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No.1-28/2006/LF

Department of Telecom(Licensing Finance Branch)

The Controller of Communication Accounts,Orissa Telecom Circle,4th,'Floor, CPMG Building,Bhubaneswar -751 001.ORISSA.

Sub: Verificati~n of deductions claimed by the licensees through quarterlyStatement of Revenue & License Fee - clarifications thereof.

This letter issues in continuation to the instructions contained in the letter of evenno. dated 20.09.2006 and 21.09.2006. It is reiterated that verification report for eachlicensee of the licensed service area on a quarterly basis is to be submitted by the 0/0CCAs as per the schedule given in letter dated 21.09.2006. For ready reference, theverification of each quarter shall be completed by the CCA within a stipulated time framei.e. by 15thOctober, 15thJanuary, 15thApril and 30th June for quarters I, II, III and IVrespectively of the concerned financial year.

2. Based on the receipt of reports and letters from the CCAs, the followingclarifications with respect to the verification of deductions claimed from the GrossRevenue by the Telecom Service Licensees through quarterly Statement of Revenue &License Fee are issued: -

Issue No.1

Clarification -

Issue No.2Clarification -

Issue No.3

Clarification -

The Licensees are not submitting in time (a) operator-wise details of thedeductions claimed, and (b) proof of payment/adjustment.A separate letter is being issued to the Licensees for the submission ofproof of payment and other details so as to back up the claimeddeductions as per quarterly Statement of Revenue & License Fee. Incase of willful refusal by the licensee to submit above details, the.CCAsshould send a separate report to the LF Branch, DoT so that necessaryaction against the licensee at the HQ level can be initiated.

Admissibility oftne deductions claimed on account of ADC paymentThe ADC payments made by the Licensees to another Telecom serviceprovider qual ifes for deduction subject to proof of payment.

Admissibility of payments made by one division of a licensee companyto another division e.g. payments made by UASL division of theCompany to the NLD/ILD division of the same Company when thelicensee company has license for UASLINLD/ILD.In case of inter-division payments of pass through nature(payments/adjustments made between UASL/NLD/ILD divisions of aCompany having UASL/NLD/ILD licenses), deductions of suchpayments are to be allowed based on proof of inter-divisionadjustments. At the time of annual assessment of License Fee such

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inter-divisional payments/adjustments are treated as permissiblededuqions upon production of duly audited proof of adjustment as perprovfsions of the extant License Agreement.

Issue No.4 - Deductions claimed by the licensee for payments made for leased linecharges, port charges, charges for infrastructure sharing etc.

Clarification - Nb deductions other than those specified in the respective LicenseAgreements qualify for deductions from the Gross revenue wnich is tobe furnished by the licensee in the prescribed format of Statement ofRevenue & License Fee. Therefore leased line charges, port charges,infrastructure sharing charges etc. or any other type of set off (items ofexpenditure against revenue) do not qualify for deduction.

Issue No.5

Clarification -

Issue No.6

Clarification -

Issue No.7Clarification -

Issue No.8

Clarification -

The actual date of payment for pass through charges in case of payment.by cheque.In case of payment by cheque of PSTNlRoaming charges etc. the dateof payment is to be taken as the date of receipt of such cheques by thereceiving licensee.

Admissibility of payments made for Service Tax/Sales Tax anddeductions thereof.If the Gross Revenue includes the Service Tax/Sales Tax, then actualpayments made by the licensee to the Government during the FYqualifies for deduction for that year. If the extant provisions of theService Tax/Sales Tax permit the licensee company to avail CENVATCredit against the Service Tax/Sales Tax dues payable by the licenseethen the Service Tax/Sales Tax paid will include such credits availed.The Claim of such deductions will be admissible subject to proof ofpayments/adjustments' and permission of the tax authorities.

Nature of proof of paymentThe proof of payment includes voucherslBank statements/receipts etc.

The % CCA has to check the admissibility of claimed deductions withrespect to proof of payment/adjustments made and in accordance withprovisions of the License Agreement. The claimed deductions are to betaken as furnished by the licensee through its quarterly Statement ofRevenue & License Fee.

Payment/adjustment of PSTN/Roaming charges made on net basisbetween two licensees.In case of adjustment of PSTN/Roaming charges between two licenseesmade on net basis, the payment of only residual amount is effected.However the respective licensee will claim deduction of the fullamount. As an illustration, in case of settlement between Licensee Aand B, if the amount payable by A to B is Rs.l 00 and amount payableby B to A is Rs.65 then the actual payment (transaction) made by A toB would be of Rs.35 only. In this case Licensee A will claim' deductionof Rs.l 00 and Licensee B will claim deduction of Rs.65, even thoughcash transaction of Rs.35 only has been made. The licensee shouldhowever support this through proof of payment and adjustment.

