Date:08/02/2006 URL: http://www.thehindubusinessline.com/2006/02/08/stories/2006020802800900.htm

Back MTNL to get huge tax refund — `Licence fee is biz expense'

Our Bureau

New Delhi , Feb. 7

STATE-owned Mahanagar Telephone Nigam Ltd will get a tax refund of Rs 1,233 crore following a direction from the Income Tax Appellate Tribunal. The tribunal has directed the Income-Tax department to refund to MTNL Rs 956 crore as tax and Rs 277 as interest on it.

The refund will enable the company to invest more on its cellular expansion plans.

For more than eight years MTNL had been demanding that it be allowed to list licence fee as an expense for running the business, as it could not provide telecom services without paying fee for the licence. While the other state-owned company Bharat Sanchar Nigam Ltd was allowed to treat licence fee as a business expense, the I-T Department had denied the same to MTNL.

The tribunal, while passing a consolidated order for four assessment years (1998-99, 1999-2000, 2000-01 and 2002-03), held the licence fee as allowable business expenditure under Section 37 of the IT Act.

MTNL's net profit has been declining for the past few years. The third quarter of 2005-06 saw a decline of 36 per cent in net profits. Last year, profits stood at Rs 940 crore and the figure for the first nine months of the current financial year was Rs 480 crore.

The MTNL share closed at Rs 141.15 on the Bombay Stock Exchange today. The scrip price was down 0.39 per cent over the week ago period.