TaxTMI 
TaxTMI 
2013 (4) TMI 904
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....R GM JOSHI, MU TULSHI R SAVANI, MR MB PARIKH, MR DEEP D VYAS, MR MEHUL SHARAD SHAH, MR DILIP B RANA, MR MURALI N DEVNANI, MR KJ BRAHMBHATT, MS VARSHA BRAHMBHATT, MR VIJAY H NANGESH, MR NISHAN LALAKIYA, MR DHAVAL G NANAVATI, MR ASHIH M DAGLI, MS JIRGA D JHAVERI for rest of the Respondents SPECIAL CIVIL APPLICATION NO. 9162 of 2009, 9186 of 2009, 9187 of 2009, 9197 of 2009, 9206 of 2009, 677 of 2010, 706 of 2010, 1337 of 2010, 1497 of 2010, 1590 of 2010, 2452 of 2010, 2456 of 2010, 2473 of 2010, 3684 of 2010, 6049 of 2010, 4721 of 2012, 3411-3413 of 2012, 7088 of 2012, 11950 of 2012, 15596 of 2012, 1681 of 2013, 3785-3787 of 2013, ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Civil Application No.3446/2010 in Special Civil Application No.3157/2009 for amendment is allowed as unopposed and disposed of accordingly. 2. These petitions raise the question of property tax on mobile towers. As simple as the question may appear, the answer is neither simple nor short. In fact, factual aspects concerning such ultimate question are also quite complicated. We may however, refer to the broad facts at first to be able to explain the background in which such question has arisen. ....
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....erred to as "the GPMC Act"), the Gujarat Municipalities Act and the Gujarat Panchayats Act. Like-wise group of petitions including Special Civil Application No.677/2010 have been filed challenging various taxation rules of the Municipal Corporations and other local bodies. 5. Regarding the petitioners' first challenge to the validity of the statutory provisions in context of the legislative competence, we may refer to the pleadings from Special Civil Application No.4084/2012. The petitioner is a company registered under the Companies Act. The petitioner is engaged in providing infrastructure for Mobile Telecommunication Services. The petitioner enjoys necessary license and registration issued by the competent authority under the Indian Telegraph Act, 1885. For providing such infrastructure to its customers, the petitioner company is required to install Base Transceiver Station ("BTS" for short), more commonly known as mobile towers. For setting up such mobile towers, the petitioner enters into agreements with private owners. Armed with such agreements, the petitioner would apply to the local authorities for permission to erect such a structure. As pointed out by the petitioner in ....
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....ted from base stations in places where the public have access are generally found to be hundreds of times below the health and safety guidelines. The intensity of electro-magnetic wave (power density) weakens very quickly as it moves away from the antenna. It is reduced to ¼ when the distance from the antenna double and to 1/9 when the distance is three times." For better understanding of these details, the pictures of mobile towers as available on the internet is reproduced hereunder : 7. Respondent no.2 Ahmedabad Municipal Corporation ("AMC" for short) and respondent no.3 Surat Municipal Corporation ("SMC" for short) issued various municipal tax bills to the petitioner demanding property tax on such BTS's erected by the petitioner within the limits of such Corporations. Copies of such tax bills are produced by the petitioner at Annexure-A collectively. These bills the petitioner has challenged on the ground that it is outside the competence of the State Corporation to tax the petitioner's BTS and ultra vires the GPMC Act. By way of an amendment, the petitioner also prayed for a declaration that section 145A of the GPMC Act is ultra vires Articles 14, 243 and 265 of the ....
