Case: UNION OF INDIA Vs. ASSOCIATION OF UNIFIED TELECOM SERVICE PROVIDERS OF INDIA

to enable interest to be charged on the accrued rate on the interest component of the capitalised sum for the succeeding period. Interest, once capitalised, sheds its colour of interest and becomes a part of the principal to become a debt as has been observed thus: 36. The English decisions and the decisions of this Court and almost all the High Courts of the country have noticed and approved long-established banking practice of charging interest at reasonable rates on periodical rests and capitalising the same on remaining unpaid. Such a practice is prevalent and also recognised in non-banking moneylending transactions. The legislature has stepped in from time to time to relieve the debtors from hardship whenever it has found the practice of charging compound interest and its capitalisation to be oppressive and hence needing to be curbed. The practice is permissible, legal and judicially upheld excepting when superseded by legislation. There is nothing wrong in the parties voluntarily entering into transactions, evidenced by deeds incorporating covenant or stipulation for payment of compound interest at reasonable rates, and authorising the creditor to capitalise the interest on remaining unpaid so as to enable interest being charged at the agreed rate on the interest component of the capitalised sum for the succeeding period. Interest once capitalised, sheds its colour of being interest and becomes a part of the principal to bind the debtor/borrower. 44. We are of the opinion that the meaning assigned to the expression the principal sum adjudged should continue to be assigned to principal sum at such other places in Section 34(1) where the expression has been used qualified by the adjective such, that is to say, as such principal sum. Recognition of the method of capitalisation of interest to make it a part of the principal consistently with the contract between the parties or established banking practice does not offend the sense of reason, justice and equity. As we have noticed, such a system has a long-established practice and a series of judicial precedents upholding the same. Secondly, the underlying principle as noticed in several decided cases is that when interest is debited to the account of the borrower on periodical rests, it is debited because of it having fallen due on that day. Nothing prevents the borrower from paying the amount of interest on the date it falls due. If the amount of interest is paid there will be no occasion for capitalising the amount of interest and converting it into principal. If the interest is not paid on the date due, from that date the creditor is deprived of the use of the money, and which it would have made if the debtor had paid the amount of interest on the date due, the creditor needs to be compensated for deprivation. As held in Pazhaniappa Mudaliar v. Narayana Ayyar, AIR 143 Mad 157, the fact situation is analogous to one as if the creditor has advanced money to the borrower equivalent to the amount of interest debited. We are, therefore, of the opinion that the expression the principal sum adjudged may include the amount of interest, charged on periodical rests, and capitalised with the principal sum actually advanced, so as to become an amalgam of principal in such cases where it is permissible or obligatory for the court to hold so. Where the principal sum (on the date of suit) has been so adjudged, the same shall be treated as principal sum for the purpose of such principal sum — the expression employed later in Section 34 CPC. The expression principal sum cannot be given different meanings at different places in the language of same section, i.e. Section 34 CPC. (emphasis supplied) 196. Concerning penal interest, this Court in Central Bank of India v. Ravindra (supra) has observed that the penalty is founded on the doctrine of penal action. Penal interest can be charged only once for one period of default, and therefore cannot be permitted to be capitalised. 55. (1) Though interest can be capitalised on the analogy that the interest falling due on the accrued date and remaining unpaid, partakes the character of amount advanced on that date, yet penal interest, which is charged by way of penalty for non-payment, cannot be capitalised. Further interest i.e. interest on interest, whether simple, compound or penal, cannot be claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be opposed to public policy. 197. It is not levy of penal interest, which is involved in the instant case. Thus, based on the decision mentioned above, we find that when there is contractual stipulation, the interest can be levied and compounded. 198. Resultantly, we are of the considered opinion that interest and penalty have rightly been levied. Once an amount of shortfall has not been paid, it has to carry 50% of the penalty on defaulted amount, as agreed. Thus, we find no substance in the submission that interest, penalty, and interest on penalty cannot be realised. It is as per the agreement. In the facts and circumstances, we find no ground to reduce the same, considering the nature of untenable objections raised on behalf of the licensees, which were in fact either barred by res judicata or constructive res judicata but as this Court had remitted the matter to TDSAT to find that demand was based on proper interpretation of licence. Matter was remitted after giving finding on inclusion of the various heads in the definition of gross revenue. Even as per the case of licensees they were not validly included in definition, now reprobating that, stand has been taken that they did not form part of revenue which is not permissible. No litigant can be permitted to reap fruits on such inconsistent and untenable stands and litigate for decades in several rounds which is not so uncommon but is disturbing scenario projected in very many cases. We have examined the matter upon merits and then aforesaid conclusion indicates frivolous nature of objections.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]44. When we consider the submissions as observed there was a paradigm shift in Telecom Policy of 1999 from the fixed licence fee to the revenue sharing basis regime, which was advantageous to the Telecom Service Providers. Under the new regime, the Central Government shared the privilege under section 4 of the Indian Telegraph Act with the TSPs. It came as a relief against the high licence fee, which used to be charged under the 1999 policy. The migration package contained the stipulation as to no dispute to be raised as to working out sharing of revenue. Experts were consulted in the field of accountancy, and it was their advice that the actual figures should be simple and objective to evolve a system of revenue sharing that does not become as arduous one and litigative, had been evolved. Revenue has been defined in a broad, comprehensive, and inclusive manner not to pose problems of interpretation and to protect from the accounting jugglery. Gross revenue has been defined to be inclusive of specific items mentioned in clause 19.1 and any other miscellaneous revenue, without any set-off for related items of expense, etc. All the licensees accepted the migration package and have signed the agreements. It has turned out to be a substantial financial booster in favour of the licensees as is apparent from figures of the gross revenue earned by them mentioned above. When under a contract signed by the parties, gross revenue and AGR have been given the meaning coupled with the format and the annexures which form part of the contract. Format is contained in appendix to Annexure-II which is part of the agreement in which requisite information has to be furnished. The meaning in clause 19 of the gross revenue and the format mentioned above have to prevail45. No doubt about it that the accounts have to be maintained as per the AS-9 regime prevalent at the relevant time. The definition of the contract has to prevail and not what is generally revenue, as defined in AS-946. The question as to what constitute Gross Revenue has been agitated, though concluded in earlier decision in 2011, by the TSPs. again by raising the submission that we have to follow the definition of revenue as defined in AS-9, it would be the revenue as generated by activities under the licence; whereas the definition of gross revenue includes the income from non-licensing activities also as part of the gross revenue, which we have to discard56. The accounting standards are mandatory to be followed by the companies, and DOT has admitted in the counter affidavit of 11.7.2003 in Petition 