New Delhi: Providing major relief to telecom operators, the Supreme Court (SC) on Monday ruled that they would be exempted from paying licence fees for earning non-telecom revenue pending a final decision by the country’s top court.
A bench headed by Chief Justice of India K.G. Balasubramaniam passed the order in response to a petition filed on behalf of telecom companies.
Senior SC lawyer Abhishek Manu Singhvi, counsel for the telecom firms, sought immediate relief from the apex court because the department of telecommunications (DoT) had issued notices to the firms to pay licence fees even on non-telecom activities by 14 January.
In an interim order on 7 December, SC had granted a stay on a 2006 ruling by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) that excluded non-telecom revenue from the purview of the licence fee. Monday’s order vacated the stay.
The Association of Unified Telecom Service Providers of India (Auspi) and Cellular Operators Association of India (COAI) filed a petition in 2003 before TDSAT challenging DoT’s decision to levy a licence fee on both telecom and non-telecom revenue. TDSAT, in the 2006 judgement, held the imposition of licence fee on non-telecom activities by DoT to be illegal.
DoT filed an appeal in SC against the TDSAT ruling. The department has argued that telecom firms would not have been in existence had it not been for the telecom licence and, therefore, wouldn’t have been in a position to earn any non-telecom revenue.
Under the universal access services licence (UASL) agreement, telecom operators pay licence fees and spectrum usage charges based on their adjusted gross revenue, or AGR.
AGR is defined as revenue that does not directly accrue to the company—service tax and interconnection charges. But AGR includes non-telecom revenue which the operators are fighting.
The apex’s court intervention means that the firms would continue paying the licence fees in line with TDSAT’s ruling of 2006 which had excluded non-telecom revenues such as dividends, capital gains and so on for computation of telecom firms’ AGR for payment of a licence fee.
“We are delighted with the court order..,” said T.R. Dua, officiating director general of COAI.
SC’s order would mean substantial savings for telecom companies. A telecom company official, who did not want to be identified, said the firm could save as much as Rs300 crore annually in payment of licence fees.
One major impact of the case being fought in SC is that telecom operators that are being subjected to special audits by DoT may have more flexibility in arguing their case.
An external audit carried out by Jaipur-based Parakh and Co. on Reliance Communications Ltd, or RCom, found that the company had reported different revenue numbers to stock exchanges and to DoT, which has ordered similar audits on Bharti Airtel Ltd, Idea Cellular Ltd, Vodafone Essar Ltd and Tata Teleservices Ltd. RCom has denied any wrongdoing.
“There is an issue of intepretation of the policy at present,” said a senior DoT official who didn’t want to be named. “There are nine exceptions (to reporting of revenue) that are given to the telcos that are being used freely by them, we suspect. The audits have been called to check on this as well as issues of arbitrage where the telcos are reporting revenue under other brackets to reduce their outgo.”