New Delhi, Oct 17 (SocialNews.XYZ) In a major setback to telecom operators in India, the Supreme Court has passed an order recognising the payment of entry fee as well as variable annual licence fee under New Telecom Policy of 1999 as capital expenditure.
It ruled that these fees should be amortised in accordance with Section 35ABB of the Income Tax Act. "...we hold that the payment of entry fee as well as the variable annual licence fee paid by the respondents-assessees to the DoT under the Policy of 1999 are capital in nature and may be amortised in accordance with Section 35ABB of the Act." the top court said in its judgment on Monday.
A bench comprising Justices B.C. Nagarathna and Ujjal Bhuyan was hearing a plea by the Department of Telecommunications over the computation of tax for licence fees to be paid by telecom companies.
The top court further ruled that the Delhi High Court was incorrect in recognising the expenditure incurred towards establishing, operating and maintaining telecom services as partly revenue and partly capital.
It ruled that the nature of payment being for the same purpose cannot have a different characterisation merely because of the change in the manner or measure of payment or for that matter the payment being made on an annual basis.
"In our view, the High Court of Delhi was not right in apportioning the expenditure incurred towards establishing, operating and maintaining telecom services, as partly revenue and partly capital by dividing the licence fee into two periods, that is, before and after 31 July, 1999 and accordingly holding that the licence fee paid or payable for the period upto 31 July, 1999 i.e. the date set out in the Policy of 1999 should be treated as capital and the balance amount payable on or after the said date should be treated as revenue." the top court's order read.
Telcos like Bharti Airtel, Reliance Jio and Vodafone Idea are likely to be majorly impacted by this judgement.
Source: IANS
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