Tata Communications Internet Services Ltd, New Delhi v. ITO, New Delhi

ITA 4214/DEL/2009 | 2006-2007
Pronouncement Date: 26-02-2010 | Result: Allowed

Appeal Details

RSA Number 421420114 RSA 2009
Assessee PAN AACCP1887F
Bench Delhi
Appeal Number ITA 4214/DEL/2009
Duration Of Justice 3 month(s) 29 day(s)
Appellant Tata Communications Internet Services Ltd, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 26-02-2010
Date Of Final Hearing 22-02-2010
Next Hearing Date 22-02-2010
Assessment Year 2006-2007
Appeal Filed On 28-10-2009
Judgment Text
I.T.A. NO.4214 /DEL/2009 1/17 IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH H BEFORE SHRI K. G. BANSAL ACCOUTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER ITA NO. 4214 /DEL/2009 (ASSESSMENT YEAR 2006-07) TATA COMMUNICATIONS VS. ITO WARD 17(3) INTERNET SERVICES LTD. NEW DELHI (EARLIER KNOWN AS VSNL INTERNET SERVICES LTD.) 274 CAPTAIN GAUR MARG 2 ND FLOOR SRINIWASPURI NEW DELHI-110 065 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AACCP1887F APPELLANT BY: SHRI KANCHUN KAUSHAL & RAVI SHARMA CAS RESPONDENT BY: SHRI D N KAR CIT DR ORDER PER GEORGE MATHAN JM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED A GAINST THE ORDER OF LD. CIT(A) XIX NEW DELHI IN APPEAL NO.198/2008-09 DATED 19.08.2009 FOR THE ASSESSMENT YEAR 2006-07. SHRI KANCHUN KAUSHAL & SHRI RAVI SHARMA CAS REPRESENTED FOR THE ASSESSEE AND SHRI D N KAR CIT DR REPRESENTED FOR THE REVENUE. 2. IT WAS THE SUBMISSION BY THE LD. A.R. THAT THE I SSUE IN THE APPEAL WAS AGAINST THE ACTION OF LD. CIT(A) IN I.T.A. NO.4214 /DEL/2009 2/17 CONFIRMING THE ACTION OF THE A.O. IN DENYING THE ASSESSEE THE BENEFIT OF DEDUCTION U/S 80IA(4)(II) O F THE ACT. IT WAS THE SUBMISSION THAT THE ASSESSEE IS A COMPANY WHICH WAS INCORPORATED UNDER THE NAME C G GRAPHNET PVT. LTD. ON 15.11.1994. THE NAME OF THE COMPANY WAS CHANGED TO C G FAX MAIL LTD. ON 15.11.1996. THE COMPANY WAS CONVERTED INTO A PUBLI C LIMITED COMPANY ON 23.09.1997. THE COMPANY WAS ACQUIRED BY DIRECT INTERNET LTD. IN AUGUST 2000 AND THE NAME OF THE COMPANY WAS CHANGED TO PRIME TELECOMMUNICATIONS LTD. W.E.F. 27.09.2000. IT WAS THE SUBMISSION THAT THE COMPANY WAS IN THE BUSINESS OF PROVIDING FAX MAIL SERVICES. THE COMPANY STARTED T WO NEW SERVICES BEING INTERNET SERVICES AND INTERNET TELEPHONY SERVICES AS PER THE LICENSE ISSUED FROM T HE DEPARTMENT OF TELECOMMUNICATION (DOT) DATED 05.01.1999 FROM OCTOBER 2000. IT WAS THE FURTHER SUBMISSION THAT THE LICENSE AWARDED BY THE DOT WAS UPDATED AS INTERNET SERVICES AND INTERNET TELEPHONY SERVICE PROVIDER FROM 2002. