The Supreme Court has given a major relief for telecom service providers, including Bharti Airtel, Reliance and Vodafone Idea, by waiving off interest due on income tax arising from an October 16, 2023 judgment, which held that telecom licence fee should be treated as entirely “capital in nature”.
A Bench of Justices B.V. Nagarathna and Ujjal Bhuyyan agreed to a waiver of the interest levy after the assessees (telcos) said payment of the tax demand from the year 2000-2001 was itself a “heavy burden”. The telcos had urged the court to at least waive the interest payable on the tax for the period.
Centre objects
Additional Solicitor General N. Venkataraman, appearing for the income tax department, had objected to the request. He had contended that it was only logical for the assessees to pay the interest if they were meeting the tax demand.
After giving thoughtful consideration to the submissions, the Bench, in a four-page order dated May 17, published on Monday, directed that “since the judgment of this court is dated October 16, 2023, and having regard to the Telecom Policy, which commenced from the year 1999, the payment of interest for the period for which the tax demand is now to be met in respect of these cases stands waived”.
Not a precedent
However, the court made it clear that the order would not act as a precedent.
“The order shall not be a precedent in any other case as we have passed this order bearing in mind the peculiar facts of this case and having regard to the lapse of time in litigation,” the Bench underscored.
The National Telecom Policy of 1994 was substituted by the new Telecom Policy in July 1999.
Telecom Policy 1999
The 1999 policy had stipulated that a licencee (telco) would be required to pay a one-time entry fee, and additionally, a licence fee on a percentage share of gross revenue.
The October 2023 judgment had concluded that the payment of the licence fee was “intrinsic to the existence of the licence as well as trade itself. Such a payment has to be treated or characterised as capital only”.
“Consequence of non-payment would result in ouster of the licensee from the trade,” the Supreme Court had observed in its October 2023 judgment.
The apex court judgment was based on appeals against a Delhi High Court judgment of December 2013. The High Court had confirmed an Income Tax Appellate Tribunal finding that the variable licence fee paid by telcos under the 1999 policy was revenue expenditure and not capital.
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