Glimpses of Supreme Court Rulings

58 C.I.T. Delhi vs. Bharti Hexacom Ltd.

(2003) 458 ITR 593 (SC)

Capital or Revenue expenditure — Amortisation of Licence fees to operate telecommunication services — Payment of one-time entry fee and licence fee based on percentage of annual revenue earned — Both payments are capital in nature and to be amortised.

The National Telecom Policy of 1994 was substituted by the New Telecom Policy of 1999 dated 22^nd July, 1999. The said Policy of 1999 stipulated that the licencee would be required to pay a one-time entry fee and additionally, a licence fee on a percentage share of gross revenue. The entry fee chargeable would be the fee payable by the existing operator up to 31,sup>st July, 1999,calculated up to the said date and adjusted upon notional extension of the effective date. Subsequently, w.e.f. 1^st August, 1999, the licence fee was payable on a percentage of Annual Gross Revenue (“AGR”) earned. The quantum of revenue share to be charged as a licence fee was to be finally decided after obtaining recommendation of the Telecom Regulatory Authority of India (“TRAI”) but in the meanwhile, the Government of India fixed 15 per cent of the gross revenue of the licencee as provisional licence fee. On receipt of TRAI’s recommendation by the Government