MTNL receives Rs 1,461 crore I-T refund

The NYSE-listed Mahanagar Telephone Nigam (MTNL) has received a refund of Rs 1,461.68 crore from the income tax (I-T) department, following the settlement of a decade-old litigation. Further, the state-owned telecom major is also expecting to get another Rs 2,000 crore as refund from the I-T department.

The refund is in pursuant to an order from the Income Tax Appellate Tribunal (ITAT), which ruled in favour of MTNL's arguments that its licence fee should be provided a discount under the Section 80IA of the I-T Act. MTNL said that the appellate tribunal has accepted its views and granted it a deduction.

The company was locked in a legal battle with the I-T department since 1996. The Section 80IA of the I-T Act, which falls under the Finance Act of 2001, states that an enterprise involved in developing, maintaining and operating any infrastructure facility can be offered a rebate. This was later extended to wireless and wired line services providers.

The total amount of Rs 1,461.68 crore involves mainly income tax and, partly, interest that the tribunal had ordered the I-T department to pay to MTNL.

MTNL, which operates in the two metros, Delhi and Mumbai, is believed to have footed nearly over Rs 4,000 crore till 2004, though the company, under the Section 80IA, was only required to pay a token tax.

This was paid to the exchequer as "arbitrarily" determined licence fee for operating the phone services. The company was unable to claim tax deductions as the I-T department was of the opinion that the licence fee was an "appropriation of its income", which the company contested.

MTNL has over 5 million customers in the country, and the Indian government holds a 56.25 per cent stake in the company. The company is also close to completing the purchase of the Sri Lankan fixed-wireless operator Suntel and has sent a delegation to conduct due diligence.

MTNL is believed to be the highest bidder for Suntel with a bid of around $160-180 million. Suntel offers fixed line services based on CDMA WiLL technology, and claims around 300,000 WiLL lines in service at the end of March 2007.