Rule 41 — Expenditure for obtaining right to use spectrum for telecommunication services. Made under s.52 of the Income-tax Act, 2025.
Rule 41 gives effect to Section 52 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) defines "actually paid" for section 52(7)(a) read with section 52(1) [Table: Sl. No. 3], which deals with expenditure for obtaining the right to use spectrum for telecommunication services. Clause (a) covers an assessee who has opted, and been allowed by the Department of Telecommunications, Government of India, to make full upfront payment of spectrum fee: there "actually paid" is the actual payment of expenditure, irrespective of the tax year in which the liability was incurred, according to the method of accounting regularly employed. Clause (b) covers an assessee who has opted, and been allowed, to make deferred payment: there "actually paid" is the amount which would have been payable had the assessee opted for full upfront payment of spectrum fee, again irrespective of the year in which the liability was incurred and according to the method of accounting regularly employed.
Sub-rule (2) deals with failure in the deferred-payment case. Where the assessee fails to comply with any condition specified by the scheme of the Department of Telecommunications and that Department terminates the allotment or assignment of spectrum, the Assessing Officer, exercising the power vested in him under section 52(5), shall recompute the total income of the assessee for the tax year in which the deduction was claimed and granted, deeming that the total spectrum fee paid up to the date of termination is the amount "actually paid", and that the spectrum was in force up to the date of its termination for determining the number of tax years required by section 52(1) [Table: Sl. No. 3, C. D].
Section 52 spreads the spectrum fee over the years the right runs, but a licensee may pay upfront or in instalments under the Department of Telecommunications scheme, and the section does not say which of those payments is the amount to be spread. Sub-rule (1) answers it by putting both routes on the same footing, the upfront-equivalent amount. Sub-rule (2) then supplies the correction that the equivalence needs: if the deferred payer defaults and loses the spectrum, the deduction already given on an assumed upfront amount is recomputed on what was really paid.
A deferred payer does not deduct what it pays. Under sub-rule (1)(b) the amount treated as actually paid is the notional full upfront fee, so instalments actually remitted in a year are beside the point for the section 52 computation. Both clauses displace the year of accrual: the definition applies irrespective of the tax year in which the liability was incurred, though it still runs according to the method of accounting regularly employed by the assessee. The recomputation in sub-rule (2) is not a fresh charge; it is the Assessing Officer using section 52(5) to redo the earlier year on two deemed facts, that only the fee paid up to termination was actually paid, and that the spectrum ran only up to termination for counting the years over which the expenditure is spread.
A company is allowed by the Department of Telecommunications to pay its spectrum fee in instalments, when the full upfront fee would have been Rs 500 crore. Under sub-rule (1)(b) it computes its section 52 deduction on Rs 500 crore, not on the instalments it remits. If it later breaches a scheme condition, the Department terminates the assignment and only Rs 180 crore has been paid by then, sub-rule (2) requires the Assessing Officer to recompute the total income of the year of claim taking Rs 180 crore as actually paid and treating the spectrum as in force only up to the date of termination.
You meet it in the computation supporting a telecom licensee's claim for spectrum fee under section 52, and in a recomputation order under section 52(5) issued after the Department of Telecommunications terminates an allotment or assignment.
the amount which would have been payable by the assessee had he opted for full upfront payment of spectrum fee, irrespective of the tax year in which the liability for the expenditure was incurred
the total spectrum fee paid up to the date of termination is the amount "actually paid"