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD BEEN FILING INCOME TAX RETURNS REGULARLY AND AS PER THE PROVISIONS OF SECTION 80IA (4) THE ASSESSEE WAS ENTITLED TO THE DEDUCTION RIGHT FR OM THE ASSESSMENT YEAR 2001-02 AS THE FIRST INVOICE WAS CU T I.T.A. NO.4214 /DEL/2009 3/17 ON 17 TH OCTOBER 2000. IT WAS THE FURTHER SUBMISSION THAT AS PER THE PROVISIONS OF SECTION 80IA(2) THE ASSESS EE COULD CLAIM DEDUCTION U/S 80IA(4) FOR 10 YEARS OUT OF 15 YEARS STARTING FROM THE YEAR IN WHICH THE ASSESS EE STARTED ITS BUSINESS BEING THE ASSESSMENT YEAR 2001 -02. IT WAS THE SUBMISSION THAT THE ASSESSEE DID NOT CLA IM DEDUCTION U/S 80IA(4) FOR THE ASSESSMENT YEARS 2001 - 02 2002-03 & 2003-04 AND THE 1 ST YEAR OF CLAIM U/S 80IA(4) WAS 2004-05 AND FOR THE ASSESSMENT YEAR 2004-05 2005-06 THE ASSESSEE HAD BEEN GRANTED THE DEDUCTION U/S 80IA(4) OF THE ACT WHERE THE ASSESSME NT ORDER WERE PASSED U/S 143(3) OF THE ACT. IT WAS TH E SUBMISSION THAT FOR THE ASSESSMENT YEAR 2006-07 BEI NG THE YEAR IN APPEAL THE A.O. HAD DENIED THE ASSESSE E THE BENEFIT OF DEDUCTION U/S 80IA(4) ON THE GROUND THAT THERE WAS VIOLATION OF THE PROVISIONS OF SECTION 80 IA(3) OF THE ACT IN SO FAR AS THE A.O. WAS OF THE VIEW TH AT THE ACTUAL BUSINESS OF THE COMPANY BEGAN IN JUNE 1997 A ND THE ASSESSEE WAS IN THE BUSINESS OF PROVIDING FAX M AIL SERVICES AND THE BUSINESS OF INTERNET SERVICES WAS STARTED VIDE AGREEMENT DATED 05.01.1999 AND THE BUSINESS OF INTERNET SERVICE PROVIDER VIDE AGREEMEN T DATED 05.01.1999 WAS CANCELLED AND A FRESH LICENSE WAS GRANTED VIDE AGREEMENT DATED 19.04.2002 WHEREIN THE I.T.A. NO.4214 /DEL/2009 4/17 ASSESSEE WAS PERMITTED TO RUN THE BUSINESS OF INTER NET SERVICES AND INTERNET TELEPHONY SERVICES AND CONSEQUENTLY THIS WAS A NEW BUSINESS IN WHICH THE ASSESSEE HAD USED THE PLANT & MACHINERY PREVIOUSLY USED IN ITS BUSINESS OF FAX MAIL SERVICES. IT WAS THE FURTHER SUBMISSION THAT EVEN BEFORE THE A.O. THE ASSESSEE HAD SUBMITTED THAT THE ASSESSEE HAD BEEN GRANTED THE BENEFIT OF DEDUCTION U/S 80IA(4) FOR TH E ASSESSMENT YEAR 2004-05 AND 2005-06 BUT THE SUBMISSION OF THE ASSESSEE WAS REJECTED ON THE GROU ND THAT EACH ASSESSMENT YEAR WAS SEPARATE AND THE ISSU E CAN BE CONSIDERED IN EACH YEAR SEPARATELY. IT WAS T HE FURTHER SUBMISSION THAT IN APPEAL BEFORE THE LD. CI T(A) THE LD. CIT(A) HAD CONFIRMED THE FINDING OF THE A.O . IT WAS THE SUBMISSION THAT THE PROVISIONS OF SECTION 80IA(3) WHICH WAS INVOKED BY THE A.O. DID NOT APPLY TO THE ASSESSEES CASE AS IT FALLS WITHIN THE PROVI SIONS OF SECTION 80IA(4)(II) OF THE ACT. IT WAS THE SUBMISS ION THAT THE PROVISIONS OF SECTION 80IA(3) HAD BEEN AMENDED W.E.F. 1.4.2005 BY THE FINANCE (NO.2) ACT O F 2004 WHEREIN CLAUSE (II) OF SUB-SECTION (4) HAD BEE N BROUGHT WITHIN THE PURVIEW OF SECTION 80IA(3) OF TH E ACT. THUS IT WAS THE SUBMISSION THAT TILL 01.04.2 005 THE PROVISIONS OF SECTION 80IA(3) OF THE ACT DID NO T I.T.A. NO.4214 /DEL/2009 5/17 APPLY TO THE PROVISIONS OF SECTION 80IA(4)(II) OF T HE ACT. IT WAS THE FURTHER SUBMISSION THAT EVEN AS PE R THE CIRCULAR ISSUED BY THE CBDT IN CIRCULAR NO.5 OF 200 5 DATED 15.07.2005 WHICH WAS BINDING ON THE INCOME TA X AUTHORITIES IT WAS CLEARLY MENTIONED THAT IF AN UNDERTAKING IS FORMED BY TRANSFER OF OLD PLANT & MACHINERY OR SPLITTING UP AND RECONSTRUCTION OF AN EXISTING BUSINESS BUT HAS STARTED PROVIDING TELECOMMUNICATION SERVICES PRIOR TO 01.04.2004 IT WOULD CONTINUE TO GET THE TAX BENEFIT AVAILABLE U/S 80IA OF THE I. T. ACT AND THAT THE AMENDMENT TAKES EFFEC TS FROM 01.04.2005 AND APPLY IN RELATION TO THE ASSESSMENT YEAR 2005-06 AND SUBSEQUENT YEARS. IT W AS THUS THE SUBMISSION THAT THE FIRSTS INVOICE HAVING BEEN ISSUED ON 17 TH OCTOBER 2000 THE BUSINESS OF THE PROVIDING TELECOMMUNICATION SERVICES AS PROVIDED U/ S 80IA(4) OF THE ACT HAD BEEN STARTED PRIOR TO 01.04. 2004 AND THE PROVISIONS OF SECTION 80IA(3) OF THE ACT PROVIDING FOR DENIAL OF DEDUCTION U/S 80IA ON ACCOU NT OF RECONSTRUCTION OR SPLITTING OF BUSINESS ALREADY EXISTING WOULD NOT APPLY. THE LD. A.R. DREW OUR ATTENTION TO PAGE 2 OF THE PAPER BOOK WHICH WAS TH E COPY OF THE CIRCULAR ISSUED BY CBDT. IT WAS THE FU RTHER SUBMISSION THAT THE A.O. AS ALSO THE LD. CIT(A) HAD I.T.A. NO.4214 /DEL/2009 6/17 ERRED IN HOLDING THAT THE AGREEMENT DATED 05.01.199 9 WAS CANCELLED AND AN AGREEMENT DATED 19.04.2002 HAD BEEN ENTERED INTO. THE LD. A.R. DREW OUR ATTENTION TO PAGE 53-59 OF THE PAPER BOOK WHICH WAS THE COPY OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S . DOT ON 05.01.1999. HE ALSO DREW OUR ATTENTION TO P AGE 61-93 OF THE PAPER BOOK WHICH WAS THE COPY OF THE AGREEMENT DATED 19.04.2002. IN THE AGREEMENT DATED 19.04.2002 HE DREW OUR ATTENTION TO CLAUSE 14 OF TH E AGREEMENT WHEREIN IT WAS SPECIFICALLY AGREED THAT T HE AGREEMENT DATED 19.04.2002 WAS IN SUPERCESSION OF ANYTHING PROVIDED ELSEWHERE AND THE EFFECTIVE DATE OF LICENSE WAS 05.01.1999. HE FURTHER DREW OUR ATTENT ION TO PAGE 67 OF THE PAPER BOOK IN CLAUSE 17 OF THE AGREEMENT DATED 19.04.2002 WHEREIN IT HAS BEEN SPECIFICALLY AGREED THAT THE LICENSE DATED 19.04.20 02 REPLACED THE OLD ISP LICENSE AGREEMENT DATED 05.01.1999. IT WAS THUS THE SUBMISSION THAT THERE WAS NO CANCELLATION OF THE AGREEMENT DATED 05.01.1999 B UT IN FACT THE AGREEMENT DATED 19.04.2002 ONLY REPLACE D THE AGREEMENT DATED 05.01.1999. THE LD. A.R. FURTH ER DREW OUR ATTENTION TO THE COPY OF THE NOTICE ISSUED BY THE A.O. FOR THE ASSESSMENT YEAR 2005-06 DATED 25.09.2007 FOR THE PURPOSE OF ASSESSMENT U/S 143(3) I.T.A. NO.4214 /DEL/2009 7/17 WHEREIN IN CLAUSE 19 OF THE SAID NOTICE THE ASSESSE E HAD BEEN ASKED TO SUBSTANTIATE WITH DOCUMENTARY EVIDENC E THE CLAIM OF DEDUCTION