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TMI Blog2025 (1) TMI 1487X X X X Extracts X X X X X X X X Extracts X X X X ..... iture.
Thus, held that the payment of licence fee to DTO under Telecom Policy, 1999 was capital in nature and allowed this appeal of Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... erm right to use the telecommunication spectrum and thus, the expenditure amounting to Rs. 159,916,462/- is in the nature of capital expenditure which would bring enduring benefit to the assessee. Thus, this amount of Rs. 159,916,42/- is hereby capitalized. However, depreciation @ 25% amounting to Rs. 39,979115/- is allowed to the assessee and the remaining amount of Rs. 119,937,347/- (Rs.159,916,462-Rs.39,979,115) is hereby disallowed and added back to the income of the assessee." Aggrieved, revenue preferred appeal before CIT(A). 5. The CIT(A) after going through the submissions of the assessee and noting that the similar additions were made in A.Ys. 2011-12, 2013-14 and 2015-16 and the same were deleted by his predecessor's orders and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court held that the license fee paid under 1994 policy regime must be amortized as there is no basis to reclassify the same under the Policy of 1999 regime as revenue expenditure. The Hon'ble Supreme Court observed in this para 25 of the judgment as under:- 25. In the light of the aforesaid discussion and having retard to the tests and principles forged by this Court from time to time, as detailed in paragraphs hereinabove, we shall proceed to consider whether the High Court of Delhi was right in apportioning the licence fee as partly revenue and partly capital by dividing the license fee into two periods, i.e. before and after 31 July, 1999 and accordingly holding that the license fee paid or payable for the period upto 31 July 1999 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such a right is not preserved under the scheme of the Telegraph Act which we have detailed above. Hence, the apportionment made by the High Court is not sustainable. iii. The fact that failure to pay the annual variable licence fee leads to revocation or cancellation of the licence, vindicates the legal position that the annual variable licence fee is paid towards the right to operate telecom services. Though the licence fee is payable in a staggered or deferred manner, the nature of the payment, which flows plainly from the licensing conditions, cannot be recharacterized. A single transaction cannot be split up, in an artificial manner into a capital payment and revenue payments by simply considering the mode of payment. Such a charact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994 Policy regime the payment of licence fee consisted of two parts: (a) A fixed payment in the first three years of the licence regime; (b) A variable payment from the fourth year of the licence regime onwards, based on the number of subscribers. Having accepted that both components, fixed and variable, of the licence fee under the 1994 Policy regime be duly amortised, there was no basis to reclassify the same under the Policy of 1999 regime as revenue. 10. As the issue is covered by the judgment of Hon'ble Supreme Court in the case of CIT vs. Bharti Hexacom Ltd: 458 ITR 593 (SC) in favour of the Revenue and against assessee wherein it is held that the payment of licence fee to DTO under Telecom Policy, 1999 was capital in nature, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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