VODAFONE SOUTH LTD. Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These are two appeals filed by the Assessee Vodafone South Ltd. (formerly known as Vodafone Essar South Ltd. and earlier to that as Hutchison Essar South Ltd.) under Section 260A of the Income Tax Act, 1961 ("1961 Act?) against a common order dated 7th February, 2014 passed by the Income Tax Appellate Tribunal ("ITAT?) in ITA Nos. 4146/Del/2011 and 91/Del/2011 for the Assessment Years ("AYs?) 2002-03 and 2003-04 respectively.

(2.) The Assessee is engaged in the business of providing cellular services in the Delhi Region. The Assessee actually commenced its business from June, 2002. During the AY 2002-03 the Assessee availed of financing facilities from the HSBC Bank, Barakhamba Branch, New Delhi. HSBC's sanction letter dated 2nd August 2001, a copy of which has been placed on record, offered the Assessee a combined credit limit of Rs.340 crores. The fixed rate of interest was 11.5% for the first year but the letter mentioned that this was "an indicative rate and will be firmed up closer to date of drawdown." The interest was payable quarterly. The terms and conditions set out in the Appendix to the said sanction letter stated inter alia that the Assessee could advance the funds availed by it to any other concern, other than in the usual course of business, after receiving the bank?s prior approval.

(3.) By a Board Resolution dated 5th November 2001, it was resolved that the Assessee would make available to its holding company Sterling Cellular Limited (SCL) a sum of Rs.100 crores on terms and conditions to be decided by the Director of the Assessee. The Assessee has placed on record a copy of the relevant statement of account which shows that an amount of Rs. 25 crores was availed of by the Assessee as a loan from HSBC at 11.60% interest per annum on 24th December 2001. Immediately thereafter, on that very date, the Assessee advanced a loan of Rs.25 crores to SCL. A letter from SCL dated 15th April, 2008 addressed to the Assessee confirms that the aforementioned loan of Rs.25 crore was disbursed to it by the Assessee @ 11.75% interest p.a.