Issue No.9Clarification -

Issue No. 10 .Clarification

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Verification of claimed deduction on sample basis.The 0)10 CCA has to ensure 100% verification of operator-wisepayments made and claimed as deduction through quarterly Statementof Revenue & License Fee. Only the amount shown as deduction in thequarterly statement is to be verified and report sent about itsadmissibility or inadmissibility. Wherever the licensee does notsubmit the operator-wise details substantiating the deductions claimedas per quarterly Statement of Revenue & License Fee, the amount hasto be quantified and the same has to be reported as inadmissible to theLF Branch, DoT HQ as per schedule.

Nature of proof of payment in case of roaming charges and in particularjnternational roaming paid through clearing houses.The Office of the CCA will ask for statements trom the Banks, dulysigned by their authorized signatories along with statement ofsettlement of account of Roaming charges from clearing house dulysigned by the operator's authorized signatories. The 010 the CCA has tocheck the admissibility of claimed deductions with respect to proof ofpayment! adjustments made and in accordance with the LicenseAgreement.

3. The formatof the verificationreportto be sentto LF Branch, DoT HQ is enclosedherewith.

4. The quarterly verification report in the prescribed format should be sent with theapproval of the CCA.

5. The CCAs may also raise a demand, if any shortfall is -noticed based on theverification exercise together with interest in terms of the License Agreement.

6. Soft copy of the report should be sent at E-maiIIDLFIV@rediffmail.com.

(Dr. Janaki A,nanthakrishnan)Director (LF-II)

Phone - 011-23036015

End: As above (3 pages)

Copy for information to: -I. DDG (AS/CS), DoT2. Director(LF-I/III),DoT3. Sr. PPS to Member(F), DoT4. PS to Member(T), DoT5. PS to DDG(LF), DoT6. HindiSectionfor Hindiversionof the above letter,7. Guard File.

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Summary RePort of verification of deductions claimed in QuarterlvStatement of Revenue & License Fee with respect to <name of the svc

area> license service area

Quarter - <qtr no.> of FY <financial year>

. .(Fig. in Rs.)

S.No. Name of Service Deductions Deductions Deductions Shortfallthe. claimed admissible inadmissible of LicenseLicensee Fee.

Total

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Report on v~rification of deductions claimed bv the licensee throughQuarterlv Statement of Revenue and License Fee

PART - I

Summary of Quarterly Statement of Revenue & License Fee(As submitted bv the Licensee)

(Fig. in Rs')

Name of the Licensee I

License No. &.DateService AreaRate of License Fee

QuarterFinancial Year

,

Previous Quarter Current Quarter Cumulative uptocurrent quarter

1. Gross Revenue(item no. AA)

2. Deductions(item no.B)

(i) PSTN related call

charges paid to otheroperators

(ii) Roaming revenueactually passed on toother operators

(iii) Service Tax paid tothe Government

(iv) Sales Tax paid to theGovernment

3. Total Deductions

(Item No.BB)4. Adjusted Gross

Revenue(Item No.CC)

5. Revenue Sharepayable

6. Revenue Share paid7. Date of payment

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PART-Ii

Revised calculation of Revenue Shan~ on the basis of verification ofl' . '1' -,," . "",j. ... ~ _. ". y . ,(l{;(lUctlOns ClaImCU m me ~ta~emtni OT ~-c.eVZI1ue LX License .fee

(rig, in Rs.)

Reasons for inadmissibility of deductions:

Sigi1:lture of the officer

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-S.No. . . Hem I Amount I

1 IGross Revenue(Item No.AA) II

A IPSTN related

I Dedu:tiO!1S claimed in Statement ofI

B Roaming charges2

' Revenue& License Fee (ItemNo. BB) Ie! Service Tax :

D Sales Tax !

E I ADC

Adjusted Gross Revenue (Item No.CC)I

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..,(as per the Quarterly Statement of Rev. I

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I& LF submitted by the Licensee) (i-2) I

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A PSTN related

I lnadmissibie deductionsB Roaming charges

4 Sei"vice Tax

D Sa!es Tax IE iADC

5 Revised Adjusted Gross Revenue (3-4)6

i Revenue share payable for the quarter II(AGR * Rate of License Fee)

7Revenue share actua!Jy paid for the I

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j !quarter i

8Short payment of Revenue Sharc/LF I

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(6-7) I