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Some of the expectations of telecom industry<\/a> from Budget 2017<\/a> are:\n
\nClarification that section 35ABA of the Act is not applicable retrospectively i.e. in relation to spectrum<\/a> allotted prior to April 1, 2016<\/strong>
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The manner of deduction towards spectrum fee, while computing taxable income, has been a subject matter of conflicting interpretations. While the Industry<\/a> players have taken a position that spectrum is clearly in the nature of acquisition of intangible assets and is thus, eligible for tax depreciation under section 32 of the Income-tax Act, 1961 (‘Act’).
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\nThe tax authorities have, however, taken an incorrect position that spectrum payments are eligible for amortization under section 35ABB of the Act (which governs amortisation of license fee for acquisition of telecom license), in complete ignorance of the fact that section 35ABB of the Act is a specific section which provides for amortisation of license fee and does not, in any manner, cover spectrum payments within its ambit. Position propagated by the tax authorities has resulted into unnecessary litigation for the telecom companies.
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\nWith the introduction of Section 35ABA by Finance Act 2016 with effect from April 1, 2016, which specifically provides for amortization of spectrum payments, and the memorandum explaining the section, it is amply clear that the past spectrum i.e. spectrum assigned prior to April 1, 2016 is governed by section 32 of the Act (and the same cannot be brought within the ambit of section 35ABA of the Act).
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\nIn the above backdrop, considering that section 35ABA has been introduced and made effective from April 1, 2016, the telecom Industry is expecting that a clarification would be issued by the CBDT stating that newly inserted Section 35 ABA of the Act does not apply for spectrum assigned prior to April 1, 2016, and the past spectrum which is acquired and put to use prior to April 1, 2016 would continue to be covered under section 32 of the Act.
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\nSection 35ABA of the Act – Inclusion of expenditure incurred (including interest on loans availed for acquisition of the right to use spectrum) upto the date of put to use of spectrum for amortization, with the expenditure incurred for acquiring the right to use spectrum<\/strong>
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\nSection 35ABA of the Act provides for amortization of the ‘expenditure incurred for acquiring any right to use spectrum.’ The language of the section suggests that only the expenditure incurred for the purpose of and upto the date of acquisition of the ‘right to use spectrum’ should be covered and creates uncertainty regarding the tax treatment of other expenditure (including interest) incurred post acquisition of the spectrum but for the purpose of actual ‘put to use’ of the acquired spectrum. Disallowance of such expenditure (on the basis of non-deployment of spectrum) without capitalization thereof for the purposes of amortization under section 35ABA of the Act would lead to a permanent disallowance, which cannot be the intent of the legislature.
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\nThe Industry is, therefore, expectant that the Government would bring an amendment to section 35ABA of the Act to provide for capitalization of any expenditure (including interest) incurred for the purpose of and upto the date of ‘put to use’ of the acquired spectrum, with the expenditure incurred for acquisition of the spectrum, and amortization thereof under section 35ABA of the Act.
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\nTDS on telecommunication charges paid to foreign operators - Position under Act and non-application of Explanation 5 and 6 to section 9(1)(vi) to DTAAs<\/strong>
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\nExplanation 5 and 6 to section 9(1)(vi), inserted with retrospective effect from June 1, 1976, intend to bring within the purview of royalty, transmission by satellite, cable, optic fibre, or similar technology; and also, use of equipment irrespective of any actual possession or control by the user.
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\nPayment made for anything which is widely available in the open market to all those willing to pay cannot constitute ‘royalty’ and is essentially in the nature of business income. Further, use of its own equipment\/ process by a service provider to provide services cannot be viewed as use of such equipment\/ process by the recipient.
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\nExplanation 5 and 6 should not be construed in a manner so as to bring a service arrangement within the ambit of royalty. The Legislature, in its wisdom, has provided two separate provisions relating to ‘royalty’ [u\/s 9(1)(vi)] and ‘fees for technical services (u\/s 9(1)(vii)] under the Act and the said provisions are mutually exclusive and do not overlap. The distinction which has been made by legislature between aforesaid concepts has to be maintained and given the intended effect.
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\nIn view of the unwarranted litigation and hardship faced by the telecom Industry owing to introduction of Explanation 5 and 6 to section 9(1)(vi) of the Act, particularly in relation to the telecommunication charges paid to non-resident telecom service providers (which are generally tax protected), the telecom Industry is expecting the Government to come out with the following amendments\/ clarifications:
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\na) Amendment to Explanation 5 and 6 to section 9(1)(vi) of the Act to provide that Explanations would not have any bearing on standard service agreements, including telecommunication service agreements between two telecom operators.
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\nb) Clarification that Explanations 5 and 6, introduced retrospectively, are not applicable on the transactions which were entered into before the Explanations were brought in the Act, which is also in line with the policy of the Government of not bringing a retrospective amendment.
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\nc) Amendment to Explanation 5 and 6 to section 9(1)(vi) of the Act to provide that these explanations would not have any bearing on the interpretation of the term ‘royalties’ under the Double Taxation Avoidance Agreements (‘DTAAs’) and the definition of “process” as defined in domestic tax law should not be imported into DTAAs.
