CIT Vs. TATA COMMUNICATIONS INTERNET SERVICES LTD

JUDGEMENT

(1.) Admit on the following substantial questions of law :

(2.) This is an appeal preferred by CIT against the order dt. 26th Feb., 2010 passed by learned Income-tax Appellate Tribunal ("the Tribunal" for short) whereby the Tribunal set aside the decision of CIT(A) and allowed the appeal of the assessee allowing deductions under s. 80-IA of the IT Act ("the Act" for short) for the asst. yr. 2006-07 holding inter alia that the Revenue cannot decline deduction for subsequent year for alleged violation of s. 80-IA(3) of the Act. Claiming of deduction under s. 80-IA of the Act can only be considered for the year of formulation of business. The Tribunal also held that the provisions of s. 80-IA(4)(i) to s. 80-IA(3) of the Act will not apply to the business of the assessee which was formulated and/or commenced prior to the asst. yr. 2004-05.

(3.) The assessee company which was incorporated under the name of C.G. Graphnet (P) Ltd. which was engaged in the business of providing telecommunication services and on 15th Nov., 1996, its name was changed to CG Fax Mail Ltd. and the company was converted into a public limited company on 23rd Sept., 1997. The company was acquired by Direct Internet Ltd. in August, 2000 and its name was changed to Primus Telecommunications Ltd. w.e.f. 27th Sept., 2000. The company was stated to be in the business of providing fax mail services. The Department of Telecommunication granted license to the assessee company on 5th Jan., 1999 for carrying of business activities for Internet Services and Internet Telephony Services from October, 2000. As per the license issued on 5th Jan., 1999, w.e.f. October, 2000, the company started two new services viz. Internet Services and Internet Telephony Services. Thereafter, this license was updated as the internet services and internet telephony services provider from 2002. The business of Fax and Email services which were being carried out earlier were discontinued and in the financial year 2003-04 the company was solely carrying on the business of internet service provider and internet telephony services. The assessee had claimed that since the first invoice was cut on 17th Oct., 2000 and it filed IT return regularly and as per the provisions of s. 80-IA(4) of the Act, it was entitled to deduction right from the asst. yr. 2001-02. It was claimed that as per the provisions of 80-IA(2), the assessee could claim deduction under s. 80-IA(4) for 10 years out of 15 years starting from the year in which the assessee started its business being asst. yr. 2001-02. Since the assessee had not claimed deduction under s. 80-IA(4) of the Act for the asst. yrs. 2001-02, 2002-03 and 2003-04 and the first year of claim under s. 80-IA(4) was 2004-05 and as It had been granted deduction under s. 80-IA(4) of the Act for the asst. yrs. 2004-05 and 2005-06, it was entitled to deduction for the relevant assessment year i.e. 2006-07.