AI Drafter 
TaxTMI 
TaxTMI 
2021 (8) TMI 523
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....tively) by M/s. SCV Sky Vision (hereinafter referred to as applicant). 3. Brief Facts of the case: • The applicant, M/s. SCV Sky Vision, is inter alia engaged in cable operation business in and around Tirupati in Chittor District of Andhra Pradesh. • The applicant is a Multi-System Operator ('MSO') and purchases digital signals from broadcasters like E-TV, Star TV Sun TV etc. These signals are transmitted through satellite to receiving stations owned by MSOs. MSOs further transmit these signals through cables to the Local Cable Operators ('LCO') who own their last-mile network to individual homes and customer premises. • As a matter of industry practice, MSO after buying/ receiving the signals of various channels from different broadcasters, turns into a single bouquet or bundle it and transmit to the individual subscribers through various LCOs. • An individual subscriber is required to subscribe to an LCO who would transmit the signals and also install a Set-Top Box ('STB') at home with a viewing card /smart card in it. STBs help MSOs to encrypt the signals for all the channels and transmit them. STBs c....
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....re and assist the purchaser to establish its network with existing subscribers and LCOs through an interconnection agreement who are the last mile connects to deliver the service. (Clause 6.1); • Applicant will ensure installation of network cables of the purchaser for provision of cable business service and acquisition of customers in the said area and ensure authorization of all broadcasters in ACNs name. (Clause 7.7) • Purchaser will have sole right to decide and collect the subscription fees post transfer of business (clause 7.5) In lieu of the instant business transfer, the purchaser shall pay applicant an aggregate amount of Rs. 12,00,00,000/- on various milestones viz 40% on execution of the BTA and remaining on completion of individual milestones like handing over of customers details, ensuring interconnection of LCOs with purchaser etc. 4. Questions raised before the authority: Whether SI.No.2 of the Notification No.12/2017 - Central Tax (Rate) dated June 28th, 2017 ('Service Exemption Notification') granting exemption to 'Services by way of transfer of a going concern as a whole or an independent part thereof' is applicab....
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....t where goods forming part of assets are transferred or disposed of under the directions of the person carrying on business (no longer form part of such assets), such transfer or disposal is a supply of goods. Thus, the goods portion in transfer of business is covered under Entry 4(a) of Schedule II. A.3. Further in the case of Deputy Commissioner (CT) v. K. Behanan Thomas, 1977 (39) STC 325 (Madras), the Madras High Court held that transfer of business does not constitute sale of goods. Hence, such supply cannot be said to be supply of goods. A.4. In the case of Paradise Food Court v. State of Telangana, 2017-VIL-238- AP, in the context of VAT Laws, the Andhra Pradesh High Court held that business is not movable property and is therefore not goods. A.5. Accordingly, there are following two supplies in transfer of business:- • Transfer of goods (assets) deemed as supply of goods under Clause 4(a) of Schedule II (supply 1); and • Transfer of business (other than goods) qualifying as supply of service (Supply 2). Supply 1 & Supply 2 qualify as 'Composite Supply' A.6. The applicant submits that Section 2(30) of the CGST Act provides for....
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....vice and transfer of asset is incidental or ancillary to such service, which helps in better enjoyment of property i.e. to say carrying out the business effectively. A.11. Basis the above, it is evident that such supply undertaken by the applicant is a composite supply since a single consideration is being charged for the supply in terms of clause 4.1 of the BTA and the supplies are naturally bundled in the ordinary course of business. A.12. Further, the intent of the applicant is to transfer the entire business. Transfer of goods is only incidental and undertaken to achieve this objective. Hence, it is the transfer of business as a going concern. Hence, the transaction will be deemed as supply of service in terms of section 8 of the CGST Act. A.13. In the present instance, transfer of business of provision and distribution of signals to the subscribers, as a going concern for lump sum consideration, will qualify as supply in accordance with Section 7(1) (a) and 7(1) (d) of the CGST Act. A.14. Further, the intent of ACN is to take over the business of seller. Transfer of goods is only incidental and undertaken to achieve this objective. Hence, transfer of business (serv....
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....siness to qualify as a going concern. B.7. The Accounting and Auditing standards by the Institute of Chartered Accountants of India ('ICAI') provides the meaning of 'going concern' as an accounting concept that implies that the business would continue to exist and operate for an indefinite period in the future. Accounting Standard (AS-1), issued by the ICAI explained the concept of a going concern as under: "The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity, of liquidation or of curtailing materially the scale of the operations". B.8. In the present instance, the applicant is transferring all its fixed assets, inventories, customer base, existing LCOs and also supporting in transferring all LCOs through an agreement to ACN. All the rights received from broad casters to the applicant is also being transitioned to ACN which would enable ACN to run the business of provision and distribution of signals through various LCOs without any interruption. B.9. The applicant submits that it retains the existing liabi....
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.... as going concern, B.15. Basis the above, the transfer of business in the present instance qualifies as ¦transfer of a going concern' squarely falling under SI.No.2 of the Service exemption Notification. The applicant is required to raise a 'Bill of supply' and charge no tax upon it. 6. Virtual Hearing: The proceedings of Hearing were conducted through video conference on 22nd October, 2020, for which the authorized representatives from, M/s. Nitya Tax Associates, Bengaluru attended and reiterated the submissions which were already made earlier. 7. Discussion and Findings: We have examined the issues raised in the application. The taxability of the goods and services supplied or to be supplied, as governed under the provisions of respective GST Acts are examined to decide the question involved in the present Ruling. The applicant intends to sell his cable network operation business as Multi-System Operator in the present operational condition to the buyer M/s ACN Private Limited, Bengaluru. Further the applicant stated that the business including the assets in the form of Set Top Boxes, Local Cable Operators and the end-users connected thereon g....