D. Manmohan, Vice-President - This appeal by the assessee-company is directed against the order passed by the DRP-I, Mumbai and it pertains to A.Y. 2009-10.

2. As could be noticed from the grounds of appeal annexed to Form No. 36, assessee raised several grounds in the alphabetical order, i.e. from (A) to (P). At the time of hearing the learned counsel for the assessee submitted that Ground Nos. (A) to (N) are referable to determination of ALP on account of issue of equity shares of Rs.10/- each @ Rs.100/- per share.

3. Brief facts of the issue in dispute are stated as under. Assessee-company was engaged in the business of Passive Telecom Site Infrastructure Service termed as "Infrastructure Service" to cellular mobile telephony operators. For the year under consideration return of income was filed on 30.09.2009 which was subsequently revised on 31st March, 2011 declaring loss of Rs.36.70 crores. Though the original return was processed under section 143(1) of the Act on 21.03.2011, the case having been selected for scrutiny, notice under section 143(2) was issued and thereafter notice under section 142(1) was issued alongwith a questionnaire.

4. During the course assessment proceedings it was noticed that the assessee declared international transactions amounting to Rs.555 crores, in Form No. 3CEB. Since the value of international transactions exceeded Rs.15 crores, the case was referred to TPO, Mumbai to compute 'Arm's length' price in relation to its international transactions. The TPO, in turn, granted sufficient opportunity to the assessee and considered the issue in detail. Vide order dated 30.01.2013, passed under section 92CA(3) of the I.T. Act, he worked out the total transfer pricing adjustment of Rs.4149 crores in relation to various international transactions of the assessee with its associated enterprises (hereinafter referred to as AE). Thereafter the AO prepared a draft order to enable the assessee to file its objections, if any. Based upon the objections filed before the Hon'ble Dispute Resolution Panel, vide directions under section 144C(5) of the Act the Panel adjudicated upon the issue and directed the AO/TPO to rework out the transfer pricing adjustment.

5. The TPO adopted the value of each equity share as Rs.756/- per share whereas according to the assessee it issued 555 lakhs equity shares each at Rs.100/- per share during the relevant financial year. On account of the difference between the price adopted by the assessee and the TPO the adjustment worked out to Rs.3640,80,00,000/-. The DRP considered the value of each equity share @Rs.784.24/-. The DRP observed that the TPO has made a clear finding that the AE is based in Mauritius and has no operational activity and has no credit rating of its own. Hence, in addition to the cost of funds to the assessee itself, in an arm's length scenario, any party would charge additional interest for the risk taken such as currency risk, entity risk and country specific risks. Therefore charging interest at a rate derived at the mark up of 3% for the risk factors on the cost of funds is the right approach. As per the directions of the DRP, adjusted arm's length interest is computed as under:—

