Telecom spectrum licence fee treated as capital expenditure because it secured an enduring operating right.

Licence fee paid for telecom spectrum rights was characterised as capital expenditure because it secured a composite and enduring right to establish, maintain and operate telecommunication services. The Tribunal followed the Supreme Court view in a sister concern matter and held that the payment could not be split into revenue and capital components merely because it was spread over time. The mode or timing of payment did not alter the capital nature of the outlay, and the Revenue's appeal succeeded.

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Issues: Whether the licence fee paid for telecom spectrum rights was revenue expenditure or capital expenditure.

Analysis: The dispute concerned the character of the licence fee claimed as a deductible revenue outlay. The Tribunal noted that the issue stood covered by the Supreme Court decision in the assessee's sister concern case, where licence fee payable under the telecom policy regime was held to be capital in nature and incapable of being artificially bifurcated into revenue and capital components merely because payment was spread over time. The governing principle applied was that the payment secured a composite and enduring right to establish, maintain and operate telecommunication services, and its nature could not be recharacterized by the mode or timing of payment.

Conclusion: The licence fee was held to be capital expenditure, and the Revenue's appeal succeeded.

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