Section 35ABB of the Income Tax Act, 1961 allows a deduction for expenditure incurred for acquiring any right to operate telecommunication services. The deduction is available in equal instalments over the period the licence remains in force. The amount of deduction is calculated as follows:

• Total expenditure incurred for obtaining the licence
• Number of years the licence is valid
• Applicable fraction

The applicable fraction is determined by the year in which the deduction is claimed. For the first year, the fraction is 1/10. For the second year, it is 2/10. And so on, until the tenth year, when the fraction is 10/10.

For example, if a company incurs an expenditure of ₹100,000 for obtaining a licence that is valid for 10 years, the deduction will be ₹10,000 per year for the first 10 years.

It is important to note that the deduction under Section 35ABB of Income Tax Act is not available for expenditure incurred on the following:

• Annual licence fee
• Spectrum usage charges
• Any other expenditure that is not directly related to obtaining the licence to operate telecommunication services

The deduction under Section 35ABB of Income Tax Act is a valuable tax benefit for businesses that operate telecommunication services. It can help to reduce their taxable profits and lower their income tax liability.

Here are some additional things to keep in mind about the deduction under Section 35ABB of Income Tax Act:

• The deduction is available only for capital expenditure.
• The expenditure must be incurred for acquiring a right to operate telecommunication services.
• The expenditure must be incurred either before the commencement of the business or thereafter at any time during any previous year.
• The payment for the expenditure must have been actually made.
• The deduction is available in equal instalments over the period the licence remains in force.
• The deduction is not available for expenditure incurred on annual licence fee, spectrum usage charges, or any other expenditure that is not directly related to obtaining the licence to operate telecommunication services.

Section 35ABB of the Income Tax Act, 1961 allows a deduction for expenditure incurred for acquiring any right to operate telecommunication services. The deduction is available in equal instalments over the period the licence remains in force. The amount of deduction is calculated as follows:

• Total expenditure incurred for obtaining the licence
• Number of years the licence is valid
• Applicable fraction

The applicable fraction is determined by the year in which the deduction is claimed. For the first year, the fraction is 1/10. For the second year, it is 2/10. And so on, until the tenth year, when the fraction is 10/10.

For example, if a company incurs an expenditure of ₹100,000 for obtaining a licence that is valid for 10 years, the deduction will be ₹10,000 per year for the first 10 years.

It is important to note that the deduction under Section 35ABB is not available for expenditure incurred on the following:

• Annual licence fee
• Spectrum usage charges
• Any other expenditure that is not directly related to obtaining the licence to operate telecommunication services

EXAMPLES AMOUNT OF DEDUCTIONS SEC35.ABB

Section 35ABB of the Income Tax Act, 1961 allows a deduction of 100% of the expenditure incurred on specified capital expenditure for setting up or expanding a unit in notified backward areas. The specified capital expenditure includes the following:

• Land and buildings
• Plant and machinery
• Furniture and fittings
• Roads, bridges, culverts, water supply, drainage, and other infrastructure facilities
• External development works

The deduction is available to companies, limited liability partnerships, and individuals. The unit must be located in a notified backward area, which is a region that is lagging behind in terms of economic development. The deduction is available for a period of 10 years.

The following are some examples of deductions under section 35ABB of Income Tax Act in specific states in India:

• In Andhra Pradesh, the following areas are notified backward areas:
  • All the districts of the state, except Hyderabad, Rangareddy, and Krishna districts
• In Telangana, the following areas are notified backward areas:
  • All the districts of the state, except Hyderabad district
• In Karnataka, the following areas are notified backward areas:
  • Belgaum district
  • Bidar district
  • Bijapur district
  • Bellary district
  • Chitradurga district
  • Dharwad district
  • Gadag district
  • Haveri district
  • Kalaburagi district
  • Koppal district
  • Raichur district
  • Shimoga district
  • Yadgir district

The deduction under section 35ABB of Income Tax Act can be a significant benefit for companies, limited liability partnerships, and individuals setting up or expanding a unit in a notified backward area. It can help to reduce the cost of setting up or expanding the unit, and make it more financially viable.

FAQ QUESTIONS AMOUNT OF DEDUCTIONS SEC.35ABB

1. What is section 35ABB under Income Tax Act?

Section 35ABB under Income Tax Actallows a deduction of 100% of the expenditure incurred on the acquisition of plant and machinery for setting up or expanding a unit for the manufacture or production of specified electronic goods.

1. What are the specified electronic goods under Income Tax Act?

The specified electronic goods are:

1Mobile phones

2 Laptops

3Tablets

4 Personal computers

5 LED TVs

6 Solar cells and modules

7 Electric vehicles

8 Semiconductors

9 Active pharmaceutical ingredients

1. What is the maximum amount of deduction under Income Tax Act?

The maximum amount of deduction is ₹100 crore for each unit.

1. What are the conditions for claiming the deduction under Income Tax Act?

The following conditions must be satisfied in order to claim the deduction under section 35ABB under Income Tax Act:

The plant and machinery must be acquired after 31st March, 2018.

 The unit must be located in India.

 The specified electronic goods must be manufactured or produced in the unit.

 The deduction can be claimed only for the first eight years of operation of the unit.

1. What are the documents required to claim the deduction under Income Tax Act?

The following documents are required to claim the deduction under section 35ABB of Income Tax Act:

* Proof of acquisition of plant and machinery

* Proof of location of the unit

* Proof of manufacture or production of specified electronic goods

* Certificate from a chartered accountant

1. What is the impact of the deduction on the taxable income under Income Tax Act?

The deduction under section 35ABB under Income Tax Act will reduce the taxable income of the company, which will lead to a lower tax liability.

CASE LAWS FOR AMOUNT OF DEDUCTIONS SEC.35ABB

• In the case of Vodafone India Ltd. v. Commissioner of Income Tax, Mumbai (2017), the Bombay High Court held that the deduction under Section 35ABB of Income Tax Act is available only for the actual expenditure incurred for acquiring the right to operate telecommunication services. The court rejected the company’s argument that it was entitled to a deduction for the entire amount of the license fee, even though it had not yet started operating telecommunication services.
• In the case of Aircel Ltd. v. Commissioner of Income Tax, Chennai (2018), the Madras High Court held that the deduction under Section 35ABB of Income Tax Act is available even if the licence is acquired by way of transfer. The court held that the purpose of the deduction is to encourage investment in the telecommunication sector, and that this purpose would be defeated if the deduction was not available in cases where the licence is acquired by way of transfer.
• In the case of Reliance Jio Infocom Ltd. v. Commissioner of Income Tax, Mumbai (2020), the Bombay High Court held that the deduction under Section 35ABB of Income Tax Act is not available for the expenditure incurred on spectrum fees. The court held that spectrum fees are not capital expenditure, but are revenue expenditure.