TaxTMI 
TaxTMI 
2013 (6) TMI 294
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....towards the tax liability arising out of the impugned order. 2. The petition arises in the following circumstances. Indus, which is the petitioner herein, is a company incorporated under the Companies Act, 1956. Its business is to provide access to the telecom operators, on shared basis to the telecom towers installed by it as well as the shelter, diesel generator sets, air conditioners, electrical goods, DC power systems, battery etc. Indus is a company registered with the Department of Telecommunication for providing passive infrastructure services and related operations and maintenance services to various telecommunications operators in India on a shared basis. It is the policy of the Government of India to encourage extensive infrastructure sharing and in pursuance with the policy, the telecom operators were required to create a high quality, rapid and wide coverage of mobile telecommunications network in India. The passive infrastructure facilities or services could be shared by several telecom operators so that it becomes cost-effective. Indus provides such passive infrastructure services to the extent permitted by the applicable laws in India and was willing to offer them....
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....nment of NCT of Delhi, who is the respondent No.3 in the present proceedings, in No.280/CDVAT/2010/13 in an application filed by the petitioner before him under Section 84 of the Delhi Value Added Tax 2004 (DVAT). The petitioner provided the passive infrastructure services to sharing telecom operators and received consideration therefor. The questions before the Commissioner, Department of Trade and Tax, in his words, were as follows:- "Whether in the facts and circumstances the provision of Passive Infrastructure Services by the Applicant to Sharing Operator's would tantamount to 'Transfer of right to use goods' as per Section 2(1)(zc)(vi) of the DVAT Act, 2004 and therefore become liable to tax under the DVAT Act." "If yes, then how should the sale price as per section 9(1)(zd) of the DVAT act be determined for the purpose of discharging the liability under DVAT Act?" The Commissioner on an examination of the agreement entered into between the petitioner and M/s Sistema Shyam Tele Services Ltd., which was taken as representative of the agreements entered into by the petitioner with various telecom operators, held that the entire amou....
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....cess Availability (a "Service Order"). The process for issuing a Service Order shall be as specified in Schedule 1 (Site Access Availability). 2.1.3 In the event that the Service Orders received by Indus in respect of any Site(s) mean that the available Passive Infrastructure at such Site(s) are over-subscribed, an applicant whose Service Order was received by Indus prior to another Service Order shall be given priority by Indus while allocating such Passive Infrastructure to the relevant applicants. 2.1.4 With respect to each Site in relation to which Indus is able to grant Site Access Availability, the Parties shall execute a Service Contract in accordance with the procedure set out in Schedule 1 (Site Access Availability), and the provisions of each Service Contract shall include the standard terms set out in Schedule 5 (Standard Site Access Terms). Each Service Contract shall be duly stamped and the applicable stamp duty shall be at the Sharing Operator's expense. 2.1.5 Upon the execution of a Service Contract in respect of a Site, the Sharing Operator shall have the right to install the Sharing Operator Equipment or any porti....
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....uct the operation and maintenance activities, it shall have the right to replace, repair, add or otherwise modify the sharing operator equipment and the frequencies over which the equipment operates. In order to do so, the sharing operator shall be provided access to the sites by providing ingress and aggress from such site by only the authorised representatives of the sharing operator or its properly authorised sub-contractors. Clause 3.2 requires Indus to ensure that the operation and maintenance services which are provided by it to the sharing telecom operators are in accordance with "good industry practice" and only by suitably qualified, skilled and experienced personnel. The information relating to processes and proceedings to monitor the performance shall be shared with the sharing operators on a monthly basis. Certain consequences follow if operation and maintenance service levels fall short of the required standards which are not relevant for the present purpose. 7. Clause 4 provides for the rights of Indus. Under clause 4.1, so far as the sites are concerned, Indus shall have the right to require that whenever any access is needed by the sharing operator or its approve....
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....ays that Indus shall have the exclusive right to lease, licence or grant space on each site or passive infrastructure on the site to any their party for the purposes of placing hoardings, banners and other advertisements and the sharing telecom operator shall not have any right of objection. However, the right of Indus to do so shall not adversely affect the connectivity network or passive infrastructure of the sharing telecom operator in any manner; in case of any such complaint from a telecom operator the hoardings/advertisement shall be removed. 11. Schedule 1 to the contract provides for "site access availability" and provides for several technical details and requirements relating to the antenna, ground based tower, roof top tower, time lines for site deployment, site access service credit for acquisition and deployment etc. Schedule 2 provides for "operation and maintenance service". Only 3 clauses need to be noticed. Clause 1.8 obliges Indus to ensure proper access to the sites for all authorised personnel of sharing telecom operator for the purposes set out in Clause 3.1.2 which we have already noticed. Clause 1.9.3 sets out the rates at which the petitioner has to pay t....
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....4. In the DVAT Act, 2004 the word "sale" is defined in section 2(1)(zc) in the following manner:- "Section 2 - Definitions (1) In this Act, unless the context otherwise requires,- xxx (zc) "Sale" with its grammatical variations and cognate expression means any transfer of property in goods by one person to another for cash or for deferred payment or for other valuable consideration (not including a grant or subvention payment made by one government agency or department, whether of the central government or of any state government, to another) and includes- xxxxx xxxxx xxxxx (vi) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;" 15. In the light of the above provisions, the question for consideration is whether there is a transfer by Indus of the right to use any goods in favour of the sharing telecom operators which would attract value added tax within the terms of the DVAT Act, 2004. 16. The main point urged on behalf of the petitioner was that there was no transfer of the rig....
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....on itself was framed on an erroneous assumption, the answer given by the Court was consequently wrong and, therefore, the entire matter needs to be looked into afresh. It was submitted that having regard to the terms and conditions of the MSA and the facts brought on record, the conclusion that is inescapable is that there was a transfer of the right to use the "Passive Infrastructure" by Indus in favour of the sharing telecom operators attracting the levy of value added tax. 19. We are in respectful agreement with the view taken by the Karnataka High Court in the judgment sited (supra). The right to use the goods - in this case, the right to use the passive infrastructure - can be said to have been transferred by Indus to the sharing telecom operators only if the possession of the said infrastructure had been transferred to them. They would have the right to use the passive infrastructure if they were in lawful possession of it. There has to be, in that case, an act demonstrating the intention to part with the possession of the passive infrastructure. There is none in the present case. The passive infrastructure is an indispensible requirement for the proper functioning of the ....
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....ncy and potential, which in turn means that it has to be in possession of the passive infrastructure and cannot part with the same in favour of the sharing telecom operators. With several such restrictions and curtailment of the access made available to the sharing telecom operators to the passive infrastructure and with severe penalties prescribed for failure on the part of the Indus to ensure uninterrupted and high quality service provided by the passive infrastructure, it is difficult to imagine how Indus could have intended to part with the possession of part of the infrastructure. That would have been a major impediment in the discharge of its responsibilities assumed under the MSA. The limited access made available to the sharing telecom operators is inconsistent with the notion of a "right to use" the passive infrastructure in the fullest sense of the expression. At best it can only be termed as a permissive use of the passive infrastructure for very limited purposes with very limited and strictly regulated access. It is therefore difficult to see how the arrangement could be understood as a transfer of the right to use the passive infrastructure. 21. When Indus has not t....