U/S 80IA AND THE REPLY OF TH E ASSESSEE DATED 05.112.2007 WHEREIN THIS ISSUE HAS B EEN CLARIFIED. IT WAS THUS A SUBMISSION THAT THE ASSES SEE WAS ENTITLED TO THE DEDUCTION U/S 80IA IN SO FAR AS THE PROVISIONS OF SECTION 80IA(3) OF THE ACT DID NOT AP PLY TO THE FACTS OF THE ASSESSEES CASE THE AGREEMENT- DATED 19.04.2002 DID NOT RESULT IN NEW BUSINESS BEING STA RTED AND ALSO ON ACCOUNT OF THE PRINCIPLE OF CONSISTENCY . 3. IN REPLY THE LD. D.R. SUBMITTED THAT THOUGH THE INTERNET SERVICES WERE STARTED FROM OCT 2000 THE COMPANY WA S INCORPORATED IN 1994 AND THE ASSESSEE HAD ITSELF IN THE CASE OF ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 CONFIRMED THAT THE BUSINESS OF THE ASSESSEE WAS STA TED IN 1997. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD BEEN ORIGINALLY IN THE BUSINESS OF FAX MAIL SERVICES AND IN OCTOBER 2000 THE ASSESSEE HAD VENTURED INTO A NEW BUSINESS BEING INTERNET SERVICES BY ENTERING INTO A N AGREEMENT WITH DOT ON 05.01.1999. IT WAS THE FURTH ER SUBMISSION THAT VIDE AGREEMENT DATED 19.04.2002 THE ASSESSEE HAD STARTED ANOTHER BUSINESS UNDER THE STY LE OF INTERNET TELEPHONY. IT WAS THE SUBMISSION THAT THE ASSESSEE THUS HAD THREE LINES OF BUSINESS BEING FAX MAIL I.T.A. NO.4214 /DEL/2009 8/17 STARTED IN 1997 INTERNET SERVICES STARTED IN 2000 AND INTERNET TELEPHONY STARTED IN 2002. IT WAS THUS A SUBMISSION THAT THE BUSINESS OF INTERNET SERVICES A ND INTERNETS TELEPHONY WERE NEW BUSINESSES. IT WAS FO RMED BY SPLITTING UP AND RECONSTRUCTION OF THE BUSINESS OF FAX MAIL ALREADY BEING DONE BY THE ASSESSEE AND THE PLA NT & MACHINERY OF THE OLD BUSINESS WAS USED FOR THE NEW BUSINESS. IT WAS THUS A SUBMISSION THAT EVEN ASSUM ING WITHOUT ACCEPTING THAT THE AGREEMENT ENTERED INTO B Y THE ASSESSEE WITH DOT ON 19.04.2002 WAS A REPLACEMENT O F AGREEMENT DATED 05.01.1999 STILL THE BUSINESS OF IN TERNET SERVICES AND INTERNET TELEPHONY WAS A BUSINESS COMMENCED BY SPLITTING UP AND RECONSTRUCTION OF THE BUSINESS OF FAX MAIL SERVICES WHICH WAS ORIGINALLY BEING DONE BY THE ASSESSEE AS ALSO BY USING PLANT & MACHINERY EARLIER USED. IT WAS THUS A SUBMISSION T HAT THE PROVISIONS OF SECTION 80IA(3) OF THE ACT DID AP PLY AND CONSEQUENTLY THE ASSESSEE WAS NOT ENTITLED TO T HE BENEFIT OF DEDUCTION U/S 80IA. HE PLACED RELIANCE ON THE DECISION OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF KERALA STATE CASHEW DEVELOPMENT CORPORATION REPORTED IN 205 ITR 19 TO SUPPORT HIS CONTENTION TH AT THE BUSINESS OF INTERNET TELEPHONY WAS DONE WHICH I S THE OLD MACHINERY USED IN THE BUSINESS OF FAX MAIL AND I.T.A. NO.4214 /DEL/2009 9/17 CONSEQUENTLY THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION OF SECTION 80IA. HE FURTHER PLACED RELIA NCE ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL