The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has considered Vodafone Idea Limited’s (Vi) claim for depreciation on the spectrum fee it paid for the financial year 2014-15. This is expected to bestow relief for the operator in a Rs 4.08 billion tax claim.
Earlier, Vi had declared a total income of more than Rs 43.50 billion in its tax return filed for the assessment year 2015-16 and claimed a depreciation of Rs 16.82 billion at 25 per cent on the spectrum fee it had paid. It treated spectrum as an ‘intangible asset’, which is allowed under Section 32 of the Income Tax Act.
To this end, the assessing officer allowed depreciation of Rs 4.08 billion that the company sought to amortise during the year on its 3G spectrum fee. Meanwhile, the principal commissioner of I-T issued a notice, disallowing depreciation citing Section 35ABB of the Act, stating that spectrum fee claimed as depreciation should not have been amortised on a pro-rata basis over the period in which a telecom licence was in force. In addition, Section 35ABB covers expenditure incurred for acquiring a licence to operate telecom services, and the deduction under it is available on the actual payment.
Further, the principal commissioner explained that the assessment order was erroneous and prejudicial to the interest of the government. However, the ITAT ruled that assessee’s claim for depreciation on spectrum fee is allowable under Section 32 of the Act.