Expenditure for obtaining Licence to operate Telecommunication Services - Section 35ABB

Expenditure for obtaining licence to operate telecommunication services: deduction mechanics and tax treatment on sale clarified.

Expenditure to obtain a licence to operate telecommunication services is capital in nature and deductible under Section 35ABB if actually paid for acquiring the right; the deduction is computed by spreading the licence fee over the remaining licence years depending on whether payment occurred before or after commencement. A deduction under Section 35ABB excludes depreciation under Section 32(1) for the same expenditure. On transfer, if sale consideration is less than written down value, the shortfall is deductible; if greater, the excess is taxable as business income; alternatively, transfers may be chargeable to capital gains with indexation where applicable. Section 35ABB does not apply to transferring companies in amalgamation/de-merger but applies to the resulting entities. Spectrum fees prior to a certain assessment year were treated as intangible assets, thereafter governed by Section 35ABA.