BNN Telecom Ltd. engaged in the business of telecommunication service, now BNN Telecom Ltd. wants to obtain a telecommunication license for 5G service. BNN Telecom Ltd approaches the acquired license and finds that the l

CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · PYQS · December 2025
BNN Telecom Ltd. engaged in the business of telecommunication service, now BNN Telecom Ltd. wants to obtain a telecommunication license for 5G service. BNN Telecom Ltd approaches the acquired license and finds that the license cost will be ₹15 crores for a period of 10 years and there are two options to make the payment. (i) The entire license fee is to be made at the time of obtaining the license i.e., 18.07.2022. (ii) ₹6.90 crores paid at the time of obtaining and the remaining ₹8.10 crores paid in equal two instalments in the next 2 years. Before the commencement of business BNN Telecom Ltd, acquired all the information so BNN Telecom Ltd. find out all the pros and cons of the business. Expert says that after at least two years if you are not in the position to run the business then you can sell the license either for: (i) ₹11 crores or (ii) ₹16.25 crores. BNN Telecom Ltd. approached you to give the report in which include all the taxation aspects for the financial year 2022-23 to financial year 2024-25. You are required to prepare a report in respect of section 35ABB of the Income Tax Act, 1961.

Answer & Explanation:

Calculation of the Amount of Deduction: 1. If the entire license fee is paid during the financial year 2022-23 on 18.07.2022 at the time of obtaining a license and in that case the license shall be in force till 18.07.2032 i.e. FY 2032-33 Therefore, deduction under section 35ABB shall be allowed for 11 relevant previous year (i.e. FY 2022-23 till FY 2032-33 till licence shall be in force) in equal amount 1.50 crore each year beginning from 2022-23 to 2031-32 The fee paid during the year/unexpired period of license = ₹15 crores/11 years Amount of deduction for the previous year 2022-23 and subsequent previous years = ₹1.36 crore 2. If the entire license fee is not paid during the financial year 2022-23. Amount of deduction allowed in the previous year 2022-23 The fee paid during the year/unexpired period of license = ₹6.90 crores/1 years Amount of deduction for the financial year 2022-23 = ₹62.72 lakhs Amount of deduction allowed in the previous year 2023-24 1/11th the amount paid in the previous year 2022-23= ₹62.72 lakhs ₹4.05 crores / 10 years = ₹40.50 lakhs Amount of deduction for the financial year 2023-24 = ₹103.22 lakhs (62.72 lakhs + 40.50 lakhs) Amount of deduction allowed in the previous year 2024-25 Amount of deduction allowed with respect to previous payment = ₹103.22 lakhs Amount of deduction paid during current year ₹4.05 crores/9 years = ₹45 lakhs Total Amount of deduction for the financial year 2024-25 = ₹148.22 lakhs For the previous year 2024-25 to 2032-33 the amount of deduction will be ₹148.22 lakhs Computation of amount of expenses of license remaining unallowed on the Date of Sale Particulars If the entire license fee is paid during the financial year 2022-23 If the entire license fee is not paid during the financial year 2022-23 Previous year 2022-23 License cost ₹15 crores ₹15 crores Less: Deduction allowed in the PY 2022-23 ₹1.36 crore ₹0.6272 crore Unallowed license fees as on 01/04/2023 ₹13.64 crores ₹14.3728 crore Less: Deduction allowed in the PY 2023-24 ₹1.36 crore ₹1.0322 crore Unallowed license fees as on 01/04/2024 ₹12.28 crores ₹13.3406 crore Case 1: Where the license sold for ₹11 crores. Particulars If the entire license fee is paid during the financial year 2022-23 If the entire license fee is not paid during the financial year 2022-23. Sale price ₹11 crores ₹11 crores Less: Unallowed license fees as on 01/04/2024 ₹12.28 crores ₹13.3406 crore The deficit shall be allowed as a deduction in the PY 2024-25 ₹1.28 crores ₹2.3406 crore Case 2: Where the license sold for ₹16.25 crores. Particulars If the entire license fee is paid during the financial year 2022-23 If the entire license fee is not paid during the financial year 2022-23 Cost of the license ₹15 crores ₹15 crores Less: Unallowed license fees as on 01/04/2024 ₹12.28 crores ₹13.3406 crore Business Income ₹2.72 crores ₹1.6594 crore Sale Price ₹16.25 Crores ₹16.25 Crores Less: Cost of the license ₹15 crores ₹15 crores Short-term Capital Gain ₹1.25 crore ₹1.25 crore

Topics: Corporate Tax Planning

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