Rpg Cellular Investment &Holdings (P) Ltd & Anr v. Assistant Commissionerof Income-Tax & Anr

THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 05.04.2013 +W.P.(C) 8645/2011 & CM 19553/2011 RPG CELLULAR INVESTMENT &HOLDINGS (P) LTD & ANR ... Petitioners versus ASSISTANT COMMISSIONEROF INCOME-TAX & ANR ... Respondents Advocates who appeared in this case:For the Petitioner: Mr Somnath Shukla for Mr Ajay VohraFor the Respondents : Mr Abhishek Maratha with Ms Anshul Sharma CORAM:-HON’BLE MR JUSTICE BADAR DURREZ AHMEDHON’BLE MR JUSTICE R.V.EASWAR JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1.This writ petition is directed against the notice dated 30.03.2011issued by the Assistant Commissioner of Income Tax, Circle- 15(1), NewDelhi under Section 148 of the Income Tax Act, 1961 (hereinafterreferred to as ‘the said Act’) seeking to re-open the assessment of thepetitioner in respect of the assessment year 2004-05 on the allegation thatincome had escaped assessment within the meaning of Section 147 of thesaid Act. 2.The purported reason for initiating the proceedings under Section148 were recorded on 28.03.2011 and a copy thereof was forwarded tothe petitioner along with the impugned notice dated 30.03.2011 itself.The purported reason for the allegation that the income had escapedassessment was, inter alia, as under:- “1.The assessment of M/s RPG Cellular Investment andHoldings Pvt. Ltd. for the assessment year 2004-05 wascompleted after scrutiny under Section 143(3) on 26.10.2006determining a loss of ` 3,04,45,816/-.After verifying therecord it is seen that the assessee claimed and was allowedexemption of ` 1,30,86,32,213/- towards long term capital gainunder Section 10(23g) of the Income Tax Act, 1961, thoughapproval for claiming the exemption was not received from theGovernment.The omission resulted in underassessment ofincome of ` 1,30,86,32,213/-.” (underlining added) 3.The petitioner furnished its objections to the said proposed re- assessment proceedings. Those objections were disposed of by virtue ofan order dated 21.11.2011. In the said order dated 21.11.2011, which isalso impugned in this writ petition, the Deputy Commissioner of IncomeTax, Circle-15(1), New Delhi, inter alia, observed as under:- “6.1From the above, it is clear that no approval was grantedto the assessee company. The assessee company has furnishedwrong evidence as the name of the assessee company appears on the certificate of M/s. RPG Cellular Services Ltd and notRPG Cellular Investment and Holding Pvt Ltd.Therefore, theassessee is not entitled for exemption under Section 10(23G) asthe Notification filed by the assessee is not in the name of the”assessee company. (underlining added) 4.It is the contention of the learned counsel for the petitioner that the purported reason for initiation of the re-assessment proceedings is non-existent. According to the learned counsel for the petitioner it appearsthat, as per the reason recorded on 28.03.2011, no approval had beenobtained for exemption under Section 10(23G) of the said Act. It was notclear as to whether the revenue was referring to the approval to be givenby the investee company (RPG Cellular Services Limited) or by theinvestor company (RPG Cellular Investment & Holdings Private Limited– the petitioner herein).However, the petitioner made it clear in itsobjections that the approval had been obtained by the investee company(RPG Cellular Services Limited), which was the requirement in law. Inthe present case, the petitioner is the investor company (RPG CellularInvestment and Holding Private Limited), whereas the investee companyis M/s. RPG Cellular Services Limited. 5.The learned counsel for the petitioner also pointed out that theorder dated 21.11.2011 and, in particular, paragraph 6.1 thereof is clearlyerroneous inasmuch as the approval that is required for entitlement ofexemption under Section 10(23G) is with regard to the investee companyand not the investor company. However, in the said paragraph 6.1 of theorder dated 21.11.2011, it has been noted that the certificate, which hasbeen furnished, was wrong inasmuch as it was in the name of M/s. RPGCellular Services Limited and not RPG Cellular Investment and HoldingPrivate Limited, implying thereby that the approval should have beengiven in respect of the investor company and not the investee company. 