I N THE CASE OF VSNL REPORTED IN 299 ITR (80) 234 MUMBAI (S.B.) TO SUPPORT HIS CONTENTION THAT THE DEDUCTION IS AVAILABLE TO THE UNDERTAKING AS A WHOLE THE SEPARAT E BUSINESSES OF THE ASSESSEE BEING THE BUSINESS OF PROVIDING FAX MAIL AND THE BUSINESS OF PROVIDING INTERNET SERVICES AND INTERNET TELEPHONY COULD NOT BE CONSIDERED SEPARATELY AS TWO DIFFERENT UNDERTAKINGS . IT WAS THUS A SUBMISSION THAT THE ASSESSEE WAS NOT ENT ITLED TO DEDUCTION U/S 80IA AND THE ORDER OF LD. CIT(A) I S LIABLE TO BE UPHELD. IT WAS HIS FURTHER SUBMISSION THAT IN RESPECT OF THE ARGUMENTS OF LD. A.R. IN REGARD TO T HE CONSISTENCY THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05 AND 2005-06 COULD NOT BE CONSIDERED AS THE A.O. HAD NOT GONE INTO THE SPECIFICS OF DEDUCTION U /S 80IA(4) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE A.O. HAD NOT CONSIDERED THE DIFFERENT INCOME BEING THE INCOME FROM FAX MAIL AND THE INCOME FROM INTERNET SERVICES AND INTERNET TELEPHONY. IT WAS THE SUBMIS SION THAT THE FAX MAIL SERVICES WAS NOT ELIGIBLE FOR THE DEDUCTION U/S 80IA. I.T.A. NO.4214 /DEL/2009 10/17 4. IN REPLY THE LD. A.R. SUBMITTED THAT THE DECIS ION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF VSNL DID NOT APPLY IN SO FAR AS IT WAS A CASE IN RELATION TO THE EARTH STATION WHICH WAS BEING RUN BY THE VSNL AND I N THE SAID DECISION IT HAD BEEN CATEGORICALLY FOUND T HAT THE ASSESSEE THEREIN HAD COMMENCED TWO EARTH STATIONS I N THE PREVIOUS YEAR BEING DURING MAY 1995 AND ANOTHER IN JUNE 1995 BUT HAD BEEN IN BUSINESS OF TELECOMMUNICATION SERVICE PROVIDER WAS AS BACK SINC E 1986 AND THE EARTH STATION BY ITSELF COULD NOT BE CONSIDERED AS SEPARATE AND INDEPENDENT UNDERTAKING AND CONSEQUENTLY THE DEDUCTION U/S 80IA HAD BEEN DENIED . IT WAS THE SUBMISSION BY THE LD. A.R. THAT IN THE ASSESSEES CASE THIS WAS NOT SO. IT WAS THE SUBMIS SION THAT THE BUSINESS OF THE ASSESSEE HAD COMMENCED AFT ER 01.04.1995 AND BEFORE 31.03.2000 EVEN ASSUMING THAT THE BUSINESS HAD STARTED IN 1997. IT WAS THE SUBMI SSION THAT THE 1 ST AGREEMENT WITH DOT HAD BEEN ENTERED INTO ON 05.01.1999 AND THIS AGREEMENT WAS REPLACED BY AN AGREEMENT-DATED 19.04.2002. IT WAS THE FURTHER SUBMISSION THAT AS PER THE PROVISIONS OF SECTION 80IA(4)(II) THE DATE FOR STARTING THE BUSINESS WAS BETWEEN 01.04.1995 TO 31.03.2005. IT WAS THE SUBMISSION THAT IN ANY CASE THE BUSINESS OF THE AS SESSEE I.T.A. NO.4214 /DEL/2009 11/17 HAD BEEN STARTED WITHIN THE PRESCRIBED TIME. IT WA S THE FURTHER SUBMISSION THAT THE ASSESSEE HAD STOPPED IT S BUSINESS OF FAX MAIL SERVICES RIGHT FROM THE FINANC IAL YEAR 2003-04. IT WAS THE FURTHER SUBMISSION THAT T HE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.2.65 CRO RES IN RELATION TO ITS BUSINESS