The controversy in these cases revolves around the question, as to, whether, the variable licence fee paid by the respondent-assessees to the Department of Telecommunications (hereinafter referred to as “DoT”, for short) under the New Telecom Policy of 1999 (Policy of 1999) is revenue expenditure in nature and is to be allowed deduction under Section 37 of the Act, or, whether the same is capital in nature, Section 35ABB of the Act. (Para 5)
Having accepted that both components, fixed and variable, of the licence fee under the 1994 Policy regime must be duly amortised, there was no basis to reclassify the same under the Policy of 1999 regime as revenue expenditure insofar as variable licence fee is concerned. (Para 25)
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 annual basis. (Para 26)
Therefore, in the ultimate analysis, the nomenclature and the manner of payment is irrelevant. The payment post 31 July, 1999 is a continuation of the payment pre 31 July, 1999 albeit in an altered format which does not take away the essence of the payment. It is a mandatory payment traceable to the foundational document i.e., the license agreement as modified post migration to the 1999 policy. Consequence of non-payment would result in ouster of the licensee from the trade. Thus, this is a payment which is intrinsic to the existence of the licence as well as trade itself. Such a payment has to be treated or characterized as capital only. (Para 27)
SUPREME COURT OF INDIA
2023 STPL(Web) 350 SC
[2023 INSC 917]
C.I.T., Delhi Vs. Bharti Hexacom Ltd
CIVIL APPEAL NO(S). 11128 OF 2016-Decided on 16-10-2023.
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