration. Ground No. 9 is partly allowed for statistical purposes.
286. The issue arising in Ground No. 10 pertains to non-grant of full credit in respect of TDS.
287. The issue is identical to Ground No. 12 of the assessee’s appeal for A.Y. 2010-11, adjudicated at para 84 hereinabove. Our findings and directions therein shall apply mutatis mutandis. Ground No. 10 is allowed for statistical purposes.
288. The issue arising in Ground No. 11 pertains to Interest u/s 234B and 234D of the Act
289. The levy of interest u/s. 234B and u/s. 234D is mandatory and consequential in nature. The Ld. AO shall recompute the same, if any, while giving effect to this order in accordance with law. Ground No. 11 does not require separate adjudication.
290. The issue arising in Ground No. 12 pertains to initiation of penalty proceedings u/s. 271(1)(c) of the Act.
291. The ground challenging initiation of penalty proceedings u/s. 271(1)(c) is premature at this stage and does not call for adjudication in the quantum appeal. Ground No. 12 is dismissed as premature.
292. The result of the captioned appeals is summarised as under:
| Sr. No. |
ITA No. |
A.Y. |
Result |
| 1 |
4216/Del/2013 |
2003-04 |
Partly allowed for statistical purposes |
| 2 |
4220/Del/2013 |
2004-05 |
Partly allowed for statistical purposes |
| 3 |
4221/Del/2013 |
2005-06 |
Partly allowed for statistical purposes |
| 4 |
4223/Del/2013 |
2006-07 |
Partly allowed for statistical purposes |
| 5 |
4225/Del/2013 |
2007-08 |
Partly allowed for statistical purposes |
| 6 |
4227/Del/2013 |
2008-09 |
Partly allowed for statistical purposes |
| 7 |
1021/Del/2015 |
2010-11 |
Partly allowed for statistical purposes |
| 8 |
1135/Del/2015 |
2010-11 |
Dismissed |
■
