Transfer of right to use goods requires possession and effective control; limited telecom infrastructure access was not taxable.

Provision of passive telecom infrastructure and related maintenance services was held not to amount to a transfer of the right to use goods under Article 366(29-A)(d) and the Madhya Pradesh VAT Act. The operator received only limited, supervised access for use of its own active infrastructure, while the provider retained title, possession, control, and the obligation to operate and maintain the facilities. Because there was no exclusive possession or effective control, and no legal transfer of the right to use goods, the arrangement was treated as a permissive licence and not a deemed sale. VAT on that basis was therefore not sustainable.

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Issues: Whether the provision of passive infrastructure and related operations and maintenance services by the petitioner to telecom operators amounted to transfer of the right to use goods under Article 366(29-A)(d) of the Constitution and Section 2(u)(vi) of the Madhya Pradesh Value Added Tax Act, 2002 so as to attract value added tax.

Analysis: The agreement showed that the petitioner retained title, possession and control over the passive infrastructure throughout. The telecom operators were given only limited site access for installation and use of their own active infrastructure, subject to strict supervision, operational restrictions, and the petitioner's continuing obligation to maintain and operate the passive infrastructure. The arrangement did not confer exclusive possession or effective control on the operators, nor did it evince an intention to part with the right to use the goods in the legal sense. The access granted was merely permissive use or a limited licence, which did not satisfy the attributes of a transfer of the right to use goods.

Conclusion: The transaction was not a deemed sale and did not fall within the taxable transfer of the right to use goods. The levy of VAT on this basis was not sustainable, and the assessee succeeded.

Ratio Decidendi: A taxable transfer of the right to use goods requires transfer of possession and legal right to use with effective exclusion of the transferor; mere restricted access or permissive use under a service arrangement is insufficient.

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