TaxTMI 
TaxTMI 
2015 (10) TMI 2783
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.... Telecom for providing passive infrastructure services to various telecommunication operators in India on a shared basis. As a part of its activity, the petitioner installs the necessary infrastructure to facilitate telecommunication operation. For providing the passive infrastructure services, the petitioner enters into a Master Services Agreement with the sharing operators, wherein the inter se roles and responsibilities of each party are clearly defined. In order to provide infrastructure services, the petitioner puts up, either on sites belonging to it or on acquired sites, the passive infrastructure which is comprised of towers and a shelter. The latter is basically a construction, in which the telecom operators are permitted to keep and maintain their base terminal stations, associated antenna, back-haul connectivity to the network of the shared telecom operators and associated civil and electrical works required to provide the telecom service. In addition to the towers and shelters, the petitioner also provides diesel generator sets, air conditioners, electrical and civil works, DC power system, battery bank etc. All these components are together referred to as the passive i....
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....f the petitioners that, on the consideration received by them for providing the services contemplated under the Master Services Agreement, they are paying Service Tax in terms of the Finance Act, 1994 as amended, and hence there cannot , at any rate, be a levy of KVAT also on the same consideration amount. 3. I have heard Sri.A. Kumar, the learned counsel appearing for the petitioners as also the learned Government Pleader appearing for the respondents in all the writ petitions. 4. Before proceeding to discuss the findings in the assessment orders, that are impugned in the writ petitions, it would be apposite to refer to some of the relevant clauses in the Master Services Agreement, entered into between the petitioners and the mobile service operators. Some of the relevant clauses in the said agreement are extracted hereunder: "Active Infrastructure" includes base terminal station equipment, associated antennae, backhaul connectivity to the Sharing Operators' network and other requisite equipment and associated civil and electrical works required to provide telecommunications services by the Sharing Operator at a telecommunications site other than Passive Infrast....
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....he terms and conditions of this Agreement. Provided that, if the Sharing Operator desires any additional service on any Site where it is already availing the services from Indus under this Agreement, the same may be provided by Indus subject to feasibility and availability. 2.1.2 Throughout the Term of this Agreement, the Sharing Operator shall be entitled to provide notice to Indus those Sites in relation to which it wishes to be granted Site Access Availability a "Service Order"). The process for issuing a Service Order shall be as specified in Schedule 1 (Site Access Availability). 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 borne equally by both the Parties. 2.1.5 Upon the execution of a Service Contract in respect of a Site, the Sharing Operator shall have the....
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....for obtaining all required approvals including but not limited to Standing Advisory Committee for Frequency Allocation ("SACFA"), Wireless Planning Commission ("WPC") clearance and such other Permits, licenses, sanctions, etc. from DoT or Telecommunications Regulatory Authority of India or other applicable regulatory body or Government Authority, banks, financial institutions, etc. as may be required for the installation of Active Infrastructure at the Site from time to time. Indus shall provide information, within its control, required by the Sharing Operator. Further, Indus shall make best endeavours to provide copies of the SAFCA approval of the other sharing operator(s). 3 Operation and Maintenance 3.1 Provision of Operation and Maintenance Services 3.1.1 Indus shall provide Operation and Maintenance Services in relation to each Site and the Passive Infrastructure at each Site in accordance with the terms set out in Schedule 2 (Operation and Maintenance Services). 3.1.2 The Sharing Operator shall be responsible for the operation and maintenance of all Sharing Operator Equipment. In order to conduct such operation and maintenance activities, t....
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....dus ("Indus Downtime"), and (ii) any Downtime that is attributable to the Sharing operator's Equipment and transmission ring failures connected to the Site shall be to the account of the Sharing Operator ("Sharing Operator Downtime"). 1.9.2 The expected Uptime Service Level in each Circle for each month is 99.95% across all Sites in that Circle that are utilised by the Sharing Operator. 1.9.3 The Operation and Maintenance Service Credits payable by Indus to the Sharing Operator for failure to achieve the above Uptime Service Levels are as set out below. Operation and Maintenance Service Level % of Total Rate payable by Indus 99.95% or greater 0.0% 99.90% or greater but less than 99.95% 5.0% 99.70% or greater but less than 99.90% 7.5% 99.50% or greater but less than 99.70% 10.0% 99.00% or greater but less than 99.50% 25.0% Less than 99.00% 30.0% Less than 94.00% 100.0% The Operation and Maintenance Service Credits payable by Indus in accordance with the table above shall be applicable in respect of those Sites in the relevant Circle which are below the Operation and Maintenance Service Lev....
