"The company will get back not only the principal of Rs 600 crore that it paid to the I-T department by way of advance tax over the years but also the interest of approximately Rs 200 crore that it would have earned on it," Mr RSP Sinha, director, finance, told eFE. The verdict also comes as a relief to the company's investors. "The fear that they might have to cough up the sum should VSNL lose the verdict was troubling the investors," said Mr Sinha. A reverse verdict, according to him, would have put the tax liability for the company at Rs 1,700 crore. Post verdict, there will be no contingent liability for the company. Though analysts felt the verdict would not have any significant financial implications for the company as it was not being provided for in the balance sheet.

The whole dispute was on whether the licence fee paid by VSNL to DOT was business expenditure or capital expenditure. VSNL was of the view that it was a business expenditure as the licence fee was paid for using DoT's communication. While the IT department felt the payment was not based on any business consideration and was made on account of `special relationship' between the two companies. The case has been sub-judice since 1994-95 when VSNL first made its claim for deduction of license fee but the assessing officer chose to shot down the appeal in view of the directives of the then finance minister and the Central Board of Direct Taxes (CBDT).