6.We entirely agree with the submission made by the learnedcounsel for the petitioner that the approval and the certificate that isrequired for exemption under Section 10(23G) of the said Act has to havereference to the investee company and not the investor company. Section10(23G), as it existed at the relevant time, to the extent relevant, is set outas under:- “(23G)any income by way of dividends, other thandividends referred to in section 115-O, interest or long-termcapitalgainsofaninfrastructurecapitalfundoraninfrastructure capital company or a co-operative bank frominvestments made on or after the 1st day of June, 1998 by way of shares or long-term finance in any enterprise or undertakingwholly engaged in the business referred to in sub-section (4) ofsection 80-IA or sub-section (3) of section 80-IAB or a housingproject referred to in sub-section (10) of section 80-IB or ahotel project or a hospital project and which has been approvedby the Central Government on an application made by it inaccordance with the rules made in this behalf and whichsatisfies the prescribed conditions: A plain reading of the said provision makes it clear that it is theinvestee company which has to have approval of the Central Government.This becomes further clear from a reading of the Rule 2E of the Income Tax Rules, 1962 ((hereinafter referred to as ‘the said Rules’). Sub-rules (3) and (4) of Rule 2E are relevant. They are set out herein below:- “(3)The Central Government shall approve an enterprise forthe purposes of clause (23G) of section 10, if such enterprise iswholly engaged in the eligible business. (4)The Central Government may, before approving anenterprise, call for such documents (including audited annualaccounts) or information from the enterprise, as it thinksnecessary in order to satisfy itself that such enterprise is whollyengaged in the eligible business and that Government may alsomake such enquiries as it may deem necessary in this behalf.” It is apparent that the approval that is to be granted by the Central Government is with respect to an enterprise which is wholly engaged in the eligible business. ‘Eligible business’ has also been defined in theExplanation to Rule 2E as, inter alia, the business referred to in Section80-IA(4) and which fulfils the conditions specified in Section 80-IA(4).In the present case, this has reference to the investee company which isM/s. RPG Cellular Services Limited.Therefore, the respondents werewrong in requiring the petitioner to furnish an approval with regard to thepetitioner company, which is the investor company. Insofar as theinvestee company is concerned, the petitioner had already placed onrecord an approval under Section 10(23G) dated 18.11.2004, which is tothe following effect:- (TO BE PUBLISHED IN PART II SECTION 3(ii) OF THEGAZETTE OF INDIA)GOVERNMENT OF INDIAMINISTRY OF FINANCEDEPARTMENT OF REVENUECENTRAL BOARD OF DIRECT TAXES New Delhi, the 18[th]November, 2004 NOTIFICATION (TO BE PUBLISHED IN PART II SECTION 3(ii) OF THEGAZETTE OF INDIA)GOVERNMENT OF INDIAMINISTRY OF FINANCEDEPARTMENT OF REVENUECENTRAL BOARD OF DIRECT TAXES New Delhi, the 18[th]November, 2004 NOTIFICATION S. No.It is notified for general information that theapproval to the enterprise, listed at para (3) below has beenrenewed by the Central Government for the purpose of section10(23G) of the Income-tax Act, 1961, read with rule 2E of theIncome-tax Rules, 1962 with effect from the Asstt. Year 2004-05 to the Asstt. Year 2015-16 (upto 29.11.2014) i.e. upto theend of period of 20 years as mentioned in Ministry of Communications, Department of Telecommunications (VASCELL)letterF.No.842-47/2000-VAS/Vol.IVdated29.01.2001 issued to amend the terms of licence agreement No.842-21/93-TM dated 30[th]November, 1994 of earlier, in theevent of violation of the terms of the agreement aforesaid. 