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of <h1>BOMT Contract: Property Transfer on Activation, Upheld Government Taxation Decision</h1> <h3>ELECTRONICS CORPORATION OF INDIA LTD. Versus STATE OF KERALA REPRESENTED BY THE SECRETARY, TAXES DEPARTMENT, THIRUVANANTHAPURAM</h3> ELECTRONICS CORPORATION OF INDIA LTD. Versus STATE OF KERALA REPRESENTED BY THE SECRETARY, TAXES DEPARTMENT, THIRUVANANTHAPURAM - TMI Issues:1. Clarification under Section 94 of the Kerala Value Added Tax Act, 2003 regarding a Build Operate Maintain and Transfer (BOMT) contract.Analysis:The appellant contested whether the BOMT contract with the Motor Vehicles Department was a works contract or a right to use goods. The appellant was responsible for infrastructure setup, software installation, maintenance, and training under the Fully Automated Services of Transport project. The appellant argued that it retained ownership until transferring goods after three years, claiming only a right to use was involved. However, the government argued that goods were transferred when the system went live, with the appellant having no property rights. The agreement stated that assets became the property of the MVD upon contract completion or termination.The court found no transfer of right to use based on the appellant's clause reliance. The contract involved building, operating, maintaining, and transferring a fully operational system after three years. Property in goods transferred when the system went live, with deferred payments made quarterly during the maintenance period. The appellant's obligation was solely to maintain and operate the system for functionality. The court rejected the appellant's argument that the transfer occurred only after three years, stating that the sale was deemed upon goods accretion as per the Constitution.Referring to a Supreme Court decision, the court noted that a works contract includes transfer of goods, even if additional obligations exist. The appellant sought deductions for civil works, labor, personnel deployment, and training expenses post 'go-live.' The government clarified that the order focused on taxing the transfer of goods' value, with the Assessing Officer responsible for granting deductions if applicable. The court upheld the authority's clarification order, rejecting the appeal without costs.
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