License fee by telecoms to be treated as capex not revenue expenditure: SC

The Supreme Court on Monday said that licence fees paid by telecommunication companies such as Bharti Airtel and Vodafone Idea after July 1999 would be treated as capital expenditure and not revenue expenditure.

Capital expenditure is the money a corporate entity spends to buy, maintain or improve its fixed assets such as buildings, vehicles, equipment or land. Meanwhile, revenue expenditure implies administrative expenses such as rent, utilities, property taxes and business travel incurred to meet the operational costs of running a business.

Dismissing the telecom companies’ contention and accepting Income Tax (I-T) department’s arguments, the court said that annual payment based on adjusted gross revenue (AGR) is towards licence fees.