6. Accordingly the adjustments under section 92CA of the Act are worked out as under: —

7. Aggrieved, assessee-company is in appeal before us. The learned counsel for the assessee, at the outset, submitted that the issue stands squarely covered by the decision of the Hon'ble Bombay High Court in the case of Vodafone India Services (P.) Ltd. v. Union of India [2014] 368 ITR 1/50 taxmann.com 300/[2015] 228 Taxman 25. He adverted our attention to the order passed by the Hon'ble High Court to submit that in the aforementioned case Vodafone India Services (P.) Ltd. (supra) issued 289224 equity shares of the face value of Rs.10 each on a premium of Rs.8,509/- per share to its holding company and thus received a total consideration of Rs.246.38 crores whereas according to the AO/TPO the fair market value of the equity shares was much higher. Assessee determined the fair market value in accordance with the methodology prescribed by the Government of India under the Capital Issues (Control) Act, 1947 whereas according to the AO/TPO the value of each equity share ought to have been determined at Rs.53,775/- per share and on that basis the shortfall in premium was determined at Rs.45,256/- per share and determined the income that was to be received at Rs.1308.91 crores. Further the sum was treated as deemed loan given by the assessee to its holding company and periodical interest was sought to be charged. The Hon'ble Bombay High Court considered the issue at great length and observed that tax is charged on the resident only in respect of profits earned and not in respect of profits which he would have normally made but not made because of a business association with a non-resident. It was further observed that tax can be charged only on income and in the absence of any income arising, the issue of applying the measure of ALP to transactional value/consideration itself does not arise and also clarified that the Revenue seems to be confusing the measure to a charge and calling the measure a notional income; in the absence of any charge in the Act the issue of shares at a premium cannot be worked out. The court also took notice of the definition of income under section 2(24)(xvi) of the Act and section 56(2)(vii-b) of the Act to indicate that the intention of the Parliament was to tax issue of shares to a resident when the issue price is above its fair market value and not when it is below the fair market value; Parliament has consciously not brought to tax the amounts received from a non-resident for issue of shares, as it would discourage capital inflow from abroad. In the absence of a charging section in Chapter X of the Act, it is not possible to read a charging provision into Chapter X of the Act. It thus, concluded that in the absence of charging provision to tax issue of shares at premium to a non-resident, the occasion to invoke computation provision does not arise. The learned counsel for the assessee also relied upon another decision of the Hon'ble Bombay High Court (Shell India Markets (P.) Ltd. v. Asstt. CIT [2014] 369 ITR 516/51 taxmann.com 519/[2015] 228 Taxman 99 wherein the view taken in the case of Vodafone India Services (P.) Ltd. (supra) was reiterated and also observed that the AO could not have brought to tax the deemed interest on the ground of non receipt of the consideration equivalent to the ALP on issue of equity shares by the assessee. He has also referred to the view taken by the Board wherein it was clarified that the Union Cabinet, Chaired by the Prime Minister Shri Narendra Modi, having decided to accept the order of the Hon'ble Bombay High Court in the case of Vodafone India Services (P.) Ltd. (supra) the Department has decided to accept the view taken by the Hon'ble Bombay High Court. In the light of the decision of the Hon'ble Bombay High Court, which was accepted by the Revenue, the learned counsel for the assessee submitted that in the instant case also the adjustment made by the AO, on account of arm's length price of shares issued and arm's length price of deemed loan to the holding company, has no legs to stand. He further submitted that there are alternative grounds raised in the grounds of appeal which need not be elaborated since the main issue stands squarely covered by the aforecited judgements.

8. The learned D.R. admitted that the issue stands squarely covered by the aforecited decisions. He, however, relied upon the reasons given in the order passed by DRP/TPO/AO.

9. It is not in dispute that the facts and circumstances are identical to the facts of the aforecited decisions. Having regard to the circumstances of the case and in the light of the binding decisions of the Hon'ble Bombay High Court we hold that the AO erred in making the impugned addition referable to the price of shares and of the interest on deemed loan to the holding company. We direct the AO accordingly.

10. Vide ground (Q) the assessee contends that the DRP erred in enhancing the value of transfer pricing adjustment without issuing any notice of enhancement as contemplated under section 144C of the Act. At the time of hearing the learned counsel for the assessee submitted that this issue becomes academic in the event of deciding the main issue arising out of grounds (A) to (N) in favour of the assessee. The learned D.R. also admitted that the issue is of academic importance. Having regard to the circumstances we reject ground (Q) as academic in nature.

11. This leaves us with ground (O) & (P) whereby the assessee contends that the AO erred in disallowing a sum of Rs.36,17,918/- referable to site survey expenditure and professional fees and also raised an alternative contention that in the event of capitalising the expenditure depreciation should have been allowed on such capitalised value. During the course of argument the learned counsel submitted that the assessee is in the business of arranging site infrastructure services to cellular mobile operators, i.e. building towers on the premises taken on lease and antenna provided therein to facilitate the mobile operators to get connected to the mobile services. During the previous year relevant to the assessment year under consideration assessee incurred an expenditure of Rs.34,91,418/- on account of site survey. The AO was of the opinion that it gives enduring benefit to the assessee - therefore it is capital in nature. On the other hand, the assessee submitted before the AO that in the process of carrying on its business it has to survey various sites at a location identified to erect towers. The process involves evaluation of multiple sites and at each site a detailed site survey has to be conducted and only on the sites which were finalised towers are erected. In this process it incurs site survey expenses. Assessee has also incurred legal and professional charges of Rs.1,26,500/- on account of site acquisition. In order to take sites on lease and erect towers, with the objective of earning revenue, it has to conduct site survey, apart from legal and professional expenses and the same is revenue in nature since a site which is rejected would no longer give any enduring benefit to the assessee.

12. The AO was, however, of the opinion that the decision of the Hon'ble Apex Court in the case of Brooke Bond India Ltd.v. CIT [1997] 225 ITR 798/91 Taxman 26 is applicable to the facts of the case, i.e. when benefit of an expenditure is of enduring nature, it should be treated as capital expenditure. Accordingly the impugned amount of Rs.36,17,918/- was disallowed. The reasons given by the AO find place in para 5 of his order.