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....th sound proof cover to reduce the noise level. 10. Respondent no.3 Surat Municipal Corporation also has filed its reply. Reliance is placed on section 2(5) of the GPMC Act defining the term 'building' to contend that the definition is wide and includes a variety of structures. It is contended that the activities undertaken by the petitioners of installing a cabin and BTS structure fall within the definition of term 'development' as contained under the Gujarat Town Planning and Urban Development Ac, 1976. It is contended that under the regulations particularly, General Development Control Regulation ("GDCR" for short) framed under the Town Planing law, the mobile companies are required to obtain necessary permission from the competent authorities before erection of the structure. 11. Respondent no.2 AMC has also filed its separate reply and taken similar contentions. 12. On behalf of the petitioners, learned counsel Shri Shalin Mehta and senior counsel Shri Saurabh Soparkar appeared and raised the following contentions : 1) A mobile tower is a telegraph and therefore, falls in Entry 31 List-I of the Seventh Schedule which is a Union list. Union legislation alone therefore, is c....
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...., in which in context of property tax on textile mills, factories, etc. imposed by the AMC, Supreme Court came to two important conclusions. Firstly, that plant and machinery would not be covered by the expression "lands and buildings" and secondly, that for different buildings situated in different areas having different characters cannot be clubbed together for collection of taxes at flat rate method. It was observed that such flat rate method of collection of tax on the floor area could only be applied where majority of the properties are so nearly alike in character as to be regarded identical for rating purposes. In case of the Municipal Corporation of Greater Bombay and others v. the Indian Oil Corporation Ltd. reported in AIR 1991 Supreme Court 686, in which the Supreme Court in the context of the provisions contained in the Bombay Municipal Corporation Act, 1988, examined the decision of the Municipal Corporation of Greater Bombay to collect the tax from the oil company on oil storage tanks. In the course of such examination, the Apex Court made certain observations with respect to which structures can be called buildings. Interestingly, the respondents have also relied on....
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....tted that for a structure to be a building, it is not always necessary that same must have a roof at the top. It was contended that with technological advancement and with changing times, the Court must interpret the provisions of different statutes keeping pace with such changes. 13.2) He further submitted that every entry in the Constitution must be given its widest possible amplitude and even extended meaning of the term 'building' should be seen to have been covered under such entry. He submitted that looking to the pith and substance of the impugned Amending Act, the competence of the State Legislature to enact such an Act should be recognised with reference to Entry 49 of the Second Schedule. 13.3) In support of his contentions, he relied on the following decisions : In case of the Municipal Corporation of Greater Bombay and others (supra) from which he pointed out that the Apex Court had upheld the levy of property tax on oil storage tanks erected by the oil company. In case of Bharti Tele-Ventures Limited v. State of Maharashtra reported in 2007(4) Maharashtra Law Journal 105, wherein Division Bench of the Bombay High Court held that mobile tower and cabin would be incl....
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....ted in 1987(2) Supreme Court Cases 504, wherein it was observed that legislative intent was to tax nuts. It was therefore, held that groundnuts would be taxable irrespective of the fact that they are also oil seeds. 13.4) In the context of Entry 49 to Second Schedule and its true interpretation, learned Advocate General relied on the following decisions : In case of Empire Industries Limited and others v. Union of India and others reported in (1985) 3 Supreme Court Cases 314, in which in context of the petitioners' challenge to the amendment to the definition of term 'manufacture' contained in Central Excises and Salt Act, 1944, in context of Entry 84 of List- I, the Apex Court held that the processes of the type which have been incorporated by the impugned Act were not so alien or foreign to the concept of manufacture that these could not come within that concept. Reliance was also placed on decision of Division Bench in case of M/s. Ujagar Prints and others(II) v. Union of India and others reported in (1989) 3 Supreme Court Cases 488, in which it was observed that entries in the legislative lists must receive a liberal construction inspired by a broad and generous spirit and....
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.... the impugned Amending Act defines the term 'mobile tower' as under : "(34AA) "mobile tower" means a temporary or permanent structure, equipment or instrument erected or installed on land or upon any part of the building or premises for providing telecommunication services." Section 127 of the GPMC Act pertains to taxes to be imposed under the Act. Sub-section(1) thereof provides that for the purpose of the Act, the Corporation shall impose the following taxes, namely, a) property tax either under section 129 or under section 141AA. b) a tax on vehicles,boats and animals. c) a tax on mobile towers. Clause(c) noted above was inserted by the impugned Amending Act. Section 129 of GPMC Act pertains to property tax of what to consist and at what rate leviable. It is not necessary for the purpose of this discussion to take a detailed note of provisions contained therein. Suffice to note that such provision permits the Corporation to collect property tax on rateable value of the property. Section 141AA of the GPMC Act which was inserted by virtue of Bombay Provincial Municipal Corporations (Gujarat Amendment and Validation) Act, 2007 pertains to property taxes of what to consist an....