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\nd) Applicability of section 194H of the Act to discount extended by telecom companies to pre-paid distributors – prescription of a lower rate
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\nTelecom companies transfer prepaid vouchers and SIM cards to independent distributors at a discount, who further transfer the same to Retailers and\/ or subscribers. Since the distributors are not agents of the telecom companies, discount allowed to them does not qualify as ‘commission’ for the purposes of section 194H of the Act. However, the tax authorities have adopted a contrary position that withholding under section 194H of the Act is required on discount extended to the pre-paid distributors, as such discount is in the nature of ‘commission’. This issue has resulted in severe litigation, with contrary decisions of the judiciary on this matter.
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\nWhile the Industry firmly believes that provisions of section 194H of the Act are not applicable to discount extended to pre-paid distributors, in order to put an end to litigation, the Industry is acceptable to a position of applicability of TDS provisions on pre-paid discount. However, given the low margins for the distributors, the Industry expects the Government to come with a lower withholding tax rate (say 2%) since the presently applicable rate of 5% would result in a drastic reduction in the margins of small scale distributors causing significant hardship to them.
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\nThe Telecom Industry, therefore, expects the Government to prescribe a lower withholding tax rate to be applied on the discount extended to the pre-paid distributors.
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\nNon-applicability of withholding tax provisions on payments made by a telecom operator to another for spectrum trading<\/strong>
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\nSpectrum trading guidelines provide that telecom companies which have acquired spectrum may grant the right to use the same to other telecom companies and state that only ‘outright transfer of right to use the spectrum’ shall be permitted.
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\nUnder the Indian Income-tax Act, royalty includes use\/ right to use of equipment, process, patent, invention, model, secret formula or process etc. Thus, spectrum, being in the nature of air waves\/ electromagnetic waves does not fall within the purview of royalty. Further, royalty does not include any consideration which is in the nature of ‘capital gains’ (however, consideration for outright transfer of right to use spectrum may be taxed as business income in the hands of the transferor). While royalty (reflecting right to use) is subject to withholding tax under section 194J, no withholding shall be required if the consideration is in lieu of outright transfer of spectrum since (i) spectrum per se does not qualify as equipment process, patent, etc.; and (ii) transfer of the right to use spectrum is in nature of sale per se.
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\nIn view of the above discussion, with the expectation that the Government would eliminate the potential dispute that would arise as a result of spectrum trading payments being characterised as royalty, the telecom Industry is hopeful that necessary clarification would be issued to the effect that payments made in connection with the trading\/ sharing of spectrum are not in the nature of royalty and hence, do not attract withholding tax obligations under the provisions of section 194J the Act or any other withholding tax provisions.