7 of 2003 that the definition of the term revenue in the agreement is in line with AS-9 under the accounting standards. Thus, they cannot approbate and reprobate. Thus, identification of revenue would come within the purview of gross revenue, is the sole test that it should conform with the definition of revenue as provided in AS-9, and the golden thread is the phrase arising in the course of the ordinary activities of the enterprise59. Thus, as per licensees the miscellaneous revenue has to be revenue as defined in AS-9. The miscellaneous revenue only serves the purpose of capturing such other revenue that satisfies common characteristics of the preceding word61. The submission raised for adopting fair valuation method relying on S.K. Synthetics (supra) is based upon misconception of method applicable to A.S-9. The argument is crafted to get rid of AS-9 and the definition of gross revenue in the agreement. We have to consider valuation method of accounting standards which are laid time to time to find an answer to the submission. The ICAI issued the AS-9 revenue recognition standard in the year 1985. In the initial years, it was recommendatory for only Level-I enterprises but was made mandatory for all enterprises from 1.4.1983. The meaning of enterprise is as defined in section 3 of the Companies Act, 1956. The IND AS-18 regime has been introduced later on. In AS-9, revenue recognition is at nominal value; whereas IND AS-18, the revenue recognition is at a fair value. The barter transactions are included in Ind AS-18, whereas this aspect is not covered in AS-9. In AS-9 revenue recognition, interest income is recognised on a time proportion basis, whereas in Ind AS-18, interest income is recognised using an effective interest rate method. AS-9 recognises revenue as per the completed service method or percentage completion method, whereas Ind AS-18 only recognises revenue as per the percentage of completion method. Thus, there is a fundamental difference. The fair value concept has no place in AS-9 as per which the accounts are to be maintained and submitted for determination of gross revenue. AS-9 revenue recognition regime states that the amount of revenue shall be measured by the gross inflow of cash, receivables, or other consideration received. There is no concept of fair valuation. Thus, the submission raised based on a fair valuation method based on the decision in J.K. Industries v. Union of India (supra) cannot be accepted as the decision is on consideration of different accounting standard which adopts fair valuation method i.e., Ind AS-18 and not relevant for the AS-9 accounting standard62. The submission is wholly devoid of substance. It is not only barred by the principle of constructive res judicata but also indicates that the licensees are raising the similar objections which they have raised earlier and were not entertained by this Court and were rejected. Again precisely, the same attempt is made by submitting; revenue should be taken as defined in AS-9, not in Clause 19.1 of the agreement, submission runs contrary to the decision of the Court, as held in para 48 of the 2011 judgment, which operates as res judicata inter se parties. The meaning of revenue is apparent that it has to be gross revenue, and the licence fee would be a percentage of the same. Thus, the licensees have made a futile attempt to submit that the revenue to be considered would be derived from the activities under the licence; whereas it has been held in 2011 that the revenue from activities beyond the licence have to be included in adjusted gross revenue, is binding63. Even otherwise, on merit, the submission raised is baseless. The contractual definition of gross revenue is binding. This Court has observed that it was open for the licensee not to undertake activities for which they do not require licence under section 4 of the Telegraph Act and transfer these activities to any other firm or company. However, they cannot avoid the consequences of the contractual definition which has been accepted by the parties, and they are bound to make payment of licence fee on the basis of gross revenue, which would be the total revenue of the licensing company. As the Government has not accepted the TRAIs recommendations, the decision of the Central Government on the point of definition of adjusted gross revenue was final and binding. This Court has also held that TRAI and tribunal had no jurisdiction to decide on the validity of the definition of adjusted gross revenue under the licence agreement and to exclude certain items of revenue which were included in the definition of gross revenue in the licence agreement between the licensor and licensee. The tribunal had no jurisdiction to exclude certain items on the ground of the validity of the definition of adjusted gross revenue. The finding of the tribunal in the order dated 7.7.2006 insofar as it decided that the revenue realised by the licensee from activities beyond the licence to be excluded from adjusted gross revenue in the licence agreement is without jurisdiction and is a nullity. The matter was sent back to TDSAT for computation of adjusted gross revenue. It was also observed if a dispute is raised that computation is not following licence agreement, the tribunal has to go into facts and material on which demand is raised and to decide demand is following the licence agreement and in particular, the definition of adjusted gross revenue. It can also interpret the terms and conditions of the licence agreement. The tribunal did not go into the facts and material relating to the demand as to the particular licence. The tribunal can go into the question of whether the demand is under the licence agreement and in particular, the definition of adjusted gross revenue64. Under clause 20.6, certification of accounts by auditors appointed under the Companies Act is stipulated under the licence. The preparation of accounts under clause 22 of the licence agreement is an independent head. The definition of gross revenue given under the agreement in Clause 19.1 and that is the total revenue. In our considered opinion, when there is a contractual definition as to what would be the gross revenue that would be the revenue and also the total revenue, the revenue as mentioned in the mode of accounting AS- 9 cannot govern the definition. The general definition of revenue in the mode of accounting cannot govern the contractual definition of gross revenue65. As per clause 20.4, a licensee must make quarterly payment in the prescribed format as Annexure-II showing the computation of revenue and licence fee payable. The Format is part of the licence and is independent of accounting standards and is in tune with the definition of gross revenue, and is the basis for the calculation of licence fee. It is only for uniformity that the account has to be maintained as per accounting standards AS-9 which are prescribed from time to time. Once the licensee provides the details to the Government in format Annexure-II along with accounts certified by the auditor, the reconciliation has to take place. The accounting standard AS-9 is relevant only for whether the figure given by the licensee as to gross revenue is maintained in proper manner once gross revenue is ascertained, then after certain deductions, adjusted gross revenue has to be worked out. The accounting standard provided in AS-9 cannot override the definition of gross revenue, which is the total revenue for licence and the finding in Union of India v. AUSPI (2011) in this regard is final, binding, and operative. The accounting standard AS-9 makes it clear that same is in the form of guidelines, it is not comprehensive and does not supersede the practice of accounting. It only lays down a system in which accounts have to be maintained. Accounting standards make it clear that it does not provide for a straight-jacket formula for accounting but merely provide for guidelines to maintain the account books in systematic manner66. Though the definition of revenue given in clause 4.1 of AS-9 cannot govern the contract, the contractual definition of gross revenue which is the gross revenue under Clause 19.1 and total revenue for the purpose of the agreement for which an independent definition has been carved out under the statutory power while parting with the privilege under section 4 by the Central Government, once the contract has been entered into, the definition of gross revenue is binding, and the licensees cannot try to wriggle out of the decision by making impermissible attempts to depart from it. The plea is barred by res judicata, and on merits the objection is wholly untenable. The