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....vanic, electric or magnetic means." 25.04.2013 Part-II of the Indian Telegraph Act, 1885 pertains to privileges and powers of the Government. Sub-section(1) of section 4 contained in said Part-II provides that within the country, the Central Government shall have the exclusive privilege of establishing, maintaining and working telegraphs. First proviso to said subsection however, authorises the Central Government to grant license to any person on such conditions and on consideration of such payments as it thinks fit, to establish, maintain or work a telegraph within any part of India.Section 7 pertains to power to make rules for the conduct of telegraphs. Sub-section(1) thereof authorises the Central Government to frame rules by issuing notification consistent with the Act for the conduct of all or any telegraphs established, maintained or worked by the Government or by persons licensed under the Act. Part-III of the Indian Telegraph Act, 1885 pertains to power to place telegraph lines and posts. Section 10 thereof authorises the telegraph authority to place and maintain a telegraph line under, over, along, or across, and posts in or upon, any immovable property. Part-IV of the....
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....on, the GPMC Act was enacted finding it expedient to provide for establishment of Municipal Corporations in the city of Ahmedabad and certain other cities with a view to ensure a better municipal government of the said cities. The Act makes detailed provisions for constitution of such Municipal Corporations through elections, for holding elections of the councillors and all issues related therewith. Detailed provisions also have been made for constitution of different committees in the Municipal Corporation such as, Transport Committee. Provisions have also been made for functioning of several Municipal Authorities envisaged under the Act as also for conducting of the business of Municipal Corporation and its different governing bodies. Detailed provisions have been made with respect to municipal property and acquisition of property by the Municipal Corporations. Chapter-IX of the GPMC Act pertains to municipal fund and other funds. Section 82 envisages constitution of municipal fund. It is but natural that any Municipal Corporation to carry out its duties and functions, would require funds. The GPMC Act authorises the Corporations to collect tax for raising its revenue. ChapterXI ....
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.... of a legislation and the entry within which it would fall. In case of conflict between entries in List-I and List-II, the same has to be decided by application of the principle of "pith and substance". The doctrine of "pith and substance" means that if an enactment substantially falls within the powers expressly conferred by the Constitution upon the legislature which enacted it, it cannot be held to be invalid, merely because it incidentally encroaches on matters assigned to another legislature. When a law is impugned as being ultra-vires of the legislative competence, what is required to be ascertained is the true character of the legislation. It was further observed that on such examination if it is found that the legislation is in substance one on a matter assigned to the legislature then it must be held to be valid in its entirety even though it might incidentally trench on matters which are beyond its competence. In case of Rajiv Sarin and another v. State of Uttarakhand and others reported in (2011) 8 Supreme Court Cases 708, it was observed that in order to find out the subject matter of an enactment, even in the context of enactments relatable to Sche....
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....prepared to proceed on such basis. We are however, unmoved by the petitioners' contention that the Indian Telegraph Act, 1885 leaves the State legislation incompetent to levy any tax on the mobile towers subject of-course, to the rider that same is established to be a building as urged by the respondents. In other words, we are of the opinion that the Indian Telegraph Act, 1885 operates in a vastly different filed and has an entire different purpose to achieve from that compared to GPMC Act. Section 145A contained in the GPMC Act authorises the Corporation to levy taxes on mobile towers. Merely because even if we were to so assume, a mobile tower is a telegraph, in our opinion, would not prevent the State legislation from framing a law authorising collection of taxes on such a structure. Any trenching in the process is wholly incidental and looking to the pith and substance of two respective Acts, we do not see any repugnancy or conflict. 24. This brings us to the second question namely, Whether, the Amending Act and in particular, Section 145A of the GPMC Act is ultra vires the Constitution? 25. Before addressing the core issue, we may clear a couple of peripheral issues. One of....
