Supreme Court Restores Vodafone Appeal on Spectrum Royalty Deduction Issue

PCIT Vs Vodafone Idea Ltd. (Supreme Court of India)

Summary: The Supreme Court of India, in Principal Commissioner of Income Tax Vs Vodafone Idea Ltd. (earlier known as Vodafone Mobile Services Ltd.), allowed a miscellaneous application seeking partial recall of its earlier judgment and restoration of Civil Appeal No. 153 of 2021 for adjudication of a specific income-tax issue concerning royalty payments for spectrum usage. The Division Bench comprising Justice B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh passed the order on 30 September 2024. The Court condoned the delay in filing the miscellaneous application and directed that Vodafone’s appeal be separated from the batch of telecom-related income-tax appeals disposed of on 16 October 2023.

The dispute arose from the Supreme Court’s earlier judgment in CIT, Delhi Vs Bharti Hexacom Ltd., delivered on 16 October 2023 in Civil Appeal No. 11128 of 2016 and connected matters. That judgment addressed the tax treatment of variable licence fees paid by telecommunications operators and decided the issue in favour of the Revenue. Vodafone’s Civil Appeal No. 153 of 2021 had been included in the batch. However, Vodafone subsequently contended that its appeal involved an additional and distinct question concerning whether royalty paid to the Wireless Planning Commission (WPC) for spectrum usage was deductible as revenue expenditure or was capital in nature.