definition of revenue in clause 4.1 of AS-9 provides that the revenue is the gross inflow of cash, receivables, or other consideration arising in the course of the ordinary activities. When the revenue in AS-9 is the gross inflow of cash and the amount which is receivable, not the amount received, which is realised or other consideration arising, can also be taken into consideration as per accounting standard AS-9. The definition of revenue in AS-9 rather than supporting the cause of the licensees defeats the same. They cannot bank upon the expression in clause 4.1 in the course of ordinary activities of an enterprise is only to be included in gross revenue as that is what has been expressly negated in Union of India v. AUSPI (2011). Given the definition of gross revenue, the same includes revenue from activities beyond the licence. Explanation to clause 5 of AS-9 also makes it clear that the agreement between the parties would determine the amount of revenue arising on a transaction67. Section 211 of the Companies Act, 1956 deals with the obligation of the company to comply with accounting standards. In case they do not comply, it has to be disclosed in its profit and loss account, the deviation, reasons for such deviation, and financial effect. Sections 211(3A) and 211(3B) are quoted hereunder:211 (3A) Every profit and loss account and balance-sheet of the company shall comply with the accounting standards. (3B) Whether the profit and loss account and the balance- sheet of the company do not comply with the accounting standards, such companies shall disclose in its profit and loss account and balance-sheet, the following, namely:(a) the deviation from the accounting standards;(a) the reasons for such deviation; and(b) the financial effect, if any, arising due to such deviation68. Thus, it is apparent that accounting standard AS-9 is a method to maintain accounts and, deviation if made, has to be reflected separately69. Prayer made in Petition No.7/2003 filed by AUSPI v. Union of India was to declare that gross revenue can only relate to revenue directly arising out of telecom operations licensed under section 4 of the Indian Telegraph Act, and items indicated in the DOT letter dated 26.7.2001 including interest income and the dividend income, value of rebates, discounts, free calls and reimbursement from the USO fund, etc. ought not to be excluded in the adjusted gross revenues. It was also prayed that revenue share on interest income and other incomes be set aside70. In Petition No.82/2005, demand was dated 28.3.2003 and 13.7.2004, etc. and refund on account of wrongful application and implementation of gross revenue and adjusted gross revenue was sought along with interest. Prayer was made that licence fee or WPC charges on any non-telecom revenue, i.e., the revenues which are not derived from the licensed activities under the licence/revenues which do not relate to or do not have a direct nexus to the establishment, maintenance and working of Telegraph, cannot be levied. DOT cannot collect what is not revenue. Prayer was also made to direct DOT to calculate adjusted gross revenue on a realisation basis and not accrual basis, and not to include any notional revenue/income in the adjusted gross revenue. Prayer was made to direct DOT to modify the definitions of gross revenue and also adjusted gross revenue, bring them in conformity with the migration package. Prayer was also made to suitably modify the format of statement of gross revenue, adjusted gross revenue and licence fee in accordance with the correct definitions, and to strike down the definitions of gross revenue, and adjusted gross revenue contained in DOTs licence amendment dated 11.4.2001 as being unfair, unjust, unreasonable and arbitrary71. Thus, it is apparent that right from the beginning, the licensees were aware of the precise terms and conditions and their obligations as contained in the letter dated 26.7.2001and purport of the definitions of gross revenue and adjusted gross revenue. Notional revenue has to be charged. The order of TDSAT excluding certain items of revenue, which were included in the definition of AGR by declaring the definition of gross revenue to be invalid, was set aside by this Court in Union of India v. AUSPI (supra) and this Court held that items are to be included in definition of gross revenue74. In our opinion, the rule mentioned above of contra proferentem does not apply to the present case as there is no ambiguity or doubt in the definition of gross revenue in the agreement76. The definition of gross revenue is crystal clear in the agreement. How the adjusted gross revenue to be arrived at is also evident. It cannot be submitted that the revenue has not been defined in the contract. Once the gross revenue is defined, one cannot depart from it and the very meaning is to be given to the revenue for the agreement. Overall revenue, has to be taken into account for determination of licence fees without set off, as provided in the agreement. The same was defined to simplify it to rule out the litigation, disputes, and accounting myriads. The submission raised that the term revenue has to be interpreted as the consideration payable in keeping with commercial and financial parlance is what is intended to be avoided. Raising of such submission is a futile attempt that has been made to wriggle out of the definition of gross revenue, which has been held to be binding in the previous judgment in Union of India v. AUSPI (2011). The submission that the contract recognises the applicability of accounting standards, in our opinion, it is only to maintain books of accounts. To a certain extent, it cannot be disputed that to have clarity, uniformity, and definitiveness; the accounting standards lay down guidelines with respect to financial terms. However, when the financial terms in the agreement are clear in the form of definition of gross revenue governed by Clause 19.1 of the agreement, the definition of Accounting Standard-9 cannot supersede it which is a general one79. Submission though attractive, but is again an attempt by taking a rigmarole to get rid of the definition of gross revenue. Earlier the validity of definition was questioned to confine the meaning of gross revenue how the revenue is sought to be confined to activities under the licence by way of AS-9. The reliance has been placed on statement made by DOT in the reply filed in 2003 that the definition of gross revenue is in line with AS-9, it is by way of explaining and cannot have the effect of changing the definition of gross revenue given in the agreement. The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue83. In our considered opinion, it cannot be said that DOT has taken inconsistent stands at different stages of the same litigation. Their stand is apparent that the gross revenue has been clearly defined in the agreement. Parties have agreed to various inclusions in the agreement and have willingly switched over to revenue- sharing regime under the 1999 policy and same is apparent from the stand and the reliefs prayed in the petitions filed in 2003 and 2005 extracted above. The licensees were aware of items specifically included in the agreement. TSPs agreed to interpretation and accepted it as held by this Court in 2011 judgment. Licensees are taking inconsistent stands, earlier they have taken the stand that all these items concerning which disputes have been raised, had been included illegally in the definition of gross revenue, the definition may be declared ultra vires, invalid, and be struck down. They have also contended that revenue from activities under the licence cannot be included in gross revenue, which submission has been negated by this Court in 2011, it was held that the gross revenue would include the revenue generated from non-licensing activities. Licensees cannot be permitted to approbate and reprobate and to take inconsistent stands that they are not included in gross revenue as per AS-9. The stand taken rather than buttressing the submissions raised by them, counters and militates against their own interest and paves the way in favour of DOT84. A submission has been raised that the definition of gross revenue is not exhaustive. It only includes those streams which are specifically included in the definition of AGR. If it is an inclusive definition of AGR, and all receipts were ipso facto part of AGR, then there was no occasion to further provide in clause 2.2 (b)(ii) that the revenue from value-added services was to be treated as part of AGR. Further, the licensee was obliged to maintain separate account for service defined in Annexure 1 to the licence in