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SC Judgement on telecom service UPSC NOTE


  • The Supreme Court has given a major relief for telecom service providers, including Bharti Airtel, Reliance and Vodafone Idea, by waiving off interest due on income tax arising from an October 16, 2023 judgment, which held that telecom licence fee should be treated as entirely “capital in nature”.

  • The Bench agreed to a waiver of the interest levy after the assessees (telcos) said payment of the tax demand from the year 2000-2001 was itself a “heavy burden”. 

  • The telcos had urged the court to at least waive the interest payable on the tax for the period


  • The 1999 policy had stipulated that a licencee (telco) would be required to pay a one-time entry fee, and additionally, a licence fee on a percentage share of gross revenue.

  • The October 2023 judgment had concluded that the payment of the licence fee was “intrinsic to the existence of the licence as well as trade itself. Such a payment has to be treated or characterised as capital only”

  • “Consequence of non-payment would result in ouster of the licensee from the trade,” the Supreme Court had observed in its October judgment.

  • The apex court judgment was based on appeals against a Delhi High Court judgment of December 2013

  • The High Court had confirmed an Income Tax Appellate Tribunal finding that the variable licence fee paid by telcos under the 1999 policy was revenue expenditure and not capital.

Capital Expenditure

  • Capital Spendings, often known as CapEx, refers to the cash spent by a corporation, enterprise, or organization to buy, update, and maintain fixed assets. 

  • Such assets include its Plant, Properties, and types of equipment, mainly consisting of workstations, equipment, framework, and more

  • Such investments are often long-term and provide value for more than one accounting time

  • When a business or organization invests in assets to generate future profits, such expenditures are termed as capital expenditures

  • Companies and corporations may utilize capital expenditure to purchase new tools or maintain assets.

The following are some examples of capital expenditures

  • Buildings for Office (expenses concerning acquisition and sustenance of a building)

  • Printers, coffee machines, computers, furniture, and other appliances are examples of workplace equipment.

  • Copyrights, Trademarks, Patents, and so forth

Revenue Expenditure

  • Revenue Expenditure is not the same as capital expenditure since they do not ensure return in future.  

  • Revenue expenditure includes spending on/in business to meet operational/maintenance cost, that may not concern with immediate return in future. 

  • It doesn’t raise income. 

  • The assets are depleted in a fiscal year, with no future advantages

  • The prices of assets are steady or fixed

  • A new purchase is required because the asset/s is/are finished in a year

  • This is an ongoing expense. 

It is divided into two categories: 

  • Direct payments include the expenditure of producing raw materials and converting them into final goods.

  • Indirect Expenses: These are exclusively associated with the selling and distributing of products, not with production.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: SC Judgement on telecom service UPSC NOTE
SC Judgement on telecom service UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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