Ownership of Equipment in Bandwidth Selling Business: ITAT upholds Reduction in Profit eligible for Deduction in Revenue Sharing [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the reduction in profit eligible for deduction in revenue sharing as the assessee had the ownership of equipment in bandwidth selling business.

The assessee-company Gujarat Info Petro Ltd was engaged in the business of selling internet bandwidth and other value added services like web hosting, designing, development and maintenance of websites etc. During the impugned assessment year 2008-09, the assessee had claimed deduction under section 80IA(4)(ii) of the Income Tax Act.

The deduction under section 80IA of the Income Tax Act was available to the undertakings which were engaged in providing telecommunication services, where basic of cellular, including radio paging, domestic satellite services, network of trunk, broad-band network and internet services at any time after 31st March, 1995 before 31st March, 2005, subjected to fulfilment of certain conditions as specified in section 80IA of the Act.

In the first round, the assessment order under section 143(3) of the Act was made on 29.10.2010 and the assessee’s entire claim for deduction under section 80IA(4)(ii) was denied.

Thereafter, the matter came up in the second round before the AO, where the disallowance was upheld by the AO noting that apart from the requirement of filing of Form no.10CCB in the earlier assessment year, the facts remained unchanged, and AO denied the claim of deduction.

S.N. Soparkar, on behalf of the assessee submitted that in subsequent assessment years  2009-10, 2010-11 and 2012-13, the AO had disallowed claim of deduction under section 80IA(4) of the Act for similar reasons by invoking provisions of section 80IA(10) of the  Income Tax Act. But the disallowance had been deleted consistently in all three years by the Commissioner of Income Tax Appeals (CIT(A))

RakeshJha,on behalf of the revenue.

The Bench observed that CIT(A) had categorically noted that the satellite equipment, navigation equipment and other linked equipments admittedly owned by the promoter company i.e. GSPL were all vital not only for the satellite business of the assessee, but also for optic figure business.

The two-member Bench of Annapurna Gupta, (Accountant Member) and Senthil Kumar, (Judicial Member) dismissed the appeal filed by the assessee and uphold the decision of Commissioner of Income Tax Appeals  (CIT(A)) reducing profits of the assessee by directing the Revenue from selling of bandwidth business of the assessee to be shared between the assessee and its parent company in the ratio of 30:70 for the satellite and 15:85 ratio from the optic fibre business; thus reducing the profits eligible to deduction under section 80IA(4)(ii) of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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