13. Aggrieved, assessee contended before the DRP (page 38 of DRP's order) that the AO erred in relying upon the decision of the Hon'ble Apex Court in the case of Brooke Bond India Ltd.(supra) since the expenditure is of revenue nature. The DRP, however, chose to follow the decision of the Hon'ble Apex Court (supra) in holding that it is a capital expenditure since it results in an enduring benefit to the assessee.

14. Aggrieved, assessee is in appeal before the Tribunal. The learned counsel for the assessee adverted out attention to Annexure-13 (page 114 on wards of the file) to submit that while conducting site survey the assessee has to look into various sites and finally only few sites are identified to erect towers. The expenditure incurred herein is connected to the sites not selected for erection of towers and thus it cannot be said that the assessee has derived any enduring benefit in the process of site selection. The expenditure is related to business of providing passive telecom infrastructure services and hence the same has to be treated as revenue in nature. He adverted our attention to the decision of the Hon'ble Bombay High Court in the case of Richardson Hindustan Ltd. v. CIT [1988] 169 ITR 516/[1987] 32 Taxman 466 wherein the court observed that an expenditure incurred in connection with capital asset on lease, for a long/fixed period, is more akin to the nature of rent and the legal expenditure thereon is allowable as business expenditure. He also relied upon the decision of the Hon'ble Calcutta High Court in the case of Binani Cement Ltd. v. CIT [I.T. Appeal No. 265 of 2009, dated 23-3-2015] wherein the court accepted the contention of the assessee's counsel regarding the expenditure incurred in construction/acquisition of a new facility which was subsequently abandoned and held that such expenditure has to be treated as incurred for the purpose of business. In the case of CIT v. Anjani Kumar Co. Ltd. [2003] 259 ITR 114/[2002] 124 Taxman 429 (Raj.) the court observed that the advance paid for acquisition of land to set up a factory but abandoned later should be treated as revenue expenditure since no benefit of enduring nature has come into existence because no capital asset has come into existence. If the expenditure is treated as revenue in nature there is no question of allowing depreciation on such asset. He has also relied upon the decision of the ITAT "I" Bench, Mumbai in the case of Idea Cellular Ltd. v. Addl. CIT [2014] 65 SOT 15 (URO)/47 taxmann.com 341 wherein the Tribunal observed that the Revenue has not made out a case that the towers were used for assessee's own business and it was a new source of income and also observed that cellular towers can be a new independent source of income if erected exclusively for leasing to other operators, and finally concluded that when the project of erecting towers were abandoned by the assessee, there was no question of any new asset coming into existence in which event the expenditure incurred thereon is allowable as revenue expenditure. The learned counsel also submitted that similar expenditure was incurred by the assessee in earlier years but upto A.Y. 2008-09 no such disallowance was made by the AO; though for A.Y. 2008-09 notice was issued under section 148 of the Act but later on no disallowance was made referable to the expenditure incurred towards site survey. Even in A.Y. 2011-12, though a query was raised by the AO no disallowance was made. Having regard to the circumstances of the case, even in this year no case was made out by the AO to make the disallowance and the Tax Authorities have wrongly laid emphasis on the decision of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. (supra) but the said case law is not applicable to the present case.

15. On the other hand, the learned D.R. submitted that the ratio of the decision of the ITAT Mumbai Bench in the case of Idea Cellular Ltd. (supra) is not applicable to the facts of this case; in the case of Idea Cellular Ltd. (supra) it incurred expenditure not only for the purpose of leasing it out to the AE but also to others.

16. Joining the issue the learned counsel submitted that the assessee's case has a strong footing because the expenditure was incurred on a leased site which was ultimately abandoned; various sites were surveyed but only a few sites were selected for erecting towers and similar expenditure was allowed in the past and in the subsequent years.

17. We have heard the rival submissions and carefully perused the record. The plea of the assessee that the expenditure pertains to general site survey and all the sites were not selected for erecting towers is not disputed by Revenue. In such an event of the matter it cannot be said that any new asset has come into existence with regard to the abandoned sites. Such being the case it is but natural to conclude that the expenditure incurred by the assessee has not given any enduring benefit to the assessee. The case law relied upon by the assessee squarely applies to the instant case and therefore we hold that the expenditure incurred by the assessee is allowable as deduction and consequently there is no question of allowing depreciation on the same.