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However, the Assessing Officer was of the view that the assessee's submissions are not acceptable. According to the Assessing Officer "the facts and circumstances of the case are not different from those in preceding years. On perusal of the license agreement it is seen that the license is to "establish, maintain and operate closed user group domestic 64 KBPS Data Network via INSAT Satellite System in extended C Band in frequencies assigned from time to time using VSAT throughout India" and the license has been granted "in consideration of the license fee". The minimum license fee is Rs. One crore per year for the fist two years, Rs.1.5 crore in the third year and to be reviewed thereafter. The license fee can be paid in equal quarterly installments also. The license is initially for 10 years, though it is non-exclusive, non-transferable, is subject to termination under certain conditions, and is subject to some other conditions. Under Schedule 'B' to the Agreement, it is clearly provided "Communication Resources and other support facilities provided by the DOT." The license was procured in Assessment Year 1995-96 and therefore, it is valid up to Assessment Year 2005-06". He further observed that "the A.Y:02-03, 03-04 & 04-05 licence is an intangible capital asset as per the provisions of section 32(1)(ii) of the Act. However, in the instant case depreciation cannot be given as there is a specific section 35ABB by virtue of which, an expense incurred for obtaining license to operate telecommunication services is to be amortised over the period of licence". The Assessing Officer after relying on the order of the ld. CIT(A) for the earlier Assessment Year i.e. Assessment Year 2001-02 and the decisions in (1) Henriksen Vs. Grafton 11 ITR Suppl.10, 18 (CA) ; (2) Southwell vs. Savill 4 TC 430 ; (3) Morse vs. Stedeford 18 TC 457 ; (4) Pendleton vs. Mitchells 45 TC 341 ; (5) Strick vs. Regent 43 TC 1, 37-38, 51(HL) ; (6) Kneeshaw vs. Abertolli 9 ITR Suppl 121 ; (7) Assam Bengal Cement vs. CIT 27 ITR 34 (SC) and (8) Kirloskar Oil Engines Ltd vs. CIT (1994) 206 ITR 13(Bom.) disallowed the DOT licence fee Rs.6,04,19,645/-. However, he was of the view that the amount paid is amotrised over a period of four years i.e. over the remaining period of the licence and hence he allowed Rs.1,51,04,912/- and disallowed balance amount of Rs.4,53,14,736/- and added to the total income of the assessee. On appeal, the ld. CIT(A) following the earlier appellate order dated 23.11.2004 while agreeing with the findings of the Assessing Officer that the amount is admissible as deduction only in the manner provided u/s.35ABB of the Act, upheld the disallowance made by the Assessing Officer.

vii) Assam Bengal Cement Co. Ltd. vs. CIT (1955) 27 ITR 34 (SC) wherein it has been held that the right to carry on business unfettered by any competition was a capital asset and as such the entire amount of Rs.40,000/- incurred annually for securing that end was capital expenditure, not allowable u/s.10(2)(xv) of the IT Act, 1922.

The ld. Departmental Representative while relying on the ratio of above decisions, submits that the licence is a capital asset within the meaning of section 2(14) and, therefore, the DOT licence fee paid by the assessee is a capital expenditure and hit by section 35ABB of the Act. He further submits that if the same is not treated as capital expenditure then section 35ABB of the Act will become redundant. The ld. DR further submits that since it is a question of law, therefore, the decision relied on by the ld. Counsel for the assessee in assessee's A.Y:02-03, 03-04 & 04-05 own case supra, has no binding force and the same can be readjudicated by this Tribunal and for this proposition the reliance was also placed in C.K. Gangadharan and Another vs. CIT (2008) 304 ITR 61(SC); CIT vs. Oswal Agro Mills Ltd. (2009) 313 ITR 24(SC); DCIT vs. Divya Investment P. Ltd. (2009) 313 ITR 363(SC); and CIT vs. Alpine Solvex Ltd. (2003) 259 ITR 719(SC). He further submits that the other decisions of the Tribunal in Mahanagar Telephone Nigam Ltd. vs. ACIT (2006) 100 TTJ (Del.) 1 and Videsh Sanchar Nigam Ltd. Vs. JCIT (2002) 81 ITD 456(Mum.) referred by the assessee in his paper book appearing at page-101 to 146 are also distinguishable on facts inasmuch as the case of Videsh Sanchar Nigam Ltd.(supra) is prior to insertion of section 35ABB which has been inserted by the Finance Act, 1997, w.r.e.f. 1.4.1996. He, therefore, submits that the order passed by the ld. CIT(A) confirming the disallowance of DOT licence fee Rs.4,53,14,736/- be upheld.

10. The scope and effect of the new provisions of section 35ABB inserted by the Finance Act, 1997 w.r.e.f. 1.4.1996 was explained by the Board in a Circular No.763 dated 18.2.1998 reported in (1998) 230 ITR (St.) 54, as under : -

A.Y:02-03, 03-04 & 04-05 "Amortisation of telecom license fees. - 19.1 In order to give a fillip to the telecom sector, a new section 35ABB has been inserted in the Income-tax Act. The section provides that any capital expenditure, incurred by an assessee on the acquisition of any right to operate telecom services and for which payment has actually been made to obtain a licence, will be allowed as a deduction in equal installments over the period for which the license remains in force. It further provides that where the license is transferred and proceeds of the transfer are less than the expenditure remaining unallowed, a deduction equal to the expenditure remaining unallowed as reduced by the proceeds of transfer, shall be allowed in the previous year in which the license has been transferred. It also provides that where the license is transferred and proceeds of the transfer exceed the amount of expenditure remaining unallowed, the excess amount shall be chargeable to tax as profits and gains of business in the previous year in which the license has been transferred. It further provides for amortization of unallowed expenses in a case where a part of the license is transferred and to which provisions of sub-section (3) do not apply. The provisions of sub-sections (2), (3) and (4) pertaining to transfer shall not apply in relation to a transfer in a scheme of amalgamation whereby the license is transferred by the amalgamating company to the amalgamated company, the latter being an Indian company".

11. According to Sampat Iyengar's Law of Income tax 10th Edition 2nd Volume at page 2935 " The amendment made to section 35ABB meant for telecommunication rules out deduction for depreciation u/s.32(1) but it does not rule out application of section 35D being preliminary expenditure nor does it rule out section 37 which allows revenue expenditure. The clause implies that expenditure on original licence would not ordinarily be deductible. But if it is so deductible, it cannot rule out that such deduction merely because it may also fall A.Y:02-03, 03-04 & 04-05 under section 35ABB in the absence of any prohibition as for deduction of depreciation. It would also mean that payment made for renewal of licence should not fall u/s. 35ABB as it would fall more appropriately u/s.37."