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....tion 99, in turn, provides for fixing of rates of taxes and refers to determination of such rates, subject to limitation and conditions prescribed in ChapterXI, the rates at which municipal taxes referred to in sub-section(1) of section 127 shall be levied in the next ensuing official year. Section 127 of the GPMC Act pertains to taxes to be imposed under the Act. Sub-section(1) thereof provides for collection of tax namely, the property tax either under section 129 or under section 141AA, a tax on vehicles, boats and animals and a tax on mobile towers. Sections 129 and 141AA prescribe property taxes of what to consist and at what rate leviable. 27. Various provisions noted above thus provide for detailed guidelines, limitations and procedures under which taxes by Municipal Corporations would be collected. The purpose of collection of taxes can be gathered from the Act itself which mainly is for the purpose of carrying out duties and functions of Municipal Corporations. Sub-section(1) of Section 127 itself provides that for the purposes of the Act, the Corporation shall impose taxes specified therein. Such taxes thus have to be collected for the purpose of the Act. In case of Gula....
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...., the State legislature can at any moment withdraw that flexibility by fixing the maximum limit up to which the Corporation can tax. Indeed, the State Legislature has now done so by Section 4 of Gujarat Act, 8 of 1968. In view of the decisions cited above it is not possible for us to agree with counsel's contention that the Act confers on the Corporation such arbitrary and uncontrolled power as to render such conferment an excessive delegation." 28. This brings us to the central question which was hotly debated before us i.e whether mobile tower can be stated to be a building? This question arises since the State legislation traces enactment under the Amending Act and in particular, section 145A of the GPMC Act to legislative Entry 49 of List-II pertaining to taxes on lands and buildings. Contention of the respondents is that the mobile towers are buildings and therefore, within the competence of the State Legislature to provide for taxation on such buildings. On the other hand, the petitioners hotly contest that by no stretch of imagination, mobile towers can be termed as building. 29. Though an attempt was made on part of the Advocate General to support the stand of the Sta....
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....pertaining to tax on sale or purchase of goods, it was observed that restrictive meaning given to such term in Sales of Goods Act cannot be adopted. In our attempt therefore, to ascertain legislative competence for collecting tax on mobile towers, we shall have to interpret legislative Entry 49 pertaining to taxes on lands and buildings as contained in the Constitution on the basis of common understanding of term 'building' ignoring the special meaning which may have been given in an expansive definition contained in section 2(5) of the GPMC Act. It is undoubtedly true that legislative entries contained in three Lists to Seventh Schedule are to be interpretd liberally and widest amplitude is to be given. It is often stated that such entries are not source of legislative power. Legislative power is derived from Article 246 and entries are only in the nature of subjects dividing such powers between the Union and the State. In case of Offshore Holdings Private Limited v. Bangalore Development Authority and others reported in (2011) 3 Supreme Court Cases 139, the Constitution Bench of Supreme Court observed that Article 246 is one of the source confirming power to legislate. Entries i....
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....the four corners of the walls built with masonary or otherwise with ingress or egress. The word, 'building' must be given its ordinary natural meaning ascribable to it including the fabric and the ground on which it stands. On a mere look at the tank, by no stretch of imagination, it could be said to be a building." In case of Ghanshiam Das v. Debi Prasad and another reported in AIR 1966 Supreme Court 1998, the Apex Court considered whether a brick kiln can be stated to be a building. Observing that U.P. Zamindari Abolition and Land Reforms Act did not define the term 'building' and that therefore, such term must be construed in its ordinary grammatical sense, the Apex Court held that a brick kiln which is more in the nature of pit and some bricks by sides and has no roof, cannot be stated to be a building. It was observed as under : "4. The word "building" has not been defined in the Act and must, therefore, be construed in its ordinary grammatical sense unless there is something in the context or object of the statute to show that it is used in a special sense different from its ordinary grammatical sense. In Websters New International Dictionary the word &quo....
