The Supreme Court will decide whether the interest paid on overdues to the Department of Telecom (DoT) can be treated as operating expenditure by operators. A three-judge bench has admitted a petition filed by Vodafone Essar Gujarat and decided to adjudicate whether such interest could be treated as operating expenditure.
Earlier, the Income Tax Appellate Tribunal (ITAT) had held that the such interest would not be treated as a part of the opex. The dispute is over the return filed for the financial year 1999-2000 by Fascel Ltd, now Vodafone Essar Gujarat Ltd. In the return filed in December 1999, the company had declared a loss of Rs 86 crore.
IT officials found that Vodafone had claimed Rs 38.66 crore as expenditure for interest on its licence fee dues, as well as Rs 1.28 crore paid to Wireless Planning Commission in spectrum (radio waves) charges.
In 2002, the I-T department disallowed Vodafone’s claim on interest and payment made to WPC under section 35 ABB and 43B of the Income Tax Act, 1961. It said the payments were not made during the relevant period.
Section 35ABB deals with the expenditure for obtaining licence to telecom operators.
It was challenged before the ITAT, which said in May, 2006 that the fee paid to WPC was part of the expenditure but the interest was not, as it was not covered under the section.
Vodafone moved the Delhi High Court which, in December 2008, affirmed the ITAT order on the WPC issue. Now, the company has moved the Supreme Court.