clause 55 to mean service in a licensed service area. By the fact that separate provision is made for value-added services, a separate account has to be maintained as per clauses 22.1, 22.2 and 22.3 that is for arriving at the figure of revenue and step in aid, to clarify how the licensee has to operate, that would not change the definition of gross revenue which is the meaning of revenue itself is apparent, same is gross inflow of the cash, and the amount which is receivable as provided in AS-9 also. Thus, the submission raised that the definition is not wide, cannot be accepted, and stands repelled. Clauses 22.1, 22.2 and 22.3 cast obligation upon the licensee to draw, keep and furnish independent accounts for the service. Under clauses 22.1 and 22.2, the licensee has to maintain records quarterly. Accounts have to be audited and can be called for by the licensor or the TRAI, as provided in Clause 22.3. The format of gross revenue is supportive of definition of gross revenue as defined in the agreement. Clause 22 is a rider upon the licensee to maintain the records of activities and other matters such as financial position as enumerated therein85. Clause 18.1 of the agreement has also been pressed into service. The submission raised that a single company may hold 5 licences for 5 different service areas; the AGR as suggested by the DOT, cannot be followed as it may end up in paying the licence fee at the rate of 5 times. As the licence fee cannot be charged more than once, there is no room to entertain the submission. It is not what is contemplated in the definition. While computing the licence fee, the gross revenue has to be taken into consideration under a particular licence for which it is being determined. The argument had been raised on a hypothetical basis without foundational facts to raise the same is thus, liable to be and is rejected at the threshold86. DOT has urged that the Central Government has exclusive privilege under section 4 of the Telegraph Act; thus, it is bound to get the best price for natural resources. To part with the exclusive privilege under the revenue sharing regime is extremely beneficial to the licensees. Thus, the State must get the price for its valuable right as mandated under Article 14. In our opinion, there is no doubt that the State is a trustee of the natural resources and is obliged to hold it for the benefit of the citizens but also to ensure equal distribution to sub-serve the common good as observed under Article 39 of the Constitution of India in Re : Natural Resources Allocation, 2012 (10) SCC 1. The Government being the sole repository of all the resources in the country, also has the exclusive power to determine the licence conditions at which it parts with the exclusive right to the resources. Government has to make an effort to get the best price for its valuable rights and cannot throw them away, and there would be no arbitrariness in the same as observed in State of Orissa & Ors. v. Harinarayan Jaiswal & Ors., (1972) 2 SCC 36 , thus:13. Even apart from the power conferred on the Government under Sections 22 and 29, we fail to see how the power retained by the Government under clause (6) of its order, dated January 6, 1971, can be considered as unconstitutional. As held by this Court in Cooverjee B. Bharucha case, one of the important purpose of selling the exclusive right to sell liquor in wholesale or retail is to raise revenue. Excise revenue forms an important part of every States revenue. The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. Hence quite naturally, the Legislature has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate. While accepting or rejecting a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. We fail to see how the plea of contravention of Article 19(1)(g) or Article 14 can arise in these cases. The Governments power to sell the exclusive privileges set out in Section 22 was not denied. It was also not disputed that those privileges could be sold by public auction. Public auctions are held to get the best possible price. Once these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in question who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate. There is no concluded contract till the bid is accepted. Before there was a concluded contract, it was open to the bidders to withdraw their bids — see Union of India v. Bhimsen Walaiti Ram , (1970) 2 SCR 594. By merely giving bids, the bidders had not acquired any vested rights. The fact that the Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of those privileges, reliance on Article 19(1)( g ) or Article 14 becomes irrelevant. Citizens cannot have any fundamental right to trade or carry on business in the properties or rights belonging to the Government—nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable rights. …88. A licence granted under section 4(1) is in the nature of a contractDOT has relied upon Khardah Company Ltd. v. Raymond & Co. (India) Pvt. Ltd., 1963 (3) SCR 183  in which it has been observed that once a contract has been reduced to writing, terms have to be ascertained from the agreement. It may be relevant to look into the circumstances in case need arises, which resulted in the inclusion of the definition of AGR in the licence agreement. The deliberations were held with the licensees, experts, and then finally migration package, revenue sharing regime is being consented to, was worked out in which the definition of adjusted gross revenue as a part of the financial condition of the licence is mentioned. As to the provisions of gross revenue there had been consensus ad idem between the parties. The licensees are bound by it as they have executed the licence agreement. A party is free to enter into a contract with a State, there is no compulsion, it is voluntary on both sides and binding and cannot be termed to be unfair as observed in Assistant Excise Commissioner & Ors. v. Issac Peters & Ors. (1994) 4 SCC 104 , thus:In re: Discount and Commissions:106. When we consider the rival submissions it has been mentioned in the communication dated 26.7.2001 that the interest income, dividend income, value of rebates, discounts, free calls, and reimbursement from the USO funds have to be included in the adjusted gross revenue. Consequently, a prayer was made to set aside the communication dated 26.7.2001 in Petition No.7 of 2003. Prayer has not been granted on the ground that the Government has not accepted the recommendations of TRAI and the decision of the Government is final, binding and conclusive as has been held by this Court in AUSPI (2011). Finding has been recorded that parties have agreed to aforesaid position as reflected in communication dated 26.7.2001107. When we ponder on the definition of gross revenue in clause 19.1 of the licence agreement, it is apparent that the gross revenue has to be taken into consideration without any set-off for related items of expense. Thus, the gross amount, as per the definition, is the gross revenue, without set-off, is to be taken into consideration including the discounts given. Parties understood right from the beginning that the gross revenue does not exclude discounts, commissions, rebate etc. and specific challenge made to the same had not been accepted in 2011. Now once again by the circuitous method, impermissible attempt has been made to re-write the definition of gross revenue. The definition of gross revenue is independent of AS-9 as the definition of revenue in AS-9 cannot govern the definition in Clause 19.1 of the licence agreement. What has been defined in AS-9 is revenue, whereas, for a licence fee, gross revenue is the revenue. It would be greatest fallacy to say that while gross revenue has been defined in Clause 19.1 of agreement, revenue has not been defined in the licence agreement. What has been defined as gross revenue is in fact broader definition of revenue and has to be taken as definition of revenue for licence agreement. An attempt has made to wriggle out of the rigour of the definition of gross revenue by banking upon the definition of revenue in AS-9 is to scuttle the effect of the previous decision in Union of India v. AUSPI (2011). Gross revenue as defined in agreement cannot be diluted in any manner whatsoever based on the submission mentioned above, as AS-9 is only for method of accounting and specific definition of revenue i.e., gross revenue under the licence agreement has to prevail. In our considered opinion, gross revenue is the revenue has been held in 2011 judgment finding is binding on parties for determination of license fees under the licence agreement and the definition of revenue in AS-9 cannot