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.... claim any rent from the appellant for the period from October 1, 1952 to September 30, 1953." 32. On the basis of such understanding of the term building, we may examine the nature of structure in question. From the record, it emerges that a BTS consists of a tower which is erected through use of 6 to 9 meters long poles made of hollow steel galvanized pipes. It also has a cabin in the shape of pre-fabricated shelter using PVC or some such similar material. Such cabin or shelter houses radio transmission and reception equipment, a diesel generator set and electronic panel. The tower is used for positioning the antenna at a height to enable uninterrupted wireless internet connectivity. In essence, thus a BTS comprises of a tower on which an antenna is hoisted and a cabin which usually is not more than 10'x10'x10'. The tower, we are informed has the height of upto 30 meters. 33. By no stretch of imagination, the tower can fit the description of a structure, usually with a roof and four walls, generally intended for use as a working or dwelling place; a constructed edifice designed to stand more or less permanently; covering a space of land usually covered by a roof and more or les....
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....ures. It is therefore, necessary for us to view these structures separately. The towers themselves therefore, are not building, but cabins constructed by the petitioners would certainly fit the description of building. We therefore, hold that the State Legislature did not have competence to enact the law permitting the collection of taxes on towers constructed by the Mobile companies for the purpose of establishment of their BTS system. We however, hold that the cabin so set up by them would definitely be a building and exigible to tax even as per the existing tax regime without any aid to section 145A of the Act. In case of Wireless-TT Info Services Ltd.(supra), Division Bench of Karnataka High Court held that the tower set up by the mobile tower company is not a building. It was observed as under : "10. If in the above manner, the 'structure' which is the subject matter in the instant case is considered, it is a metal pole or tower to which the antenna is attached and has the backup system at its base. No doubt, it would have to be fastened to the roof of the building or embedded to the land with concrete base, nuts, bolts and the height of the pole may vary from case to case. ....
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....tioners that the tower and/or the cabin set up by the mobile company would not fall within the definition of building or development, cannot be accepted. The learned Judge was interpreting such term in the context of Maharashtra Regional and Town Planning Act which itself did not contain the definition of word 'building'. Learned Judge fell back on definition of the term used in various statutes. Situation thus clearly emerges that the Court was not concerned with interpretation of Entry 49 and based its conclusions on various definitions of the term 'building' contained in different statutes. In case of Municipal Corporation of Delhi v. M/s. Pradeep Oil Mills P. ltd.(supra), the Full Bench of Delhi High Court held that storage tank of the respondent oil companies are mere shelters for carrying on business activities of storing the petroleum products and therefore, such structures raised on the land are not exempted as plant and machinery under section 116 of the Act. In case of Indian Organic Chemicals Ltd. and others(supra), of-course, the case where legislative competence with reference to term lands and buildings used in Entry 49 was the question considered by the Division Ben....
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....(supra), the Supreme Court upheld the decision of Division Bench of Delhi High Court. Once again in this case the question of legislative competence with reference to Entry 49 and the term 'building' was not at issue. The Apex Court observed that the Delhi Municipal Corporation is required to render several services for which tax is required to be imposed both on land and building. The definition of land and building as provided in the Act must be given its full effect. In the decision in case of the Municipal Corporation of Greater Bombay and others(supra) even an oil tanker was held to be a building. Similarly in decision in case of Cellular Operators Association of India and ors. etc. (supra), learned Single Judge held that temporary structures/towers on rooftops for providing Cellular Basic Mobile Phone services are building within the meaning of Municipal Act and hence cannot be erected or installed without obtaining the permission of the Municipality. This decision has two distinctions. Firstly, it was not concerning the question of taxing such structures and the legislative competence for framing such a law was not at issue at all. In any case, the Court gave its findings o....