Vodafone's claim for depreciation on “spectrum fee” is allowable under section 32 of the Income Tax Act: ITAT

Vodafone's claim for depreciation on “spectrum fee” is allowable under section 32 of the Income Tax Act: ITAT Appellant Vodafone Idea Limited by filed appeal sought to set aside the impugned order passed by Pr. Commissioner of Income Tax under section 263 of the Income Tax Act by invoking the revisionary jurisdiction qua the assessment order dated 29.12.2017 framed by the Assessing Officer under section 143(3) of the Act. Briefly stated facts necessary for adjudication of the controversy at hand are that; assessee company is into the business of providing cell phone and data services. In its books of accounts assessee company amortized amount spent on acquiring 3G spectrum and claimed 1/20th of the expenditure for the year as fee paid for spectrum. However, for the income tax purposes the assessee company capitalized the item and claimed depreciation @ 25% treating the spectrum as an ‘intangible asset’. The assessee company by filing return of income for A.Y. 2015-16 declared total income at Rs.4350,27,68,335/- by claiming depreciation to the tune of Rs.1682.48 crores @ 25% on the spectrum fees paid by treating it as ‘intangible asset’, which was allowed by the AO under section 32 of the Act. However, the Ld. PCIT by invoking the revisionary jurisdiction called upon the assessee company by way of issuance of notice under section 263 of the Act, as to why the spectrum fee claimed as depreciation by the assessee company, should not have been amortized on pro-rata basis over a period of license in force as per provisions of section 35AB of the Act as the assessment order is erroneous in so far as prejudicial to the interest of the Revenue.

ITAT Order

24. Since the issue as to the allowability of depreciation on spectrum fee as claimed by the assessee under section 32 of the Act and the provisions contained under section 35ABB are not applicable has already been decided in favour of the assessee by the Tribunal, the order of the Tribunal cannot be allowed to be disobeyed by Ld. PCIT merely on the pretext that the department has not accepted the said decision and appeal has already been filed before the Hon’ble High Court. In order to maintain judicial discipline Ld. PCIT had no option but to follow the order. 25. Following the order passed by the co-ordinate Bench of the Tribunal, we are of the considered view that even on merits the assessee’s claim for depreciation on “spectrum fee” is allowable under section 32 of the Act as the provisions contained under section 35ABB of the Act being not applicable to the issue at hand. Hence, the order passed by the AO is not erroneous. So we are of the considered view that the AO has rightly allowed the claim by virtue of the assessment order framed under section 143 of the Act. So the question No.II framed is also decided in favour of the assessee and against the Revenue. 26. In view of what has been discussed above, we are of the considered view that impugned order passed by the Ld. PCIT under section 263 of the Act by invoking revisionary jurisdiction is not sustainable in the eyes of law, hence hereby quashed. Resultantly, appeal filed by the assessee is allowed. Click on the Link Given below to Download the order.