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conditions of amortization of telecom license fees

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked almost 3 years ago

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Aarti Vadnerkar answered over 2 years ago

Eligible expenditure – Any capital expenditure incurred for acquiring any right to operate telecommunication services. Expenditure can be incurred before commencement of business or after commencement of business. Payment has to be actually made for obtaining license. Period of deduction – Such expenditure is allowed as a deduction over the period for which the license remains effective. Calculation is made on yearly basis, therefore date of payment or date of effectiveness of license in a year doesn’t matter. If the expenditure is incurred before the commencement of business, then deduction starts from the year of commencement of the business. Such expenditure is allowed for the remaining time for which the license remains effective. Transfer of license – If whole of license is transferred Where proceeds are less than the expenditure remaining unallowed – Expenditure remaining unallowed as reduced by the amount of sale proceeds is allowed as a deduction in the year of transfer. Where proceeds are more than the expenditure remaining unallowed – Amount of sale proceeds or amount of expenditure incurred to obtaining license (whichever is less) as reduced by the expenditure remaining unallowed shall be taxable as business profits in the year of transfer, whether business exists or not in that year. If the sale proceeds is more than the expenditure incurred to obtain license, then such excess is taxable as Capital Gain under Section 45. If part of the license is transferred Where proceeds are less than the expenditure remaining unallowed – In this case the deduction allowed under this section for remaining period will be calculated as follows: (Expenditure remaining unallowed less sale proceeds)/No. of years remaining for effectiveness of license Where proceeds are more than the expenditure remaining unallowed – Amount of sale proceeds or amount of expenditure incurred to obtaining license (whichever is less) as reduced by the expenditure remaining unallowed shall be taxable as business profits in the year of transfer, whether business exists or not in that year. If the sale proceeds is more than the expenditure incurred to obtain license, then such excess is taxable as Capital Gain under Section 45. In case of amalgamation or demerger, provisions apply to amalgamated/demerged company as they would applies to amalgamating/demerging company.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered over 2 years ago

Deduction will be allowed in respect of any capital expenditure incurred and actually paid by an assessee for acquiring any right to operate telecommunication services over the period of obtaining license. The amortisation shall be allowed in the previous year in which the license fee is actually paid and the subsequent previous years during which the license is in force.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered almost 3 years ago

**CONDITIONS OF AMORTIZATION OF TELECOM LICENSE FEES** The following conditions should be satisfied - 1. The expenditure is capital in nature. 2. It is incurred for acquiring any right to operate telecommunication services. 3. The expenditure is incurred either before the commencement of business or thereafter at any time during any previous year. 3. The payment for the above has been actually made to obtain license. Thanks

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Data?1494421738 samkit kothari answered almost 3 years ago

Deduction will be allowed in respect of any capital expenditure incurred and actually paid by an assessee for acquiring any right to operate telecommunication services over the period of obtaining license. The amortisation shall be allowed in the previous year in which the license fee is actually paid and the subsequent previous years during which the license is in force. Amount of Deduction A deduction equal to the appropriate fraction of the amount of such expenditure shall be allowed. Profit/Loss on Sale of Telecom License On Transfer of Entire License: If the sale proceeds of the licence < the unamortized expenditure, then the deficiency will be allowed as business loss in the year of transfer of such license. If the sale proceeds of the license > the unamortized expenditure, then the surplus will be taxed as Business Income of the year in which the license is being transferred. However, the profits will not exceed the amount of deduction allowed earlier.

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