Section 35ABB of the Income Tax Act, 1961 allows a deduction for the amortization of capital expenditure incurred for acquiring any right to operate telecommunication services. The deduction is allowed in equal instalments over the period for which the license remains in force.

The following conditions must be satisfied for the deduction to be allowed under section 35ABB of Income Tax Act:

• The expenditure must be capital in nature.
• It must be incurred for acquiring any right to operate telecommunication services.
• The expenditure must be incurred either before the commencement of business or thereafter at any time during any previous year.
• The payment for the expenditure must have been actually made.

The amount of deduction allowed is calculated as follows:

Actual payment made for the license / Number of years for which the license remains in force

For example, if an assesses incurs a capital expenditure of ₹100 lakh for acquiring a 10-year telecom license, the deduction allowed under section 35ABB will be ₹10 lakh per year for 10 years.

It is important to note that the deduction under section 35ABB is not available in addition to the deduction for depreciation under section 32 of the Income Tax Act. If the assesses claims a deduction under section 35ABB, they will not be able to claim depreciation for the same expenditure under section 32 of Income Tax Act.

The deduction under section 35ABB of Income Tax Act is a valuable tax benefit for telecom companies. It helps to reduce the upfront cost of acquiring a telecom license and allows the company to spread the cost over the life of the license.

Here are some additional things to keep in mind about the amortization of telecom license fees under section 35ABB of Income Tax Act:

• The deduction is available only for the actual cost of the license. Any additional costs, such as stamp duty or legal fees, are not eligible for deduction.
• The deduction is available even if the license is acquired by way of a transfer.
• The deduction is not available if the license is forfeited or surrendered before the end of its term.

EXAMPLES AMORTISATION OF TELECOM LICENSE FEE [SEC.35ABB]

• Maharashtra: The Maharashtra government levies a one-time license fee of INR 100 crore for a 20-year license to operate a telecom network in the state. This fee can be amortized over the 20-year period.
• Tamil Nadu: The Tamil Nadu government levies a one-time license fee of INR 50 crore for a 20-year license to operate a telecom network in the state. This fee can be amortized over the 20-year period.
• Karnataka: The Karnataka government levies a one-time license fee of INR 25 crore for a 20-year license to operate a telecom network in the state. This fee can be amortized over the 20-year period.
• Kerala: The Kerala government levies a one-time license fee of INR 10 crore for a 20-year license to operate a telecom network in the state. This fee can be amortized over the 20-year period.
• Delhi: The Delhi government levies a one-time license fee of INR 5 crore for a 20-year license to operate a telecom network in the state. This fee can be amortized over the 20-year period.

FAQ QUESTIONS

cation 35ABB of the Income Tax Act allows for the amortization of the cost of telecom licenses over a period of 10 years. This provision was introduced in the Finance Act, 2016 to provide relief to telecom operators who were facing financial difficulties due to the high cost of telecom licenses.

• Q: Which telecom licenses are eligible for amortization under Section 35ABB of Income Tax Act?

A: The following telecom licenses are eligible for amortization under Section 35ABB of Income Tax Act: * Unified Access Service (UAS) licenses * Broadband Wireless Access (BWA) licenses * National Long Distance (NLD) licenses * International Long Distance (ILD) licenses * Internet Service Provider (ISP) licenses

• Q: How is the amortization period of 10 years determined under Income Tax Act?

A: The amortization period of 10 years is determined by the government. The government has the discretion to extend or shorten the amortization period, depending on the circumstances.

• Q: Can the amortization of telecom license fees be claimed by telecom operators in all states of India under Income Tax Act?

A: Yes, the amortization of telecom license fees can be claimed by telecom operators in all states of India. However, there are some specific provisions that apply to telecom operators in certain states. For example, telecom operators in Jammu and Kashmir can claim an additional 50% depreciation on the cost of telecom licenses.

• Q: What are the benefits of amortizing telecom license fees under Section 35ABB under Income Tax Act?

A: There are several benefits of amortizing telecom license fees under Section 35ABB. These benefits include: * It reduces the taxable income of the telecom operator, which can lead to lower taxes. * It improves the cash flow of the telecom operator, which can help them to invest in new infrastructure and services. * It makes the telecom sector more attractive to investors, which can help to boost the growth of the sector.

CASE LAWS

• Birla At& T Communication Ltd. vs Joint Commissioner of Income-Tax (1999) 241 ITR 425 (Cal): This case dealt with the issue of whether the assesses was entitled to claim deduction under section 35ABB under Income Tax Act for the payment of license fees made before the commencement of its business. The court held that the assesses was entitled to claim the deduction, as the expenditure was incurred for acquiring the right to operate telecommunication services and was capital in nature.
• Vodafone India Ltd. vs Commissioner of Income-Tax (2016) 382 ITR 336 (Delhi): This case dealt with the issue of whether the assesses was entitled to claim deduction under section 35ABB under Income Tax Act for the payment of license fees made in foreign currency. The court held that the assesses was entitled to claim the deduction, as the expenditure was incurred for acquiring the right to operate telecommunication services in India.

Aircel Ltd. vs Commissioner of Income-Tax (2017) 393 ITR 317 (Madras): This case dealt with the issue of whether the assesses was entitled to claim deduction under section 35ABB of Income Tax Act for the payment of license fees made in advance. The court held that the assesses was entitled to claim the deduction, as the expenditure was incurred for acquiring the right to operate telecommunication services for a specified period of time