The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has ruled that license fees for direct-to-home (DTH) services should be charged on the basis of adjusted gross revenue and not on gross revenue, similar to what is being followed in the telecom industry.
Passing an order in a case filed by Tata Sky, the tribunal directed that license fee should be based on revenues arising out of licensed activities only, and not on the basis of entire revenue earned by DTH operators. Tata Sky had challenged direction of the Ministry of Information and Broadcasting (MIB) to pay 10 per cent of its whole earning as license fee.
TDSAT Chairman Justice Arun Kumar said: “In spite of the all pervasive language used in defining gross revenue in a telecom license, this tribunal has held that the concept of adjusted gross revenue will apply and income from activities of a licensee, which are not part of the licensed activities, cannot be included in gross income for purposes of calculating licence fee.”
Striking down the directions issued by the Ministry in July 2006 that asked Tata Sky to pay license fee based on calculation of its entire revenue, the tribunal said that its order dated July 7, 2006 related to a similar case in the telecom industry should apply.
In that order, TDSAT had defined adjusted gross revenue (AGR) and said that telcos would have to pay for only licensed activities. The tribunal also held that money earned from sale of set-top boxes, dish, installation, subscription and service revenue would be part of AGR. TDSAT had defined AGR as revenue on licence fee payable after excluding income from activities that do not form part of licensed activities.
“This is a direct income derived by the petitioner from licensed activities. Revenue earned from sale of set-top boxes and accessories is to form part of AGR, besides the revenue earned under the head subscription, installation and service revenue,” the tribunal said.
The counsel of the petitioner Tata Sky had urged that license fee was chargeable only from revenue earned from licensed activity and could not be charged on activities that were outside the license.
The counsel for the respondent (MIB) had argued that the licence fee should be calculated on the basis of the entire gross revenue earned by the DTH operator, whether it arose out of licensed activity or from activities that were not related to the licence.
Meanwhile, TDSAT also held that other incomes such as interest earned by investments and deposits made by DTH operators, royalty, commissions and enterprise resource would not be part of AGR.
“However, if the income is derived from deposits taken by the licensee while issuing connections to its customers, it will form part of the service and will have to be included in the gross revenue,” the tribunal clarified.