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Expenditure for obtaining License to operate Telecommunication Services [ Section-35ABB]

Section 35ABB was inserted with effect from the assessment year 1996-97.


Deduction under section 35ABB is available if the following conditions are satisfied—

1.         The expenditure is capital in nature.

2.         It is incurred for acquiring any right to operate telecommunication services.

3.         The expenditure may be incurred either before the commencement of business or at any time thereafter.

4.         The payment for which has actually been made to obtain licence.

If all the above conditions are satisfied, then one can claim deduction under section 35ABB. if, however, these conditions are not satisfied, then deduction under section 35ABB is not available [one may claim deduction under section 37(1)].


The payment will be allowed as deduction in equal instalments over the period starting from the year in which such payment has been made (if payment is made before the commencement of business, deduction is available from the year in which business is commenced) and ending in the year in which the licence comes to an end. It may be noted that the deduction starts from the year in which actual payment of expenditure is made irrespective of the previous year in which the liabffity for the expenditure is incurred according to the method of accounting regularly employed by the assessee.


Any profit or loss on sale of telecom licence is taken into consideration while computing business income. The relevant rules are given below. In the
table given below, WDV is the written down value (i.e., the expenditure incurred remaining unallowed) on the first day of the previous year in which telecom licence is transferred—

Different Situations

Tax treatment

1. Entire telecom license is transferred

1.1 When sale consideration is less than WDV

WDV minus sale consideration is allowed as deduction under section 35ABB in the year of sale.

1.2 When sale consideration is more than WDV

The excess of sale consideration over WDV is taxable as business income in the year of sale (subject to rules given in Notes 1, 2 and 3 below).

2. When a part of telecom license is transferred

2.1 When sale consideration is less than WDV

WDV minus sale consideration will be allowed as deduction over the unexpired period.

2.2 When sale consideration is more than WDV

Same tax treatment as is given in 1.2

Notes :

1.         In situations 1.2 and 2.2, the amount taxable as business income cannot exceed deduction allowed under section 35ABB in the earlier years.

2.         The aforesaid amount is taxable whether (or not) business is in existence.

3.         In respect of the same expenditure no further deduction will be allowed under section 35ABB.


Where, under the scheme of amalgamation, a telecom license is transferred by the amalgamating company to the amalgamated company (being an Indian company), then deduction will not be available under section 35ABB to the amalgamating company. However, the provisions of section 35ABB continue to apply to the amalgamated company as these would have applied to the amalgamating company if the latter had not transferred the license.

• A similar rule is applicable from the assessment year 2000-01 in the case of demerger. For this purpose, subsection (7) provides that the aforesaid provisions relating to transfer of license shall not be applicable in the case of demerged company and the provisions of the section allowing deduction of expenditure incurred for obtaining the license shall be applicable to the resulting company as it would have applied to demerged company.


Where a deduction for any previous year is claimed and allowed under section 35ABB, then no deduction shall be allowed under section 32 for the same previous year or any subsequent previous year in respect of the same expenditure.


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