OF INTERNET SERVICES AN D INTERNET TELEPHONY. HE FURTHER DREW OUR ATTENTION TO PAGE 28 OF THE PAPER BOOK WHICH WAS SCHEDULE J TO THE P & L ACCOUNT BEING THE INCOME FROM OPERATION WHICH SHOWED ONLY INCOME FORM INTERNET ACCESS AND INTERNET TELEPHONY. IT WAS ALSO THE SUBMISSION THA T THE ASSESSEE DID NOT HAVE ANY INCOME FROM THE BUSINESS OF FAX MAIL DURING THE RELEVANT ASSESSMENT YEAR AND TH E PROVISIONS OF SECTION 80IA(4)(II) WHICH APPLIES TO THE ASSESSEE WAS NOT CONTROLLED BY THE PROVISIONS OF SE CTION 80IA(3) TILL 01.04.2005. IT WAS THE SUBMISSION THA T THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA AS CLAIM ED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FOR BE TTER UNDERSTANDING IT WOULD BE NECESSARY TO EXTRACT THE PROVISIONS OF SECTION 80IA(3) AND 80IA(4) OF THE AC T WHICH ARE AS FOLLOWS: 80IA(3) - THIS SECTION APPLIES TO 40[AN 41[UNDERTAKING] REFERRED TO IN 42[CLAUSE (II) OR] CLAUSE (IV) 43[43A[OR CLAUSE (VI)]] OF SUB-SECTION I.T.A. NO.4214 /DEL/2009 12/17 (4)] WHICH FULFILS ALL THE FOLLOWING CONDITIONS NAMELY:- (I) IT IS NOT FORMED BY SPLITTING UP OR THE RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF AN 44[UNDERTAKING] WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH 44[UNDERTAKING] AS IS REFERRED TO IN SECTION 33B IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE: 80IA (4) THIS SECTION APPLIES TO- 53[(II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS PROVIDING TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLULAR INCLUDING RADIO PAGING DOMESTIC SATELLIT E SERVICE NETWORK OF TRUNKING BROADBAND NETWORK AND INTERNET SERVICES ON OR AFTER THE 1 ST DAY OF APRIL 1995 BUT ON OR BEFORE THE 31 ST DAY OF MARCH 54[2005].] 5.1 A PERUSAL OF THE PROVISIONS OF SECTION 80IA(3) CLEARLY SHOWS THAT THE TERM CLAUSE (II) WAS INSERTED BY T HE FINANCE NO.2 ACT OF 2004 W.E.F. 01.04.2005 THIS INSERTION IS NOT WITH RETROSPECTIVE EFFECT AS IT I S NOT SO SPECIFIED IN THE ACT. THE CIRCULAR ISSUED BY THE C BDT EXPLAINING THE PROVISIONS RELATING TO DIRECT TAXES FINANCE NO.2 ACT OF 2004 ALSO SHOWS THAT THE INSERT ION I.T.A. NO.4214 /DEL/2009 13/17 IS TO TAKE EFFECT FROM 01.04.2005 AND IS TO APPLY I N RELATION TO THE ASSESSMENT YEAR 2005-06 AND SUBSEQUENT YEARS. THE 1 ST YEAR OF CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA UNDISPUTEDLY IS THE ASSESSME NT YEAR 2004-05. THE BUSINESS OF FAX MAIL HAS BEEN STARTED BY THE ASSESSEE IN 1997 AND THE BUSINESS OF PROVIDING INTERNET SERVICES DURING THE YEAR 2000 BE ING 17 TH OCTOBER 2000 RELEVANT TO ASSESSMENT YEAR 2001- 02. THEREFORE WHAT IS TO BE SEEN IS WHETHER THERE HAS BEEN ANY VIOLATION OF THE PROVISIONS FOR THE CLAIM OF DEDUCTION U/S 80IA(4)(II) FOR THE ASSESSMENT YEAR 2001-02 OR AT THE MAXIMUM IN THE 