Indus Towers Ltd (formerly known as Bharti Infratel Ltd) Vs DCIT (ITAT Delhi)
ITAT Delhi held that initial transaction of demerger of Passive Infrastructure Assets [PIAs] without any consideration qualifies as gift is already affirmed by the Hon’ble Delhi High Court while approving the demerger scheme. Thus, the income tax department again questioning the transaction not permissible.
Facts- The assessee company was formed as a joint venture between Bharti Infratel Limited (‘BIL’), Vodafone India Limited (‘VIL’) and Aditya Birla Telecom Limited (‘ABTL’) [referred as Operating Companies- OpCos.] and was incorporated on 20-11-2007 with the objective of providing Pl support services to the telecom operating entities of the shareholder groups [OpCos.] and other independent telecom operators. For consolidation of their PIAs, the shareholders (including the relevant group entities) entered into a Framework agreement dated 8-12-2007, which inter-alia provided a two-step restructuring with effect from 1-4-2009 ie. Transfer of the PIAs owned by the shareholder groups to their respective Tower Companies (‘Tower Co(s)’) under a Court approved scheme; and Merger of the TowerCos with applicant under a Court approved Merger Scheme.
Since the PIAs were acquired by the TowerCos without any consideration, transfer of the PIAs ‘gift’ As per Explanation 2 to section 43(1) of the Act, where an asset is acquired by the assessee by way of ‘gift’ or ‘inheritance’, the actual cost of the asset to the assessee shall be the actual cost to the previous owner as reduced by the depreciation that would have been allowable to the assessee. In other words, the tax written down value (‘WDV’) of the assets in the hands of the transferor/ donor is considered as the ‘actual cost’ of such gifted assets in the hands of the recipient/donee.
