Dispute over AGR definition took turn in 2007

February 15,2020

 The dispute over the definition of adjusted gross revenue (AGR) between the Department of Telecommunications and telecom operators took an eventful turn in 2007-08.

 The dispute over the definition of adjusted gross revenue (AGR) between the Department of Telecommunications and telecom operators took an eventful turn in 2007-08.

In 2007-8, Telecom Disputes Settlement and Appelate Tribunal (TDSAT) had narrowed the scope of AGR. Following this, the then UPA government went into an appeal.

The Department of Telecommunications (DoT) challenged in the Supreme Court TDSAT's jurisdiction over the terms of the telecom licences that had earlier been accepted unconditionally by telcos.

In an order dated January 19, the apex court dismissed DoT's appeal and directed it to raise its contentions before the TDSAT.

At that time, A. Raja was the Union Telecom Minister, who was later involved in several controversies. The TDSAT again reiterated its earlier findings.

On August 30, TDSAT accepted most of TRAI's recommendations and passed an order that would be applicable to those AUSPI members that had moved the TDSAT with effect from the date when they filed their petitions.

Industry body AUSPI and the Cellular Operators Association of India (COAI) filed a review petition urging that the TDSAT order be made applicable to all members of the two bodies from the date of filing of their petition.

Following this, DoT again went into an appeal on the advice of the law ministry which was headed at that time by Kapil Sibal.

DoT again moved the Supreme Court against the August 30 TDSAT order. Even as the DoT appeal was pending before the apex court, some telcos filed petitions before TDSAT requesting to be included in the tribunal's August 30 order.

The dispute between DoT and the mobile operators was mainly on the definition of AGR. The DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services.

The companies claimed that AGR should comprise just the revenue accrued from the core services and not dividend, interest income or profit on sale of any investment or fixed assets.

The Supreme Court on October 11, 2011, held that TDSAT's August 30, 2007, order should be set aside. It allowed licencees to challenge any demand before TDSAT, which would have to go into the merits of the claim and decide whether it was in accordance with the licence agreement and in consonance with the AGR definition. All telecom licencees moved the TDSAT challenging the basis of DoT's licence fee demand.

In 2015, the TDSAT stayed the case in favour of telecom companies and held that AGR includes all receipts except capital receipts and revenue from non-core sources such as rent, profit on the sale of fixed assets, dividend, interest and miscellaneous.

As a matter of reference, the case would be akin to say that of an aluminium plant. The excise could have claimed that the cost of a fan and lake ought to be part of the assessable value. The cost of land, workers, etc. all be part of the final cost of each kg of aluminium.