By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether limited access granted can be considered as transfer of right to use, chargeable to VAT? Held, No
Facts:
The petitioners provide access to telecom towers, to telecom operators as well as provide passive infrastructure services and related operations and maintenance services on sharing basis. The active infrastructures are owned by the telecom operators. The sharing operator has a non-extensive right of site access availability on “use only basis” for installation, operation and maintenance of active infrastructure. Passive infrastructure provided was considered to be transfer of right to use goods by VAT department. It was contested that it is leviable to service tax under business support services and that the order for levying VAT was ultra vires Article 14, 19(1)(g) and 265 of the Constitution of India. The decision of Indus Towers Ltd. 2012 (285) ELT 3 (Kar) delivered in its own case by Karnataka High Court wherein it was held that providing services in relation to site access cannot be considered to be transfer of right to use goods was relied on. However, the respondents contested that the question framed before the High Court was erroneous and therefore, the matter should be decided afresh.
Held:
No right, title, interest or any similar right was created in favour of telecom operator and it was the responsibility of the petitioners to ensure that the passive infrastructure was functioning efficiently. The limited access made available to telecom operators was inconsistent with the notion of “right to use” and it was only a permissive use for very limited purposes with very limited and strictly regulated access. The substance of the decision of the Karnataka High Court was thus followed.
