INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H”: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRIYOGESH KUMAR U.S.,JUDICIAL MEMBER (Assessment Year: 2012-13)

Vodafone Idea Ltd Vs. ACIT, (earlier known as Vodafone Circle-26(2), Mobile Services Ltd) New Delhi

10^th Floor, Birla Centurion, Century Mills Compound, Pandurang Budhkar Marg, Worli, Mumbai, Maharastra (Appellant) (Respondent)

PAN: AAACB2100P Assessee by : Shri Salil Kapoor, Adv Ms. Soumya Singh, Adv Revenue by: Shri S. K,. Jadav, CIT DR Date of Hearing 13/08/2025 Date of pronouncement 24/10/2025

O R D E R

PER SHRI S. RIFAUR RAHMAN:

1. The Assessee Vodafone Idea Ltd (hereinafter referred to as ‘assessee) by filing the present appeal sought to set aside the impugned order dated 30.08.2019 passed by the Assessing Officer (AO) under section 143(3) r.w.s. 143C of the Income Tax Act, 1961 (for short ‘the Act’) inconsonance with the order passed by the Dispute Resolution Panel-2(DRP) dated 27.06.2019 u/s 144C(5) and order dated 30.01.2016 passed by Transfer Pricing Officer (TPO) under section 92CA(3) for AY

2016-17.

2. Brief facts of the case are, the assessee (along with its erstwhile entities except one entity) had filed a demerger scheme ("Demerger Scheme") for transfer of their Passive Infrastructure ('PI') assets to Vodafone Infrastructure Limited (VInfL.') with effect from 01.04.2009. The Demerger Scheme in case of two erstwhile entities, as approved by the Hon'ble Delhi High Court (in the case of erstwhile VSL) and Madras High Court (in the case of VCL) provided that book value of the „PI‟ assets transferred shall be carried to the Balance Sheet as miscellaneous expenditure and amortized over a period of 10 accounting years beginning from 01 April 2009. The unamortized balance of the said miscellaneous expenditure amounted to Rs. 1879,70,00,000/- reported in the stand-alone Balance Sheets of the erstwhile two entities as on 31 March 2011. Accordingly, as a result implementation of the Demerger Scheme, all the transferor entities therein (including erstwhile VSL and VCL) accounted for such transfer of „Pl‟ assets as per the accounting treatment provided as per the method prescribed in the Demerger Scheme. While erstwhile VCL and VSL (ie. Fifth and Seventh Transferor Company in the Demerger Scheme) followed the treatment specified in clause (b) above. Other transferor companies (including the Assessee on a standalone basis) followed the accounting treatment specified in clause (a) above. This accounting treatment was in line with the Court approved Demerger Scheme. Subsequently, when erstwhile VCL and VSL merged into the Assessee with effect from April 1, 2011 under a Court approved scheme for amalgamation ('Merger Scheme'), the accounting policies of merging and merged entities had to be aligned in view of AS-14 which specifies that a uniform set of accounting policies shall be followed pursuant to amalgamation. Accordingly, with respect to the accounting of „Pl‟ assets transferred by the merging entities, since there was difference in the accounting policy of erstwhile VCL and VSL in comparison to the Assessee, which had written off the loss arising on transfer of „PI‟ assets to Profit and Loss account, the unamortized balance of 'Miscellaneous Expenditure' reported in the standalone financial statements of erstwhile VCL and VSL (as on March 31, 2011) was charged off to the profit and loss account of the Assessee during FY 2011-12 in line with the accounting policy followed by the Assessee (which was to debit the book value of the transferred „Pl‟ assets to the profit and loss account). The AO has made an adjustment amounting to INR 1,879,70,00,000 to the book profits under section 115JB of the Act for the reason that the same is debited to the Profit & Loss account but is not added back by the Assessee for the purpose of MAT calculation. The said adjustment was upheld by the DRP. Pursuant thereto, the A.O., in terms of the impugned final Assessment Order, ma