1 ST YEAR OF CLAIM OF DEDUCTION U/S 80IA BEING THE ASSESSMENT YEAR 2004- 05. THIS IS BECAUSE ONCE IT IS HELD THAT THE ASSES SEE IS ENTITLED TO THE DEDUCTION U/S 80IA AND THIS FINDING HAS BECOME FINAL THE DEDUCTION U/S 80IA CAN AT BEST BE VARIED ON ACCOUNT OF THE ADDITIONS OR DISALLOWANCES BUT IT CANNOT UNDER ANY CIRCUMSTANCES BE DENIED AS ONCE THE DEDUCTION U/S 80IA IS GRANTED IT IS ACCEPTED THAT T HE BUSINESS OF THE UNDERTAKING IS NOT HIT BY ANY OF TH E VIOLATION OR BAR AS PROVIDED IN SECTION 80IA ITSELF . HERE IT IS NOTICED THAT THE ASSESSEE HAS BEEN GRAN TED THE DEDUCTION U/S 80IA IN THE COURSE OF ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05. NOW IT IS NOT POSSIBLE F OR I.T.A. NO.4214 /DEL/2009 14/17 THE REVENUE TO PICK UP AN ASSESSMENT YEAR SUBSEQUEN T TO THE GRANTING OF THE CLAIM HOLDING THAT THERE WAS VIOLATION OF THE PROVISIONS OF SECTION 80IA(3) OF T HE ACT IN SO FAR AS THE BUSINESS WAS FORMED BY SPLITTING U P AND RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE THA T IT WAS FORMED BY THE TRANSFER TO THE NEW BUSINESS PLA NT & MACHINERY PREVIOUSLY USED FOR ANY PURPOSE. THIS BA R AS PROVIDED IN SECTION 80IA(3) IS TO BE CONSIDERED ONL Y FOR THE 1 ST YEAR OF CLAIM OF DEDUCTION U/S 80IA. ONCE THE ASSESSEE HAS BEEN SHOWN TO HAVE USED NEW PLANT & MACHINERY WHICH WAS NOT PREVIOUSLY USED FOR ANY PURPOSE AND ONCE IT IS SHOWN THAT THE UNDERTAKING I S NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF A BUSIN ESS ALREADY IN EXISTENCE AND THE ASSESSEE BECOMES ENTIT LED TO THE DEDUCTION U/S 80IA IN THE SUBSEQUENT YEARS IT IS WELL AVAILABLE TO THE ASSESSEE TO ACQUIRE FRESH MACHINERY AND PLANT WHETHER NEW OR PREVIOUSLY USED FOR ANY PURPOSE. AS THE DEDUCTION IS AVAILABLE ON THE INCOME OF THE UNDERTAKING AND THE BAR PROVIDED U/S 80IA(3) IS IN RELATION TO THE FORMATION OF UNDERTAK ING ONCE THE FORMATION IS COMPLETE THE DEVELOPMENT OF UNDERTAKING CANNOT BE PUT UNDER RESTRAIN OF SECTION 80IA(3) OF THE ACT. RIGHT FROM THE ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS BEEN GRANTED THE CLAIM OF I.T.A. NO.4214 /DEL/2009 15/17 DEDUCTION U/S 80IA CONSEQUENTLY FOR THE RELEVANT ASSESSMENT YEAR BEING THE ASSESSMENT YEAR 2006-07 BEING A SUBSEQUENT ASSESSMENT YEAR IT CANNOT BE DEN IED. THE ELIGIBILITY FOR THE CLAIM OF DEDUCTION U/S 80IA BY APPLYING THE RESTRAINTS OF SEC. 80IA(3) CANNOT BE CONSIDERED FOR EVERY YEAR OF THE CLAIM OF DEDUCTION U/S 80IA BUT CAN BE CONSIDERED ONLY IN THE YEAR OF FORMATION OF THE BUSINESS. 