- Conditions for allow ability:
- Expenditure should be capital in nature.
- It should be incurred for the purpose of acquiring any right to operate telecommunication services.
- Payment should have been actually made to obtain a license for claiming deduction.
- It may be incurred either before commencement of business or any time during the previous year.
- Amount of deduction:
- License fees actually paid before commencement of business: License fee actually paid before commencement of the business / No. of years from the previous year of commencement of business to the previous year in which license expires.
- License fees paid after the commencement of business: License fee actually paid after the commencement of the business / No. of years from the previous year in which license fee actually paid to the previous year in which license expires.
- Consequences in case of transfer:
- Determination of un allowed amount: Actual cost of license Less Amount of deduction already allowed u/s 35ABB.
- Treatment of consideration received on transfer:
- Where whole license is transferred and net consideration is less than “Un allowed Amount”: Business Expenditure = Un allowed amount Less Net Consideration.
- Where part of license is transferred and net consideration is less than “Un allowed Amount”: Amount of deduction: Un allowed Amount- Net Consideration / Remaining period of license.
- Where whole or part of license is transferred and net consideration is more than the “Un allowed Amount”:
- Net Consideration is more than un allowed amount but less than Original Cost of license: Business Income = Net Consideration Less Un allowed amount.
- Net Consideration is more than Original Cost: Business Income = Original cost of license Less Un allowed amount.
- Capital Gain = Net Consideration Less Original cost of license
- Treatment in the hands of the transferee in all the above cases: The amount paid by the transferee towards the acquisition of license shall be allowed in equal installments over the balance license period.
- No further deduction for transferor: In case the whole license is transferred or part of license is transferred for consideration more than the un allowed amount, no deduction shall be allowed in the hands of the transferor in the previous year in which such license is transferred or in subsequent previous years.
- Treatment in case of Amalgamation / De-merger: Section 35ABB (2) or (3) or (4) shall not apply to amalgamating company or De-merged company. The same shall apply in the hands of Amalgamated Company or Resulting Company respectively.
- No Depreciation: Depreciation u/s 32 shall not be allowed on such assets.
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