Together good things happen - Airtel

Unless otherwise stated below, the management
believes that, based on legal advice, the outcome of
these contingencies will be favorable and that a loss is
not probable.
c) Sales tax
The claims for sales tax as at March 31, 2010 comprised
the cases relating to :
i. the appropriateness of the declarations made by the
Company under the relevant sales tax legislations
which was primarily procedural in nature;
ii. the applicable sales tax on disposals of certain
property and equipment items;
iii. lease circuit / broadband connectivity services; and
iv. the applicability of sales tax on sale of SIM cards, recharge
coupons, SIM replacements, VAS, Handsets and
Modem rentals.
v. In the State of J&K, the Company has disputed the levy
of General Sales Tax on its telecom services and
towards which the Company has received a stay from
the Hon'ble J&K High Court. The demands received to
date have been disclosed under contingent liabilities.
The Company, believes, that there would be no
liability that would arise from this matter.
d) Service tax
The service tax demands as at March 31, 2010 relate to:
i. roaming revenues charged from other operators;
ii. subscriber receivables written off; and
iii. cenvat claimed on tower and related material.
e) Income tax demand under appeal
Income tax demands under appeal mainly included the
appeals filed by the Company before various appellate
authorities against the disallowance of certain expenses
being claimed under tax by income tax authorities and
non deduction of tax at source with respect to
dealers/distributor’s payments. The management believes
that, based on legal advice, it is probable that its tax
positions will be sustained and accordingly, recognition of
a reserve for those tax positions will not be appropriate.
f) Custom duty
The custom authorities, in some states, demanded
Rs 2,198,348 thousand as at March 31, 2010 (March 31,
2009 - Rs 2,198,348 thousand) for the imports of special
software on the ground that this would form part of the
hardware along with which the same has been imported.
The view of the Company is that such imports should not
be subject to any custom duty as it would be an operating
software exempt from any custom duty. The management
is of the view that the probability of the claims being
successful is remote.
g) Entry tax
In certain states an entry tax is levied on receipt of material
from outside the state. This position has been challenged
by the Company in the respective states, on the grounds
that the specific entry tax is ultra vires the constitution.
Classification issues have been raised whereby, in view of
the Company, the material proposed to be taxed not
covered under the specific category. The amount under
dispute as at March 31, 2010 was Rs 1,956,008 thousand
(March 31, 2009 - Rs 1,020,873 thousand) included in
Note 3 (b) above.
h) Access charges
Interconnect charges are based on the Interconnect
Usage Charges (IUC) agreements between the operators
although the IUC rates are governed by the IUC
guidelines issued by TRAI. BSNL has raised a demand
requiring the Company to pay the interconnect
charges at the rates contrary to the guidelines issued
by TRAI. The Company filed a petition against that
demand with the Telecom Disputes Settlement
and Appellate Tribunal (‘TDSAT’) which passed a
status quo order, stating that only the admitted amounts
based on the guidelines would need to be paid by
the Company.
The management believes that, based on legal advice,
the outcome of these contingencies will be favorable and
that a loss is not probable. Accordingly, no amounts
have been accrued although some have been paid
under protest.
i) DoT Demands
i) The Company has not been able to meet its roll out
obligations fully due to certain non-controllable
factors like Telecommunication Engineering Center
testing, Standing Advisory Committee of Radio
Frequency Allocations clearance, non availability of
spectrum, etc. The Company has received show cause
notices from DoT for 14 of its circles for nonfulfillment
of its roll out obligations. DoT has reviewed
and revised the criteria now and the Company is not
expecting any penalty on this account.
ii) DoT demands also include demands raised for
contentious matters relating to computation of
license fees.
j) Others
Bharti Airtel Annual Report 2009-10
Others mainly include disputed demands for
consumption tax, disputes before consumer forum and
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