5.2 EVEN OTHERWISE THE CLAUSE (II) OF SUB-SECTION ( 4) OF SECTION 80IA HAVING BEEN INSERTED IN SUB-SECTION (3 ) OF SECTION 80IA W.E.F. 01.04.2005 AND THE BUSINESS OF THE ASSESSEE HAVING BEEN FORMED AND STARTED MUCH BEFORE THAT DATE BE IT 1997 OR JANUARY 1999 OR 19.04.2002 AS THE BUSINESS OF THE ASSESSEE HAS BEEN FORMED AND COMMENCED MUCH BEFORE 01.04.2005 THE RESTRICTIONS PLACED BY SECTION 80IA(3) TO THE PROVISIONS OF SECT ION 80IA(4)(II) WOULD NOT BAR THAT ASSESSEE FOR CONTINU ING WITH ITS CLAIM OF DEDUCTION U/S 80IA. THUS AS THE PROVISIONS OF SECTION 80IA(3) ARE NOT APPLICABLE TO THE PRESENT ASSESSEES CASE THE BAR PROVIDED U/S 80IA(3 ) WOULD NOT DISENTITLE THE ASSESSEE FROM CLAIMING THE DEDUCTION U/S 80IA ON OF ITS INCOME FROM INTERNET SERVICES AND INTERNET TELEPHONY. I.T.A. NO.4214 /DEL/2009 16/17 5.3 IN REGARD TO THE SUBMISSIONS OF LD. D.R. THAT T HE BUSINESS OF THE ASSESSEE AND THE INCOME FORM THE BUSINESS OF FAX MAIL CANNOT BE CONSIDERED FOR DEDUC TION U/S 80IA IT IS NOTICED THAT THE ASSESSEE HAS NOT M ADE A CLAIM NOR DOES THE ASSESSEE HAVE ANY INCOME FROM TH E BUSINESS OF FAX MAIL DURING THE RELEVANT ASSESSMENT YEAR. WE ARE NOT GOING INTO THE ISSUE AS TO WHETHE R FAX MAIL ITSELF IS TO BE CONSIDERED AS TELECOMMUNICATIO N SERVICE WHETHER BASIC OR CELLULAR AS NO INCOME THER E FROM ITSELF HAS BEEN SHOWN BY THE ASSESSEE AND THE ASSESSEE HAS CATEGORICALLY ADMITTED THAT IT IS NOT DOING THE BUSINESS OF FAX MAIL SERVICES AND THE SAME HAD BEEN DISCONTINUED RIGHT FROM THE ASSESSMENT YEAR 2004-05 . IN THESE CIRCUMSTANCES EVEN ON THIS GROUND THE ASS ESSEE CANNOT BE DENIED DEDUCTION U/S 80IA. HERE IT MAY BE MENTIONED THAT THE LD. D.R. HAS FILED A LETTER DATE D 23.02.2010 AFTER THE DATE OF HEARING OF APPEAL STAT ING THAT THE TRIBUNAL HAS THE DUTY AND THE JURISDICTION TO CORRECT ALL ERRORS IN THE PROCEEDINGS UNDER APPEAL AND TO ISSUE IF NECESSARY APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREF ERRED TO DISPOSE OF THE WHOLE OR ANY PART OF THE MATTER A FRESH UNLESS FORBIDDEN FROM DOING SO BY THE STATUTE. I.T.A. NO.4214 /DEL/2009 17/17 5.4 AS WE HAVE CATEGORICALLY FOUND THAT THE ASSESSE E IS ENTITLED TO THE DEDUCTION U/S 80IA FOR THE ASSESSME NT YEAR UNDER APPEAL AND AS WE HAVE CATEGORICALLY NOTI CED THAT THE ASSESSEE DOES NOT HAVE ANY INCOME FROM THE FAX MAIL SERVICES THERE IS NO DIRECTION THAT IS REQUIR ED TO BE ISSUED TO THE LOWER AUTHORITIES FOR ANY VERIFICATIO N. IN THESE CIRCUMSTANCES THE FINDINGS OF LD. CIT(A) AND THE A.O. ON THE ISSUE IS REVERSED AND THE A.O. IS DIREC TED TO GRANT THE ASSESSEE THE BENEFIT OF DEDUCTION U/S 80I A ON THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF INT ERNET SERVICES AND INTERNET TELEPHONY. IN THESE CIRCUMST ANCES THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 7. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 26 TH FEB. 2010. SD./- SD./- (K. G. BANSAL) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:26 TH FEB. 2009 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI