Gifted Towers, Genuine Discounts & No TDS on Roaming: ITAT Grants Major Relief to Vodafone

Vodafone West Limited. Vs DCIT (ITAT Mumbai)

Mumbai ITAT decided cross-appeals in the case of Vodafone West Limited (formerly Vodafone Essar Gujarat Limited) for AY 2010-11, granting substantial relief to Assessee. Tribunal held that transfer of Passive Infrastructure (PI) assets by way of gift under a court-approved scheme of demerger qualifies for exemption u/s 47(iii) & depreciation cannot be denied by imputing notional consideration. Allegations of tax avoidance, application of GAAR provisions & invocation of section 50D were rejected.

Tribunal further held that disallowance of network site rentals paid to Indus Towers requires detailed factual examination & restored the issue to AO for fresh adjudication. Disallowance u/s 14A was deleted as no exempt income was earned during the year. Roaming charges paid to domestic & overseas telecom operators were held not liable for TDS, following binding precedents, leading to deletion of disallowance u/s 40(a)(ia) & 40(a)(i).

Trade discounts given to prepaid distributors were held not to be commission & hence not subject to TDS u/s 194H, following Supreme Court ruling in Bharti Cellular Ltd. Deduction u/s 80IA was allowed on SFIS income, foreign exchange gain & other receipts, holding that section 80IA(2A) for telecom operators has a wider scope & does not require “derived from” test. MAT computation u/s 115JB was directed to be made without applying section 14A disallowance. Revenue’s appeal was largely dismissed, while assessee’s appeal was allowed partly with significant relief.