Supreme Court Rejects Telecom Operators’ Appeal; Directs Companies To Pay Rs 92,000 Crore To The Government

The Supreme Court has rejected the appeal of telecom companies against the central government’s definition of adjusted gross revenue (AGR) and ruled in favor of the government on the AGR issue.

The Supreme Court has also9 directed the telecom companies to pay Rs 92,000 crore to the government, which is a setback to these companies.

The Supreme Court will decide later about the timeframe for the telecom companies to pay the AGR to the government.

AGR is a measure of income calculated from a company's gross income and is used to determine its taxable income.

Earlier, telecom companies had claimed that AGR only includes license and spectrum fees, whereas the government’s Department of Telecom (DoT) held that AGR would include much else which would take the dues of the telecom sector to thousands of crores.

In 2005, the Cellular Operators Association of India (COAI) had filed the first case, challenging the government’s definition on calculation of AGR. It had contended that components of AGR, which the government was trying to include, were contrary to the Telegraph Act and the recommendations made by the Telecom Regulatory Authority of India (TRAI).

While the industry already paid 85% of the demand raised by the DoT, the remaining 15% has remained a dispute.

In the meantime, telecom companies kept on getting favorable judgments at various legal forums, including the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) and high courts.

Accordingly, the telecom companies withheld payments to the government since legal judgments till date clearly favored their arguments on the definition of AGR.

However, in 2015, the TDSAT ruled that AGR would also include rent, dividends as well as profits on the sale of assets apart from license fees and spectrum user charges.

The central government and telecom companies appealed against this TDSAT verdict to the Supreme Court.

However, now that the Supreme Court has agreed with the DoT’s interpretation of AGR, the telecom companies would have to cough up Rs 92,000 crore to the government, which would be a setback to these companies.