ITAT Allows Voda Idea to Claim Depreciation on Sepectrum Fee 

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has allowed Vodafone Idea’s claim for depreciation on the spectrum fee it paid for the financial year 2014-15, bringing some relief for the cash-strapped telecom company in a Rs.408 crore tax claim.

Vodafone India, which merged with Idea Cellular in 2018 to from Vodafone Idea, had in its tax return filed for the assessment year 2015-16 declared a total income of more than Rs.4,350 crore and claimed a depreciation of Rs.1,682.48 crore at 25% 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.

The assessing officer allowed depreciation of Rs.408.01 crore that the company sought to amortize during the year on its 3G spectrum fee. But the principal commissioner of I-T issued a notice, disallowing depreciation citing Section 35ABB of the Act, said spectrum fee claimed as depreciation should not have been amortized on a pro-rate basis over the period in which a telecom licence was in force.

Section 35ABB covers expenditure incurred for acquiring a licence to operate telecom services, and the deduction under it is available on the actual payment.

The principal commissioner said 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. S-ET

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