govern. Reliance upon the affidavit filed on behalf of DOT is wholly misconceived. What is the meaning of the definition of gross revenue has been finally settled inter parties vide 2011 judgment. Thus, there is no scope to entertain the misconceived submission. Though artistically designed with ingenuity, however, the same is misconceived one on in-depth scrutiny108. The submission was raised on behalf of the licensees relying upon J.K. Industries (supra) that fair value has to be taken into consideration to reduce discounts etc. The concept of fair value is not the basis of Accounting Standard-9. Fair value is the operating concept of IND AS-18. In AS-9, revenue recognition is at nominal value and that the fundamental difference between the two accounting standards. Thus, the nominal value has to be taken as the one which is relevant for AS-9. Under the AS-9 regime, the revenue recognition shall be measured as the gross inflow of cash, receivables, or other consideration received. There is no concept of fair valuation under AS- 9109. With the advent of modern technology, the mode of business transactions has changed. The number of online purchases and sales has been continually growing, and the techniques to retain clients online are being utilised. Unlike sales promotion schemes in the case of off-line transactions, the online transactions of sales carry cash back rewards, discount coupons, and reward points. The incentives may include cash coupons, discount coupons, cash discounts, cash- back and credit points, etc. The various incentives affect the amount of revenue to be recognised. Under IND AS-18 Revenue or IND AS-115, Revenue from Contracts with Customers states that revenue shall be measured at the fair value of the consideration received or receivable after taking into account the number of various incentives provided to the customers114. The trade discounts cannot be deducted from the gross revenue merely on the ground that they represent a reduction of cost. The reliance by the licensees on the Guidance Note filed that discounts are reduction granted by a supplier from the list price of goods or services is of no avail owing to the definition of the gross revenue. Set off of trade discounts is not permissible under Clause 19.1 of agreement against revenue as expenses are not permitted to be netted up115. Concerning cash discount, it is apparent that cash discount may be used in various methods. It is an incentive for customers. The customer makes payment after deducting amount of cash discount, if eligible for availing of the same as per the agreement between the entity and the customer. Under AS-9, revenue is recognised at the gross amount and cash discount is regarded as an expense when the seller receives the payment net off discount is not permissible. For example, if A has sold goods to Z for Rs.1000 on 90 days credit period, but if Z pays within 50 days, a cash discount of 10% shall be provided by A. It is reasonably sure that Z to pay the amount within 15 days. In the AS regime, the revenue has to be recorded at Rs.1000, and when Z pays Rs.900, the amount of cash discount of Rs.100 will be recognised as an expense. That is the effect of the revenue to be recognised as a gross amount under AS-9. Concerning the volume-based discount, under the AS-9 regime, revenue is recognised at the gross amount received or receivable from the customers. However, the value of trade discounts and volume rebates received cannot be deducted from the gross revenue owing to the definition in clause 19.1. The subscribers discount can also be in the form of free calls, some free minutes SMS value116. DOT has rightly asked for the licence fee on the notional revenue of free calls, SMS, VAS minutes/data. When these amounts admittedly are reflected in the invoice raised on the subscriber as memorandum, it is the gross revenue. It forms part of the gross revenue and cannot be deducted. That is what was intended by carving out the definition to make it free from litigation and accounting jugglery and to free determination of licence fee from the clutches of accounting jugglery117. The discounts allowed on international roaming, commission, and discount allowed to distributors on sale of pre-paid vouchers form part of the gross revenue and cannot be deducted by placing reliance on the definition of revenue and certain notes of AS-9 standards; whereas they are explicitly included in the definition of gross revenue118. As to pre-paid options, the format of statement of revenue and licence fee contained in Appendix II to Annexure-II provides in the case of pre-paid options, sale of pre-paid SIM cards including full value of components charged therein. Revenue from mobile community phone service including full value of all components charged therein has to be considered, revenue from franchisees/re-sellers including all commissions and discounts, etc. have to form part of the gross revenue. How the parties have understood and agreed to pay the gross revenue is apparent from the correspondence and letter date 22.7.2001 and the ultimate definition mentioned in the licence agreement Clause 19.1 and rejection of TRAIs recommendations by the Government119. The TDSAT has erred in holding that if the discounts are in the form of reduced billing, no addition to be made in the gross revenue. It would mean violating the definition of gross revenue where no set-off is permitted. It is rightly submitted by DOT that discounts over and above the agreed charges are part of overall commercial strategy to enhance the business, and hence, these discounts are like expenses. Expenses are not permitted to be net off under clause 19.1 from the gross revenue under the licence agreement. Similarly, the TDSAT has erred in holding and giving a finding concerning commission and discounts if the invoice is at a discounted price, which is at Rs.90 instead of Rs.100. For the same reason, the finding of TDSAT is not sustainable120. The TDSAT has rejected the case of the licensees. Where the bill is for a higher amount and the discount is in the form of volume discount given separately, the billed amount should be taken as the revenue, and the discount may be treated as an expense. That part of the finding is not disturbed. However, for all discounts and commissions allowed on international roaming, and to distributors on sale of pre-paid vouchers, trade discounts, subscribers discounts, and volume rebates form part of gross revenue121. It has also been submitted on behalf of the licensees that offering discounts is frequently used to increase business in the long run/term. These are inevitable as there were 8 to 10 operators operating in the same geography at highly competitive prices. Discounts help to survive and grow business and augment revenue. Thus it is in the nature of expense for earning the profit and by this method it is admitted that business has grown and there is an increase in revenue, hence the same being part of the commercial strategy to enhance the business, it has to be treated in the nature of expense and cannot be deducted from gross revenue122. Thus, we have no hesitation to reject the claim for various forms of discounts, commissions, pre-paid vouchers, goodwill waiver etc., raised on behalf of the licensees and set aside the finding of the TDSAT to the extent it is contrary to the stand taken by DOT, and we hold that all discounts and commission etc. as discussed form part of the gross revenue for the purpose of payment of licence feeIn re: Gains arising out of Foreign Exchange Fluctuations:127. When we consider the rival submissions, it is apparent that there can be realised as well as unrealised foreign exchange gains/losses which may differ depending on whether or not the transaction has been completed by the end of the accounting period. The realised gains or losses are the gains or losses that have been achieved. It means that the customer has already settled the invoice before the close of the accounting period. For example, to say a customer purchased items worth $1000 from a foreign seller based abroad, and the invoice is valued at $1100 at the invoice rate. When customer settles the invoice after a few days, say four weeks, after the date invoice was sent, and the invoice is valued at $1200 when converted to US dollars at the current exchange rate. It means that the seller will have a realised gain of $100. The foreign currency gain is recorded in the income section of the income statement. Unrealised gain or loss results when the invoice is settled, but in case the customer fails to pay the invoice by the close of the accounting period. The seller calculates