Brief of the case:
- The ITAT Delhi in the case of Digital Radio Broadcasting Ltd. held that the migration from one phase to another phase cannot be considered as transfer of license awarded under phase I particularly when the license agreement restrict any type of transfer or assignment of license or rights thereunder.
- Such migration is rater a modification in terms and conditions of license awarded under Phase I and thus,, allowable as deduction for the modified period of license awarded under Phase II as per Sec 35ABB(1).
Facts of the case:
- The assessee company are engaged in the business of FM radio broadcasting under a license awarded from the Ministry of Information and Broadcasting, Government of India for operation of FM radio station in different cities.
- In an auction held in March, 2000 it was awarded a license for radio broadcasting for a period of 10 years against a license fee Rs. 7.12 crores and subsequently there is an escalation clause of 15 % every year during the term of license. Such licenses were made operational from 29.04.2003. As the F M radio industry was suffering from high amount of fixed license fees, Government of India came out with a new policy document dated 13.7.2005 for expansion of F M radio Broadcasting services through private agencies known as Phase – II. Existing broadcasters in metro cities were not entitled to participate in these fresh bids but they were three options as under:
i) Migrate to Phase – II policy regime with fresh term of 10 years provided they had operationalized their FM channels and paid off all license fees dues of Phase –I license up to the cut-off date of 1st April 2005 and were not in default of any other license conditions till the date of migration to phase – II.
ii) Continue to remain under Phase – I policy regime
iii) Surrender their FM channel under Phase -I license in order to exit.
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