2.The approval is subject to the conditions that – (i)the enterprise/ undertaking will conform to andcomply with the provisions of section 10(23G) ofthe Income-tax Act, 1961, read with rule 2E of theIncome-tax Rules, 1962;comply with the provisions of section 10(23G) ofthe Income-tax Act, 1961, read with rule 2E of theIncome-tax Rules, 1962; (ii) theCentralGovernmentshallwithdrawthisapproval if the enterprise/ undertaking:-approval if the enterprise/ undertaking:- (a)ceases to carry on the eligible business asdefined in Explanation (b) to Rule 2E of I.T.Rules, 1962; ordefined in Explanation (b) to Rule 2E of I.T.Rules, 1962; or (b) fails to maintain books of account and get suchaccounts audited by an accountant as requiredby sub-rule (6) of rule 2E of the Income-taxRules, 1962; oraccounts audited by an accountant as requiredby sub-rule (6) of rule 2E of the Income-taxRules, 1962; or (c)fails to furnish the audit report as required bysub-rule (6) of rule 2E of the Income-tax Rules,1962.sub-rule (6) of rule 2E of the Income-tax Rules,1962. 3.The enterprise/undertaking approved is – M/s Aircel Cellular Limited (formerly M/s RPG CellularServices Ltd and M/s Mobile Telecom Services Ltd), 5[th]Floor,Spencer Plaza, 769, Anna Salai, Chennai for their project ofproviding Cellular Mobile Telephone Service in Chennai MetroService Area as per licence agreement No. 842-21/93-TM dated30[th]November, 1994 and as amended vide Ministry ofCommunications, Department of Telecommunications (VAS CELL) letters F. No. 842-47/2000-VAS/Vol. IV dt 29.01.2001and 25.09.2001 consequent to Migration to revenue sharingregime of New Telecom Policy -19999 (F. No 205/56/2000-ITA-II) (Vol.I) Sd/- (Nidhi Singh)Under Secretary to the Government of IndiaCentral Board of Direct TaxesNotification No. 282/2004 (F. No. 205/56/2000/ITA.II) (Vol.I) To The Manager,Government of India Press,Mayapuri, New Delhi. Copy to:- 1.The applicant. 2.All CCsIT and DGsIT 3.C & AG of India 4.Joint Secretary and Legal Advisor, Ministry of Law, NewDelhi.Delhi. 5.Addl. Secretary (Admn.), Deptt. Of Revenue, New Delhi.6.DIT (RSP & PR) (Bulletin Section), New Delhi.7.MinistryofCommunications,DepartmentofTelecommunications, Govt. of India, New Delhi.6.DIT (RSP & PR) (Bulletin Section), New Delhi.7.MinistryofCommunications,DepartmentofTelecommunications, Govt. of India, New Delhi. (Nidhi Singh)Under Secretary to the Government of IndiaCentral Board of Direct Taxes” This notification had also been produced at the time of the originalassessment under Section 143(3) of the said Act. Apart from this, we had asked the learned counsel for the petitioner to produce the originalapproval granted by the Central Government inasmuch as the notification dated 18.11.2004 appears to be a renewal granted by the CentralGovernment. The learned counsel for the petitioner has, today, placedbeforeusanotificationdated16.01.2001,wherebytheCentralGovernment had granted the original approval for the purposes of Section10(23G) of the said Act read with Rule 2E of the said Rules in respect of the assessment years 2001-02, 2002-03 and 2003-04.The said (Nidhi Singh)Under Secretary to the Government of IndiaCentral Board of Direct Taxes” This notification had also been produced at the time of the originalassessment under Section 143(3) of the said Act. Apart from this, we had asked the learned counsel for the petitioner to produce the originalapproval granted by the Central Government inasmuch as the notification dated 18.11.2004 appears to be a renewal granted by the CentralGovernment. The learned counsel for the petitioner has, today, placedbeforeusanotificationdated16.01.2001,wherebytheCentralGovernment had granted the original approval for the purposes of Section10(23G) of the said Act read with Rule 2E of the said Rules in respect of the assessment years 2001-02, 2002-03 and 2003-04.The said notification clearly applies to the investee company, namely, M/s. RPGCellular Services Limited.The present case is concerned with theassessment year 2004-05 for which the approval had already been placedon record being the notification dated 18.11.20004. 7.In the aforesaid circumstances, there is absolutely no reason for re-opening the assessment under Section 147 of the said Act. The purportedreason for re-opening does not exist.Consequently, we set aside andquash the notice dated 30.03.2011 as also the order dated 21.11.2011.The writ petition is allowed. There shall be no order as to costs. BADAR DURREZ AHMED, J R.V.EASWAR, J APRIL 05, 2013SR