the gains or losses that would be earned if the customer paid the invoice at the end of the accounting period. While preparing a financial statement, a transaction will be recorded as an unrealised loss of $100 in case the value of the invoice was $200. On the last date of the accounting period, the invoice is valued at $100. Thus, the unrealised loss will be of $100. The unrealised gain or loss is recorded in the balance-sheet. When preparing the actual financial statement, companies are required to report the transaction in the home currency to make it easy to understand all the financial reports. It means that all transactions carried out in foreign currency must be converted to the home currency at the current exchange rate when the business recognises the transaction. The exchange difference which arises on reporting the mandatory items at the rate different from the ones at which they are recorded initially, must be recognised rate as an income or an expense. Thus, gain from foreign exchange fluctuation is to be taken in the calculation of AGR, and that is the actual revenue and cannot be ignored128. Similarly, gain from foreign exchange fluctuation should be added on accrual basis. If later on, the amount has to be spent on the purchase of equipment or settling roaming charges in foreign currency, that is also a gain and results in economic benefit and has to be accounted for while working out the gross revenue as a decrease in liability would be gain. Whatever may be the expenditure, whether it has increased or decreased, must be accounted for as it forms part of the gross revenue129. In the definition of gross revenue, any other miscellaneous revenue is included, and when once the item has to be shown in the balance-sheet or profit and loss account, obviously, it has to be accounted for gross revenue, even as a notional figure. Once the amount is receivable, it has to be taken as part of gross revenue. The finding to the contrary recorded by the TDSAT is thus liable to be set aside. Whether the amount is paid for the purchase of equipment, it has to be accounted for and must be accounted for as per the value spent on the date of the banking transaction, which cannot be ignored. Thus, the gains from foreign exchange fluctuations have to be added in the computation of gross revenue, otherwise, the benefit which is accruing will be ignored. Where profit or loss arises on account of appreciation of foreign currency, such gain or loss has to form part of profit from the business or loss. Whether it is profit or loss on account of trading or on account of asset, it has to form part of profit and loss account, thus, it has to account for gross revenue. The fluctuation in the foreign currency has to be accounted for in the account at the time when the amount is received or at the end of the accounting year. Thus, there is no escape from the conclusion that forex gain has to be accounted for as part of gross revenue. When loss can be claimed as an expenditure, profit or gain due to fluctuations in the rate of foreign exchange has also to be accounted for towards gross receipt, which is gross revenueIn re: Monetary Gains on Sale of Shares:131. Given the definition of gross revenue in the licence agreement, every amount which is more than the book value of the current asset and comes to licensee company, has to be considered for calculation of gross revenue without netting off. Thus, the reasons given by the tribunal that any gain over and above the net book value, that is, when the sale proceeds are less than the original purchase cost but more than the net worth of the assets, has to be excluded from the gross revenue, cannot be accepted. The gross revenue for the current year has to be worked out based on the value of the capital assets. Gross revenue for any year is considered in light of the opening statement and also closing statement at the end of the year. What is gain over and above the book value in the year in question, has to be taken into consideration towards gross revenue received. Submission to the contrary raised on behalf of the licensees cannot be accepted. We are not able to accept the submission that the money collected on the sale of shares etc. is not like revenue receipt but is a capital receipt. The gain from the sale of capital asset including increase over and above net book value and scrap and not the entire proceeds are to be taken as revenue in calculation of the gross revenue without netting off and should be on accrual basis, is unobjectionably within the ken of definition of gross revenue. To say in case e.g., gain for AGR will accrue when the sale proceeds or the current disposition value of the goods is Rs.60, and if it is sold at Rs.70, in that case, there will be a gain of Rs.10. That shall be taken as a gain for AGR calculation. The result would be the same in case the value of an asset worth Rs.100 has depreciated to book value worth Rs.60 and is sold at Rs.70, as urged on behalf of DOT, Rs. 10 will form part of gross revenue. For what purpose and head the income tax would be leviable, is not the question for our consideration132. The submission raised that the sale of shares is not an ordinary business activity, as provided in Para 4.1 of AS-9. Even Para 3(i) of AS- 9 which excludes from the ambit of revenue any realised or unrealised gains resulting from disposal of non-current assets, i.e. appreciation in the value of fixed assets. Again, a futile attempt has been made to get rid of the definition of gross revenue, and confusion is sought to be created by ordinary business activity, which is the expression used in Para 4.1 of AS-9. In contrast, the definition of gross revenue in clause 19.1 includes gross revenue from non-licensed activities also. Thus, the submission is wholly sans substance and stands repelled. Finding to the contrary recorded by TDSAT considering the initial cost is set aside. It has to be seen as book value as on date of sale. The stand of TDSAT is approved in this regard in regard to assets/scrap, shares etcIn re: Insurance claim in respect of capital assets:133. Where an asset is destroyed, and the insurance claim is received for more than its book value. The difference between the insurance claim received and the book value is treated as revenue by the DOT for computing AGR. The dispute was not raised initially by the licensees, while the order in the year 2007 came to be passed. It has been raised after this Court has remitted the case to the TDSAT in the year 2011. The TDSAT has held that if the asset destroyed is replaced immediately and the claim received is more than the actual cost of replacing the equipment, the difference would be taken as income; and in a case where the asset destroyed is not replaced immediately, the gain to the extent more than the gross book value is considered as income. The asset has appreciated over time, then insurance claim received more than the total cost, though being real gain, is not treated as revenue for clause 19.1 of the licence agreementIn case the insurance claim received is more than the book value, it is to be treated as revenue. According to the definition in clause 19.1, the gross inflow of cash for the current year, over and above the book value, is to be treated gross revenue. There is no need to make any classification as to when an asset is destroyed and replaced later on. The insurance claim received more than depreciated book value has to be recorded in the profit and loss account under any other income, that too constitutes a gain, therefore, it will form part of the gross revenue in the calculation without netting off and on accrual basis. To say if the revenue to form part of gross revenue will be treated only when the insurance claim received is more than the book value. Therefore, the excess amount received over and above the book value shall be taken as revenue for calculation of gross revenue. For the use of accounting, the gain from the insurance claim, the bifurcation made by the contingencies, was uncalled for and cannot be culled out from the definition of gross revenue, which was to simplify the procedure of assessment of licence fee. What is the meaning to be given to the word immediately would differ from case to case and determination of licence fee. The cost of replacement also depends upon various factors. An old asset may be replaced by a brand new one of the higher prices. For an accounting of gain from the insurance claim, the methodology classification adopted by DOT is not found to be proper and is not in tune with the definition of gross revenue135. It is submitted on behalf of the licensees that the