The Supreme Court has given a major relief for telecom service providers, including amongst others Bharti Airtel, Reliance and Vodafone Idea, by waiving off interest due on income tax arising from an October 16, 2023 judgment that had held that telecom licence fee should be treated as entirely “capital in nature”.
After hearing the counsel of the assessees (telcos) who said that payment of the tax demand from the year 2000-2001 itself was a “heavy burden”, Judges B.V. Nagarathna and Ujjal Bhuyyan approved a waiver of the interest levy. The telcos had requested for the atleast scrapping of interest payable on the tax for the period.
Centre objects
However, this request was objected to by Additional Solicitor General N. Venkataraman representing Income Tax Department. It was his submission that it was only logical for the assessees to pay interest if they were paying tax.
The Bench having gone through all the arguments carefully in its four-page order dated May 17 directed on Monday stated: “Since the judgment of this court is dated October 16, 2023, and having regard to Telecom Policy which commenced from year 1999; payment of interest for this period during which these cases now have to meet up with tax demand stands waived”.
Not a precedent
Nevertheless, today’s bench made it clear that this order will not be used as a guiding principle.
“This order shall not be called upon as a precedent in any other case as we have passed this order bearing in mind peculiar facts of this case and having regard to passage of time in litigation,” emphasized by bench.
The National Telecom Policy of 1994 was replaced by new Telecom Policy in July 1999.
Telecom Policy 1999
Under this policy issued in year 1999 ,a licensee (telco) would need to make payment of a one-time entry fee and also, pay license fee being a proportionate share of gross revenue generated by the licensee.
According to October 2023 judgment, “payment of license fee is inherent with the identity and existence of the license as well as trade itself. Such payment must only be treated or characterized as capital.”
The Supreme Court had emphasized that “Consequence of non-payment would result in ouster of the licensee from trade” in its October 2023 judgment.
Delhi High Court’s Appeals against which were decided by apex court were based on judgments delivered on December 2013. The High Court affirmed an ITAT finding that variable licence fee paid under policy for year 1999 are not capital but revenue expenses.
