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Deduction for Whom

This section is for telecom companies like Airtel ,Vodafone etc.

Amt of Deduction

These companies obtain license from the government for a fix period of time to provide the services.

As per this section this license fees shall be allowed equally over the period of license. 


Suppose, Rs50 crores paid for 5 years by a telecom company to government as license fees for telecom service in Delhi or example 10 crores in each year


Deduction Allowed from When?

License PurchasedDeduction Allowed from Year when

After Commencement of Business

Payment Made

Before Commenceent of Business

Business Commenced


Question 1

The company paid license fees of Rs 60 crores for 5 years license for  the period 1 may 2014 to 30 April 2019.What is the amount of deduction each year


In this case the license is operational for 5 years but 6 previous Years are covered in this period.

2014 - 2015, 2015 -2016,  2016 - 2017,2017 - 2018, 2018 - 2019, 2019 – 2020

 Deduction will be allowed equally over 6 years

i.e.60/6=10 lacs every year as shown below

Previous Year or Financial YearDeduction Allowed
Total Deduction60



Question 2

Suppose in last question the company paid 36 crores on 1st may 2014 and remaining  24 crores on 1st may 2015 . How is deduction available.


36 lacs wil be available equally in 6 years i.e. 36/6 =6 every year, from 2014-15 Financial year onwards

 24 lacs will be avaialble equally in 5 years i.e. 24/5=4.8 every year, from 2015-16 Financial year onwards as shown below 

Previous Year or Financial YearDeduction Allowed of 36 lacsDeduction Allowed of 24 lacsTotal Deduction
2014-156 6
Total Deduction362460



Question 3

The company was formed on 1st April 2010 , it obtained 5 years telecom license on 1st may 2010  for 40 Crores.(From 1/05/2010 to 30/04/2015)

However,It started its operation from 31st may 2012.

When will deduction start?


Deduction Allowed only from the year business commenced 31st May 2012 i.e. Financial Year 2012-13 and will be available till expiry of licence(30/04/2015)




How much deduction every year?


No of years from 2012-13  to 2015-16=4

Deduction every year=40/4=10 Cr



  1. If deduction claim under this section on license fees then deprecation can’t be claimed under Section 32
  2. If assessee follows cash system then this expense must be paid to claim deduction

However , if assessee follows mercantile system then whole expense should be incurred to claim the deduction.

Sale of License

There can be 3 cases

  1. If WDV > Selling Price
    Balance Deduction Allowed in Year of Sale

  2. If Selling Price > WDV
    then Selling Price - Original Cost = LTCG/STCG
    Original Cost - WDV = Business Income of the year of sale

  3. Original Cost > Selling Price > WDV
    then no LTCG/STCG
    Selling Price - WDV = Business Income


Question 4

Suppose License purchased on 1 May 2014 for 40 Cr for 3 years

It was sold 18 Nov 2015 for 26 Cr 

What is the WDV at the time of sale?


License is for 4 financial years(2014-15,2015-16,2016-17 and 2017-18

Hence deduction allowed each year

=40/4=10 Cr

WDV at the time of sale


=30 Cr



What is the taxable treatment on Sale


WDV > Selling Price(30>26)

Hence, remaining 4 lac deduction allowed  at the time of sale



Question 5

Solve Q4 assuming license was sold for 42 lacs


In this case 

then Selling Proce - Original Cost = LTCG/STCG

(42 - 40 = 2lacs is STCG)


Original Cost - WDV = Business Income

40 - 30 = 10 lacs = Business Income

of the year of sale



Question 6

Solve Q4 assuming license was sold for 39 lacs


In this case, there is no LTCG/STCG

Selling Price-WDV=Business Income

39-30 = 9 lacs = Business Income

of the year of sale


  1. Income Tax
  2. PGBP Income
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com.