amount received towards insurance claim is for indemnification towards loss of capital asset to compensate for the loss. The decision in Vania Silk Mills v. C.I.T. Ahmedabad, (supra) has been pressed into service wherein it has been held that while paying for the loss, the insurance company compensates for the loss. The insurance claim is not the value of the damage to property but only takes into consideration the amount required to restore it to its original condition. Insurance contracts are for indemnification. Therefore, it is submitted that the claims are not as revenue136. The submission raised on behalf of the licensees cannot be accepted as the insurance claim over and above the book value is considered as revenue and not the value of the capital asset as there is an inflow of cash received. It is accounted for in the profit and loss account. It has to form part of the gross revenue as defined in clause 19.1. The artificial bifurcation of insurance claim made by the TDSAT cannot be accepted and is contrary to contractual definition of gross revenue. The finding of TDSAT to the extent it is contrary to revenue is set asideIn re: Amount of negative balance of pre-paid customer:137. The negative balance occurs when a pre-paid customer exhausts the available talk-time. TSPs as a matter of policy, sometimes provides the customer with a small amount of loan talk-time as it may deem fit, say of the value of Rs.10 or Rs.20. The utilisation of this talk-time results in negative balance in the account of the pre-paid customer. The balance is recovered from the subsequent re-charge made by the customer. In case where the customer fails to re-charge the fresh top- up amount, the balance remains negative in the pre-paid account of the customer. The pre-paid vouchers are sold for a price for which the customer gets a fixed duration of talk-time/usage of the service. When it is exhausted, and long talk-time is used, it results in a negative balance. The TDSAT has held that the negative balance cannot be taken into account for computation of gross revenue as it is notional revenue, which is neither billed nor received. It is not due to the fault of the licensee, and the licensee does not gain anything from such usage beyond the permitted duration for the amount received by it138. The case set up by DOT is that the negative balance is communicated to the customer and also shown in the account. It is billed on accrual basis and becomes part of gross revenue. In case it is not realised, the same has the effect of bad debt, which is not allowed as a deduction as per the definition of gross revenue. In case it is not counted towards the gross revenue, it may encourage the licensee to give discounts increasing their gross revenue by such incentive and not paying the licence fee to the public exchequer139. It is apparent that the amount of negative balance is a business strategy, and the amount is adjusted in case re-charge is opted. Otherwise also, it is billed and reflected on accrual basis in the account of the customer. Though it has to form part of gross revenue for determination of licence fee under clause 19.1, the number of calls at the full value have to be measured without any discounts or incentive of such business strategy. It is a part of revenue. It cannot be deducted from the gross revenue to be worked out as per the definition of gross revenue under AS-9. Thus, the finding of the TDSAT cannot be said to align with the meaning of gross revenue in factual aspects of the case and is set asideIn re: Reimbursement of the infrastructure operating expenses144. The stand of DOT is that the interpretation is expressly contrary to clause 19.1, which categorically includes revenue from permissible sharing infrastructure. The definition of gross revenue does not permit differentiation between the reimbursement of expenses and rent for the usage of the facility. By the interpretation of TDSAT, accounting jugglery would take place, and the licensee will try to derive maximum reimbursement of infrastructure operating expenses under the category of reimbursement of expenditure rather than under the rent category. The company may form cartel and put up a common expenditure in the type of reimbursement of the cost it would give a chance for netting off the expenditure against revenue, which is prohibited in clause 19.1145. In the definition of gross revenue, the item sharing of infrastructure facility is explicitly mentioned. In the format in Appendix 2 to Annexure-II also, the entire amount is required to be shown. It has been specifically mentioned that there cannot be any setting off of the amount of gross revenue, and the entire money received has to be treated as the gross revenue for the determination of licence fee. It is not the determination of profit. The gross revenue carries a different definition, and the intendment is clear to prevent disputes. Thus the entire amount received by the licensee on account of sharing of passive infrastructure has to be counted in the gross revenue while working out AGR. Thus, the finding to the contrary recorded by the TDSAT is set asideIn re: Waiver of late fee149. In case the late fee is attracted, it has to be counted towards gross revenue without setting off, and if the operator waives it off, it has the same effect of discount being given to the customer which cannot be allowed as no deduction (net off) is allowed under clause 19.1. When once the late fee amount is billed and the amount is not paid within the due date, and the late fee is attracted, merely non- realisation of the same for any reason, cannot be excluded from the part of gross revenue as per its definition. Gross revenue has to be taken whether it is received or not, and netting off is not allowed under clause 19.1. Once the amount has been billed, it is for the licensee to realise it. There cannot be any justification for excluding late fee from the gross revenue. In case money is lost by the service provider, the same losses cannot be excluded from the AGR for the determination of licence fee150. Late free is included explicitly in the definition of gross revenue. As such, it has to be computed as part of gross revenue. Merely by waiver, it cannot be ousted from the purview of gross revenue once it becomes leviable. Thus, the finding of the TDSAT is not sustainable and is set asideIn re: Gains from roaming charges and PSTN pass-through charges154. Clause 19.2 makes it clear that detailed call charges paid to other eligible telecommunication service providers within India shall be excluded from gross revenue. Similarly, roaming revenues passed on to other eligible/ineligible service providers are also excluded. In that case, they must be actually passed over to the licensees in different service areas. Only then it can be excluded from gross revenue and not otherwise156. In the impugned order, the tribunal has held that the revenue from operating FCC 214 licence arises not from the licence granted by DOT but by FCC. Hence, this inflow cannot be taken as part of AGR unless the DOT can establish that there is technical, managerial and financial interconnection interlacing and synergy between companys operations in the USA and India the gross revenue from the services of 214 FCC licence is reflected in the companys accounts157. The stand of the DOT is that if this is permitted, every TSP/licensee in India would have branch offices in other parts of the world and would treat majority of the international income of the licensee as having been generated in the branch office outside the country and would not take it into account from calculation of gross revenue for payment of licence fee. It could not be said that the situation would not affect the profitability of the company since the revenue is generated in the branch office of the company but will affect the calculation of gross revenue as only a repatriated amount would be taken for calculation. Relying on the observations made by this Court in Union of India v. AUSPI (2011) at Para 49 in which this Court has held that in such a scenario, the business can be transferred to a separate legal entity to avoid the branch offices revenue to be clubbed with the main office. The income of the subsidiaries has to be included in the case of Bharti Airtel, it has separate subsidiaries, which are separate legal entities in and outside India, and the income generated from such subsidiaries are not considered or included while computing the adjusted gross revenue of Bharti Airtel. Since BILGO is a branch of Bharti Airtel and not a separate legal entity, because of the previous decision of 2011, the business