In this article, I have explained the provisions related to Expenditure for obtaining a license to operate telecommunication services.
1. In case any capital expenditure is incurred for acquiring a license to operate telecommunication services and actual payment has been made, a deduction of an amount equal to the appropriate fraction shall be allowed in every previous year during which the license shall be in force.
Appropriate fraction = actual payment made x 1/Number of previous years for which the fee is paid.
"Actual payment has been made" means the actual payment of expenditure irrespective of the previous year in which liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee
2. Any expenditure incurred to acquire any right to operate telecommunication services in India before the commencement of business shall be deemed to have been incurred in the year in which business commences and shall be written off in the same manner.
3. In case the licence is sold and capital sum realized from transfer is less than the expenditure remaining unallowed shall be fully allowed to be debited in the year in which it is sold.
4. In case the capital sum realised is more than the amount of expenditure remaining unallowed, the difference between the money realised and amount remaining unallowed shall be chargeable tax as income under the head Profits and gain of business and profession in the previous year in which license is transferred but it shall not exceed the amount which has been written off so far. In case the license is transferred in the year in which business is not in existence, even then this provision shall be applicable as if business is in existence.
5. In case licence is transferred wholly or in part and capital sum realised is not less than the expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed in the year in which such licence is transferred and in any subsequent previous year.
6. In case any part of the licence is sold and money realized is more than the unallowed amount and the excess amount does not exceed the amount allowed so far, such excess shall be taxable as business profit. In case the amount realized does not exceed the unallowed value, the difference can be written off in the remaining number of years.
7. Where under a scheme of demerger, the license is sold by the demerged company to the resulting Indian Company the sub-clauses (2), (3) and (4) shall not be applicable. Note. In case deduction of any expenditure is allowed under this section, such asset shall not qualify for depreciation under section 32(1).
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