Transfer of right to use goods requires real possession or control; passive infrastructure sharing was treated as a licence and service arrangement.

Passive infrastructure sharing was held not to amount to a transfer of the right to use goods under Article 366(29A)(d) because the owner retained ownership, possession, title, control and the right to grant access. Telecom operators received only permissive access to the site to install and operate their own active equipment, together with supporting services such as power, maintenance, security and environmental support. As no possession, effective control or transferable interest in the infrastructure passed to the operators, the arrangement was characterised as a licence and service contract, not a deemed sale. The transaction was therefore outside VAT under the Karnataka Value Added Tax Act, 2003.

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Issues: Whether the passive infrastructure sharing arrangement amounted to a transfer of the right to use goods and a deemed sale under Article 366(29A)(d) of the Constitution of India so as to attract value added tax under the Karnataka Value Added Tax Act, 2003.

Analysis: The arrangement, read as a whole, showed that the assessee retained ownership, possession, title, control and the right to grant access to the passive infrastructure. The telecom operators were only given permissive access to use the site, to install and operate their own active equipment, and to receive allied services such as power supply, maintenance, security and environmental support. The operators did not obtain possession of the infrastructure or any transferable interest in it, and the assessee could not be said to have parted with the bundle of rights necessary to constitute a transfer of the right to use goods. The transaction was therefore in the nature of a licence and service arrangement, not a transfer of goods or of the right to use goods.

Conclusion: The arrangement was not a deemed sale and was not exigible to VAT.

Ratio Decidendi: A transaction attracts Article 366(29A)(d) only when there is a real transfer of the right to use identifiable goods, involving transfer of possession or effective control and not merely permissive access for services.

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