for which no licence is required, should be transferred to a separate legal entity to avoid computation of gross revenue, if not due it has to be part of gross revenue158. In our opinion, para 49 of the judgment of 2011 takes care of the submission. Once there is a branch, maybe based abroad, its income and the activity of the branch may not require any licence since licensee is undertaking the activity, and the definition of adjusted gross revenue activities includes revenue beyond the licence. The same has to be included in the gross revenue. The submission stands concluded by the previous decision, and we find no merit in the submission159. The finding recorded by the TDSAT, to the extent it is contrary to the DOT, based upon certain conditions, is set asideIn re: Non-refundable Deposits160. It is permissible for the licensee to accept deposits from its customers, which at times are non-refundable but are used to provide discounts on the bills raised. Concerning non-refundable deposits, the claim was not pressed by the learned counsel appearing on behalf of DOT before the tribunal. However, we find that the concession given by the learned counsel on behalf of DOT concerning non-refundable deposits is palpably incorrect161. We had put learned counsel for the parties at notice during the hearing as to the correctness of the finding recorded by the tribunal based on the concession, which was prima facie incorrect. We have heard learned counsel for the parties on the issue whether non- refundable deposit forms part of the revenue of the licensee162. Appendix II to Annexure-II of the licence agreement: Item No.5, in Section D of the format, is an entry concerning non-refundable deposits from subscribers. It has to be included as per the format in the statement of the gross revenue. The definition of gross revenue is wide enough to cover non-refundable deposits as non-refundable deposits are revenue earned from licensed activities. Non-refundable deposits are to be treated as accrued in the profit and loss account as per Annexure III of the licence agreement. It is apparent that non- refundable deposits are in fact revenue received in advance from the subscribers. Even if they are used for discount etc. in the bills, they form part of revenue. Licensees themselves treat non-refundable deposits as income under section 80 IA (2a) of the Income-tax Act. Be that as it may. The finding recorded by the TDSAT concerning non- refundable deposits not being part of the revenue based upon wrong concession made by the learned counsel appearing for the DOT, is as a result of this is liable to be set-aside. It was expected of the TDSAT to consider the concession following law, as such cases cannot be decided and ought not to be decided on the basis of prima facie incorrect concession of the counsel, it has to be legally tested. In case any admission is made, its correctness has to be examinedIn re: Licence fee demand where spectrum is not granted163. Concerning demand of licence fee in the circle where the licensee was not granted spectrum: When the spectrum itself has not been issued, licence activity has not come into play, no revenue is generated. TDSAT has held that the demands of licence fee based on other activities, are bad, unreasonable, invalid, and unsustainable. During the period in question, the UAS licence came bundled with the spectrum, and it is evident that without a spectrum, the licensee could not work out the licence. The finding recorded by the TDSAT is appropriate. Once there is no activity under a licence, merely on the basis that the licence has been issued, no revenue earned, it cannot be shared. Still, there is no activity under the licence, i.e., based on non- licensed activities, the revenue sharing could not have been asked. It would be an unreasonable and unconscionable bargain to pass on such a liability. We agree with finding recorded by TDSAT in the case of Videocon & S. TelIn re: Income from interest and dividend164. Argument has also been raised concerning interest income and dividend income. Since these items are expressly included in the definition of gross revenue in clause 19.1. There is no scope to entertain the submission concerning the exclusion of interest and dividend from gross revenue. Whatever, interest and dividend earned from the licensing and non-licensing activities, have to form part of gross revenue for determination of licence feeIn re: Bad-debts written off165. The bad debts written off are not allowed as a deduction by the DOT while computing adjusted gross revenue, bad debt is written off when recovered subsequently, it cannot be added to the gross revenue. The TDSAT in the impugned order, has observed as under:Licensees submit that if a bad debt, that is written off is later on recovered, it is required to be reported to the DoT, this, according to the licensees, that bad debts written off may be allowed as deductions from revenue but as and when those are recovered subsequently those should be added on to revenue. The submission is not acceptable but it needs to be clarified that when any bad debt written of is recovered finally, it may not be charged to license fee again as that would result in double charging of license fee on the same revenue166. TDSAT has not accepted the submission of the licensees. However, at the same time, it has safeguarded the interest of the licensees. In case it is realised later on, it may not be charged again. It should be charged only once. We find the finding to be appropriate. No case for interference in the findings recorded by the TDSAT is made outIn re: Liability written off167. The TDSAT has observed as under:Take the example of a company that makes a provision for retirement benefits for the amount. For income tax, it will be considered as an expense, but no discount from income will be allowed for the sum for determining the license fee. If such a liability is written off on a future date and shown accordingly in the profit and loss statement it surely cannot be brought to charge for a second time for computing licence feeNo objection has been raised on behalf of DOT to the said findings168. DOT submits that the reasoning is correctIt is presented on behalf of the licensees that notional revenue cannot be included in the revenue of the company based on provisional liability being finalised by actual liability. The amount kept as provisional liability cannot be treated as income. In our opinion, TDSAT has rightly held that if it is to be considered as an expenditure, liability has to be treated as an expense, and no discount on the income will be allowed for the sum for determining the licence fee. It cannot be charged for the second time for computation of licence fee169. In Rajputana Trading Co. Ltd. v. Commissioner of Income Tax, West Bengal-I, (1982) 2 SCC 775 , it has been observed that once liability is written off, it has to be added as income from the business under section 10(2A) and such income should be given some local habitation or name170. Hence, we hold that it is to be treated as an expense, and discount cannot be allowed for determining the licence feeHowever, TDSAT could not have undertaken this exercise head-wiseIn re: Inter-corporate loan171. Certain licensees have raised the loan being holding companies for the subsidiaries from various banks and financial institutions. In turn, this amount is given to the subsidiaries for their day-to-day operations. On this amount, the subsidiaries pay interest at the SBI Prime Lending Rates (PLR) every quarter, which in turn is paid by the holding company to the banks/financial institutions. DOT seeks to include the interest received from the subsidiaries companies in the revenue of the holding company. The TDSAT has included the income from interest on inter-corporate loan as part of gross revenueIt is submitted on behalf of licensees that as the holding company only performs the function for the subsidiary company and the interest amount is only reimbursement of the amount paid to the bank, it cannot be included in the gross revenue. As such, it does not form part of gross revenue172. The submission has no legs to stand, and it is apparent from the definition of gross revenue in clause 19.1 that income from interest is to be included in the gross revenue. Thus, the submission is baseless. By the fact that the holding company gives loan to the subsidiary company and recovers interest from subsidiaries, is good enough to make it a part of gross revenue173. Thus, interest income from inter-corporate loan has to be included in the gross revenue for working out the licence feeIn re: Revenue under IP-1 Registration