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\n(The article was written by Vishal Malhotra, Tax Telecom Leader, EY and Prashant Singhal, Global Telecommunications Leader, EY. )<\/body>","next_sibling":[{"msid":56868435,"title":"Intex wallet app available on Google Play","entity_type":"ARTICLE","link":"\/news\/intex-wallet-app-available-on-google-play\/56868435","category_name":null,"category_name_seo":"telecomnews"}],"related_content":[],"msid":56868851,"entity_type":"ARTICLE","title":"What telcos expect from the Budget 2017","synopsis":"Here's what telecom industry expects from Budget 2017","titleseo":"telecomnews\/what-telcos-expect-from-the-budget-2017","status":"ACTIVE","authors":[],"Alttitle":{"minfo":""},"artag":"ETTelecom","artdate":"2017-01-30 12:56:09","lastupd":"2017-01-30 13:04:06","breadcrumbTags":["Budget 2017","industry","spectrum","telecom industry","Income Tax","GST"],"secinfo":{"seolocation":"telecomnews\/what-telcos-expect-from-the-budget-2017"}}" data-authors="[" "]" data-category-name="" data-category_id="" data-date="2017-01-30" data-index="article_1">
的一些期望电信行业从预算2017是:澄清部分35 aba的行为不适用回顾性即有关光谱2016年4月1日之前分配
的方式向光谱的费用扣除,计算应纳税所得额时,一直是一个主题相互矛盾的解释。而行业球员位置光谱显然是在收购无形资产的本质,因此,符合税收折旧部分32个人所得税法案下,1961年(“法”)。
税务机关已经采取一个不正确的位置,谱下支付有资格获得摊销部分35 abb的行为(管理许可费用的摊销收购电信许可),完全不知道这一事实的部分35 abb的行为是一种特定部分提供许可费用的摊销和不以任何方式,覆盖在它的范围内频谱支付。位置由税务机关传播使得成电信公司的不必要的诉讼。
通过引入部分35阿坝2016年财政法与效应从4月1日,2016年,专门提供频段支付的摊销,和备忘录解释部分,充分清楚的是,过去的光谱即频谱分配在4月1日之前,2016年的32节是由法案(同样不能带范围内的部分35 aba的法案)。
在上述背景下,考虑到部分引入了35阿坝,有效的从4月1日,2016年,澄清的电信行业预计将发布的CBDT声称新插入的部分35 ABA的行为不申请频谱分配在4月1日之前,2016年,和过去的光谱获取和使用在4月1日之前,2016年将继续承担部分32的行动。
节35 aba的行为——包含的费用(包括贷款利息利用频谱使用权)的收购到投入使用日期摊销的光谱与费用获得正确的使用频谱
35节aba的行动提供了摊销的费用获得任何权利使用频谱。”部分的语言表明,只有为目的的费用和到收购日期的频谱使用权应覆盖和创造了不确定性对其他支出的税收待遇(包括利息)所收购后频谱但是为了实际的使用获得的光谱。拒绝这样的支出(non-deployment谱)的基础上没有资本化、摊销的目的下节35 aba的行为将导致永久的拒绝,不能立法的目的。
行业,因此,准政府将修改部分35 aba的行动提供任何支出的资本化(包括利息)发生的目的,到日期的“使用”获得光谱,收购的费用,和摊销在35节aba的行动。
TDS电信费用支付给外国运营商——位置在行为和不适用的解释5和6节9 (1)DTAAs (vi)
解释5和6节9 (1)(vi),插入与回顾效应从6月1日,1976年,打算把皇室的范围内,通过卫星传输,有线电视、光纤,或类似的技术;而且,使用的设备无论任何实际占有或控制由用户。
任何付款是广泛使用在公开市场上那些愿意支付不能构成“皇室”,本质上是在营业收入的性质。此外,使用自己的设备/过程由服务提供者提供服务不能被视为由收件人使用这样的设备/过程。
解释5和6不应该解释的方式,以使服务安排皇室的范围内。立法机关,在其智慧,提供了两个独立的相关规定“皇室”(u / s 9 (1) (vi)]和“技术服务费用(u / s 9(1)下(七)]法》和《说规定是相互排斥的,不重叠。已由立法机关之间的区别上述概念必须维护和考虑到预期的效果。
的毫无根据的诉讼和电信行业面临的困难由于引入解释5和6节9 (1)(vi)的行为,尤其是在与电信费用支付给非居民电信服务提供商(一般税收保护),电信行业预计政府推出以下修改/澄清:
5和6)修正案解释部分9 (1)(vi)的行为提供解释不会有任何轴承标准服务协议,包括两个电信运营商之间的电信服务协议。
b)澄清解释5和6,回顾历史,介绍了不适用的交易进入解释了之前的行为,这也是不符合政府的政策将回顾修正案。
c)修正案解释5和6节9 (1)(vi)的行动提供这些解释不会有任何影响的解释术语“版税”下的避免双重征税协定(“DTAAs”)和“过程”的定义中定义国内税法不应该导入DTAAs。
d)适用性的部分194 h法折扣延长电信公司预付费分销商——处方率较低
电信公司转账预付折价券和SIM卡独立分销商,他们进一步传递相同的零售商和/或用户。由于经销商不是代理的电信公司,允许他们的折扣不符合“委员会”的目的部分194 h的行动。然而,税务机关采取了相反的位置下扣缴部分194 h法预付费经销商折扣上需要扩展,这样的折扣是在“委员会”的本质。这个问题导致了严重的诉讼,司法部门在这个问题上的相反的决定。
虽然行业坚信,194 h节的规定行为不适用折扣扩展到预付费经销商,为了终结诉讼,该行业是可以接受的适用性的TDS规定预付的折扣。然而,考虑到经销商的利润率较低,未来行业预计政府代扣税率较低(2%)以来,目前适用5%的速度将导致利润大幅减少的小规模分销商引起严重困难。
电信行业,因此,预计政府规定代扣税率更低折扣上应用扩展到预付费分销商。
Non-applicability代扣所得税的规定支付由电信运营商的频谱交易到另一个
频谱交易指南提供电信公司已获得光谱可能授予权利使用相同的其他电信公司和国家,只有彻底的频谱使用权转让的,应当允许。
根据印度所得税法案》,皇室包括使用/正确使用设备,流程,专利,发明,模型,秘密公式或流程等。因此,光谱,在空中电波/电磁波的性质不属于皇室的管辖范围。此外,皇室不包括任何考虑在“资本利得”的本质(然而,考虑直接转让使用权光谱可以作为业务收入征税的让与人)。而皇室(反映使用权)受到预扣税section 194 j下,不需要隐瞒应当考虑是否代替直接转移光谱自(i)光谱本身不符合设备过程中,专利等;和(2)传输的频谱使用权出售本身的性质。
鉴于上述讨论,期望政府消除潜在的纠纷,会出现由于频谱交易支付被定性为皇室,电信行业是希望必要的澄清将发布的效果与交易有关的付款/共享频谱不是皇室的本质,因此,不吸引代扣所得税义务的规定section 194 j的行为或任何其他预提税的规定。
税(这篇文章的作者是Vishal Malhotra电信领导,迪士尼和Prashant Singhal,全球电信领导,等等)。
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