TaxTMI 
TaxTMI 
2011 (4) TMI 234
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....transactions which are in the nature of service contract and also according to him, as per section 65(l1) of the Finance Act, 1994 it is only a service contract. 3. The petitioner erects and constructs tower sites and lease out the space on such sites to various telecom/cellular operators such as BSNL, Airtel, Vodafone, etc. It is stated, they are service providers falling with the category zzzq defined under section 65(105) read with section 65(105)(104C) of the Finance Act, 1994. Petitioner also holds a registration certificate issued by the Centralized Service Tax authority at Bombay and is having centralized billing and accounting system and is filing periodical returns and paying proper tax due to the Union. 4. Acting under section 39 of the VAT Act, 2003, the 3rd respondent has issued notice for the assessment years 2007-08 and 2008-09 proposing to impose VAT on providing of cellular telephony towers on rent to various service providers stating that the transaction falls under the definition of 'deemed sale' under section 2(29)(d) of the Act read with sections 3 and 4(1)(b) of the VAT Act, 2003 and also proposition notices were issued for those periods as at Annexur....
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....; Dy. CST(Law) v. Bobby Rubber Industries [1998] 108 STC 410 (Ker.) 5. CST v. Prahlad Industries [1999] 112 STC 548 (All.) 6. Tata Consultancy Services v. State of AP [2005] 1 SCC 308 7. Rashtriya Ispat Nigam Ltd. v. CTO [1990] 77 STC 182 (AP) 8. State of AP v. Rashtriya Ispat Nigam Ltd. [2002] 126 STC 114 (SC) 9. BSNL v. Union of India [2006] 3 STT 245 (SC) 10. Lakshmi Audio Visual Inc. v. Asstt. CCT [2001] 124 STC 426 (Kar.) 11. Imagic Creative (P.) Ltd. v. CCT [2008] 2 SCC 614. 7. In the statement of objections filed by the State, it is stated, the relief sought for by the petitioner to restrain the State from proceeding to recover as per section 45 of the VAT Act and challenging the authority to impose tax under section 3 of the VAT Act is not maintainable. On the basis of the order of the Commissioner for Commercial Taxes as per section 6 of the Act, the respondent authority visited the business premises of the petitioner's company, passed an order of reassessment after proceedings had been initiated by issuing notice under section 39(1) of the Act....
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....is not leasing any immovable property, it is stated, petitioner is liable to pay tax as per section 4(1)(b) of the Act treating this as lease of equipment and transfer of right to use goods. The tower is not embedded permanently and it is a movable property, it can be shifted at any point of time to any new site and rather, land is hired from private parties to make temporary fixation. Any instrument/equipment let out incidentally, exclusively it is taxable as per the agreement. The decision of the Apex Court in Karthik Engg. Works' case (supra) is not applicable to the case on hand and so also the decision in Lakshmi Audio Visual Inc.'s case (supra) cannot be squarely made applicable to the case. Accordingly, resisting the petitions, it is submitted the telecom towers are movable property and leasing of these towers by collecting rentals are deemed to be sale of movable property exigible to tax. 8. The 1st respondent has not filed any counter rather, it is his contention that the nature of service extended by the petitioner is only in the form of service to various telecom companies. Accordingly, petitioner having registered under the Service Tax law, is paying the taxes ....
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....s permanently fastened to anything attached to the earth requires determination of both the intention as well as the factum of fastening to anything attached to the earth and, this has to be ascertained from the facts and circumstances of each case. 11. Although an opinion is formed by the Bombay High Court based on Triveni Engg. & Industries Ltd.'s case (supra) that the erection of towers cannot be treated as mobile and it is fixed to the earth, in my opinion, it cannot be accepted in the context to treat it as immovable property to contend that it is only in the form of service rendered and not transfer of right to use the goods. The definition provided under the provisions of section 3 of the Transfer of Property Act or under the Sale of Goods Act if interpreted insofar as this type of equipment fixed to the earth or on the building, definitely it can be dismantled and replanted else where. Except the civil work of putting up a platform to fix the equipment/tower, the structure does not acquire the character of immovable goods to detract the application of the VAT Act. Though it appears, for outward appearance, a semblance of service is being rendered but, factually i....
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....12) of the Constitution. 14. While advancing his argument, learned Sr. counsel for the petitioner referred to the provisions of the agreement entered into between the petitioner and the customer at clauses 1.2.5; 1.2.6; 1.2.9; 1.6.2 and 4.2.3 to contend that the erection of tower cannot be treated as movable property and mere delivery without control is not a sale and that there is no delivery involved at all in the context and it is only a matter of service and not lending of goods or lending the right to use the goods. 15. The specific contention raised by the petitioner is, respondent has not proved the test of mobility and has also laid thrust on Hutchison Max Telecom (P.) Ltd.'s case (supra) rendered by the Bombay High Court to contend the lending of space in the tower is immovable property. 16. Learned Advocate General contended that the transaction involved is a component of sale to which VAT Act applies. There is transfer of right to use the goods as is mentioned under Article 366, clause 29A(d) of the Constitution. Learned counsel has also referred to clauses 4.3.5; 4.4.3 and 5.1 of the Agreement which reads: 4.3.5: Identification of Equipments: The cellular operat....
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....hat may have been purchased for the purposes of getting a telephone connection. As far as the subscriber is concerned, no right to the use of any other goods, incorporeal or corporeal, is given to him or her with the telephone connection, but, in para 65 it has observed 'We cannot anticipate what may be achieved by scientific and technological advances in future. No one has argued that at present electromagnetic waves are abstractable or are capable of delivery. It would, therefore, appear that an electromagnetic wave (or radio frequency as contended by one of the counsel for the respondents), does not fulfil the parameters applied by the Supreme Court in Tata Consultancy for determining whether they are goods, right to use of which would be a sale for the purpose of Article 366 (29A)(d).' 20. In the reassessment order passed by the respondent authority as a matter of fact finding, he has referred to the various equipment used in the installation of the tower either on the land or on the roof of the building and also the agreement entered into between the parties and opined that the petitioner company has transferred the right to use the goods i.e., cellular telephon....