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.... Indus covenants, warrants and represents that it: 5.2.1 shall use its best endeavours to renegotiate all lease or licence agreements in relation to the Sites where such lease, or licence agreements are due to expire during the Term. 5.2.2 shall use its best endeavours to ensure that no other sharing operator on the Site, causes any damage to or installs any equipment that is of a type or frequency which will cause harmful interference with or physical obstruction of, any Sharing Operator Equipment existing at the Site at the time of such installation and in case any harmful interference or obstructions is caused to Sharing Operator Equipment at the said Site, to take all steps necessary to make any other sharing operator to correct or eliminate such interference or obstruction, including but not limited to powering down the newly installed equipment; 5.2.3 shall endeavour to share the Passive Infrastructure in a manner that will enable the simultaneous use by other sharing operators, without affecting the Sharing Operator Equipment or the Sharing Operators utilisation of the same. 5.2.4 shall maintain the Passive Infrastructure in a good and....
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....equired to hold under Law and such other policies, at such coverage limits, as a prudent business conducting similar operations would maintain. 14.2 Indus will, at its own expense, maintain in effect such insurance policies in relation to the Passive Infrastructure on a Site, including third party claims, with a reputable insurance company as it is required to hold under Law and such other policies, at such coverage limits, as a prudent business conducting similar operations would maintain, including public liability insurance and business interruption insurance policies." 5. It will be apparent from a consideration of the various clauses in the Master Services Agreement that, what is contemplated therein is the provision of certain infrastructural facilities by the petitioner, which could be tapped into by various mobile services operators, who have entered into an agreement with the petitioners, on payment of a fee as consideration. What is evident from a perusal of the various clauses is that the ownership of the infrastructural facility continues to be with the petitioners. The obligation to maintain and control the passive infrastructure is also retained with the p....
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....id agreement could not be construed as having transferred a right to use passive infrastructure to the mobile service operators. The findings of the Division Bench of the Karnataka High Court are to be found at paragraph 71 and 72 of the judgment, which read as follows: "71 It is well-settled that, whether the transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole to determine the nature of the transfer. From a close reading of all the clauses in the agreement it appears to us that under the terms of the contract there is no transfer of right to use the passive infrastructure conferred on the sharing operator/mobile operator. What is permitted under the contract is, a permission in the nature of a license to have access to the passive infrastructure and permission to keep the equipments of the mobile operator in the pre-fabricated shelter with permission to have ingress and egress only to the authorised representatives of the mobile operator. It is because an owner of a property has a bundle of rights, namely, right to possess, right to use and enjoy, right....
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.... so as to attract levy of tax under the Karnataka Value Added Tax Act, 2003. (d) In so far as the State appeals are concerned, the appeals preferred against the order of the learned single judge in so far as denying the penalty and interest are rejected as we have held there is no liability to pay tax at all. (e) In so far as the direction issued by the learned single judge that the State has to recover the tax from the Union of India, in view of our finding that there is no liability to tax, that portion of the order of the learned single judge is hereby set aside. (f) The payments made by the assessees either in terms of the order of the assessment order or in terms of any interim order passed in the writ petitions or in pursuance of the final order shall be refunded to the assessees within three months from the date of receipt of a copy of this order, failing which the said amount to be refunded would carry simple interest at nine per cent after the expiry of 90 days till the date of payment. (g) No costs" 7. The aforesaid decision of the Karnataka High Court has since been followed by the Delhi High Court in the judgment reported in Indus ....
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....nsfer of its use was not to the exclusion of the transferor. This aspect of non-exclusive use was seen as militating against the concept of a transfer of right to use goods and it was therefore held that, on the facts of that case, there was no transfer of right to use goods for the purposes of the KVAT Act. Going by the ratio of the decisions referred to above, I am of the view that in the instant cases as well, there is no transfer of the right to use the passive infrastructure, that is made available by the petitioner to the various mobile service operators. As already noted above, the petitioners retained control over the passive infrastructure that was maintained by them and this degree of control, that was exercised by the petitioners over the passive infrastructure, ensured that the mobile service operators, who were given permission to use the infrastructural facility, obtained only a licence to access the infrastructural facilities offered by the petitioner, and did not get a right to use the goods transferred to them in the process. I therefore, find that, in these cases, there is no transfer of the right to use the infrastructural facilities, from the petitioners to the ....