The New Telecom Policy of 1999’s entry fee and variable annual license fee are to be considered capital expenses and amortized in accordance with Section 35ABB of the Income Tax Act, the Supreme Court said on Monday.
The Delhi High Court’s allocation of the costs involved for setting up, running, and maintaining telecom services as capital and revenue was deemed incorrect by the supreme court.
“We hold that the payment of entry fee as well as the variable annual licence fee paid by the respondents-assessees to the DoT (Department of Telecommunication) under the Policy of 1999 are capital in nature and may be amortized in accordance with Section 35ABB of the (Income Tax Act),” Justices BV Nagarathna and Ujjal Bhuyan wrote in their decision regarding an appeal by the Income Tax Department clubbed with 33 similar petitions.
According to the National Telecom Policy of 1999, telcos were required to pay a one-time license cost to launch their business as well as an ongoing license charge based on their annual revenue. In contrast to the previous policy, which required them to pay the entire license price up front, this was allowed.
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