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 Purchased Deduction 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

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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.

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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?

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How much deduction every year?

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  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?

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What is the taxable treatment on Sale

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Question 5

Solve Q4 assuming license was sold for 42 lacs

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Question 6

Solve Q4 assuming license was sold for 39 lacs

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.