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TMI Blog2024 (12) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... holly untenable. As the Supreme Court held in Bharti Airtel, telecommunication towers would clearly not qualify the five fundamental precepts which define an immoveable property. It was found that they neither qualify the test of permanency nor can they be said to be attached to the earth . Mobile towers, it was held, could be dismantled and moved and that they were never erected with an intent of conferring permanency. Their placement on concrete bases was only to enable those towers to overcome the vagaries of nature. Therefore, there cannot possibly be a doubt with respect to telecommunication towers being moveable property. Turning then to the provisions of Section 17 (5) itself, it is pertinent to note that the said provision sets out various goods and services which would stand exorcised from Section 16 (1) and thus not liable to be taken into consideration for the purposes of availing input tax credit - The expression plant and machinery has been defined by the Explanation appearing in Section 17 (5) to mean apparatus, equipment and machinery fixed to earth by foundation or structural support. However, it specifically excludes telecommunication towers from the ambit of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred by Indus Towers Limited [W.P. (C) 14710/2024] and Elevar Digitel Infrastructure Pvt Ltd W.P. (C) 16477/2024, impugn Show Cause Notices [SCNs] laying similar allegations. 3. For purposes of brevity, we propose to take note of the salient facts as they obtain in the writ petition preferred by Indus Towers. The impugned SCN under Section 74 of the CGST Act raises a demand of tax along with interest and penalty for the period 01 July 2017 to 31 March 2024 relating pan India to 48 Goods and Services Tax [GST] registrations of the writ petitioner. Indus Towers explains that it is engaged in the business of providing passive infrastructure services to telecommunication service providers. 4. As was noticed in the prefatory parts of this decision, the impugned SCNs seek to deny input tax credit on inputs and input services used for setting up passive infrastructure on the ground that the same were used in the construction of telecommunication towers and consequently falling within the ambit of clause (d) of Section 17 (5) of the CGST Act. The relevant part of Section 17 is extracted hereinbelow:- 17. Apportionment of credit and blocked credits. xxxx xxxx xxxx (5) Notwithstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.] (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation . For the purposes of clauses (c) and (d), the expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; (e) goods or services or both on which tax has been paid under Section 10; (f) goods or services or both received by a non-resident taxable person except on goods imported by him; (fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, are intrinsically moveable items and were liable to be treated as capital goods entitled to be viewed as inputs under Rule 2 (k) of the 2004 Rules. 7. Both Mr. Lakshmikumaran, learned counsel as well as Mr. Ghosh, learned senior counsel, who appeared for the writ petitioners had submitted that Bharti Airtel has in unequivocal terms held that these towers cannot be viewed as constituting immovable property. It is on this basis that the petitioners call upon this Court to quash the orders and the notices impugned. 8. While the conclusions rendered in Bharti Airtel as well as by this Court in Vodafone Mobile Services is not questioned by the respondents, they would seek to distinguish those decisions essentially in light of the Explanation which stands appended at the end of Section 17 of the CGST Act and the exclusion of telecommunication towers specifically in terms thereof. 9. However, and on hearing learned counsels for respective sides, we find ourselves unable to sustain that argument for reasons which follow. 10. The Supreme Court in Bharti Airtel was principally concerned with whether mobile service providers who pay excise duties on various items of infrastructure includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial enjoyment of the land of the owner as observed in para 37 of the decision of the Delhi High Court which is reproduced below: 37. On an application of the above tests to the cases at hand, this Court sees no difficulty in holding that the manufacture of the plants in question do not constitute annexation and hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be attached to the earth within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. It was thus held that these are not immovable properties as held by the Tribunal. 10.9.2. Having held that these are not immovable but moveable, the Delhi High Court went on to examine the second issue as to whether the Assessee is entitled to clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted by the Bombay High Court. 11.9.1. What is attached to the earth to make it an immovable property would have to possess any of the three attributes as specified under Section 3 of the Transfer of Property of Act, namely, (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached: 11.9.2 . The present items in issue are not the ones which are rooted in the earth as in the case of trees and shrubs [sub-clause (a)]. Therefore, the next consideration will be whether these are embedded in the earth, as in the case of walls or buildings [sub-clause (b)], or whether these are attached to what is so embedded for the permanent beneficial enjoyment of that to which these are attached to the earth [sub-clause (c)]. The attachment of tower to the earth/building, however, does not partake of the character of walls or buildings imbedded in the earth. 11.9.3. It is on the tower that the antennas are mounted and affixed at proper height, to make these stable. Since the antennas are used for receiving and sending radio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and keep it wobble free so that the antenna which is hoisted on it can receive and transmit the electromagnetic signals effectively and without any disturbance. Affixing of the tower to the earth or building is not for the permanent beneficial enjoyment of the land or building, but to make it stable for effective functioning of the antenna for seamless rendering of mobile services by the service provider to the consumers/subscribers. Same is the case with prefabricated buildings (PFB). 11.9.7. If we thus apply the functionality test, it can be stated that the attachment of tower to the earth/building is not for the benefit of the land or the building but for better functioning of the antenna which is fixed on the tower. Thus, based on functionality test it can be said that tower is a movable property, as also held in Municipal Corporation of Greater Bombay(supra). 11.9.8. These items are not embedded in the earth as in the case of walls or buildings so as to fall under clause (b) of the definition of attached to the earth as provided under Section 3 of the Transfer of Property of Act. Neither do these items fall under clause (c) of the definition of attached to the earth and nor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent annexation to the land or the building as the tower can be removed or relocated without causing damage to it. It is also to be noted that the attachment of the tower to the building or the land is not for the permanent enjoyment of the building or the land. Further, the tower is fixed to the land or building for enhancing the operational efficacy and proper functioning of the antenna which is fixed on the tower by making it stable and wobble free. The fact that the tower, if required can be removed, dismantled in the CKD and SKD and sold in the market is not disputed. Application of the tests evolved and discussed above on these items clearly points to the movability as opposed to immovability of these items. We are, thus, of the view that mobile towers and PFBs are movable properties and hence, goods . xxxx xxxx xxxx 11.11.12. We, therefore, agree with the conclusion arrived at by the Delhi High Court that towers and shelters (PFBs) support the BTS/antenna for effective transmission of mobile signals and thus enhance their efficiency and since these articles are components/accessories of BTS/antenna which are admittedly capital goods falling under Chapter 85 within sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressed to be exclusive of the land beneath, creates an interest in immovable property, for it is permanently attached to the ground on which it is built. 30. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the land or building. Machinery for metal shaping and electroplating which was attached by bolts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for mere beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by the tenant, are not affixtures. 31. Applying the above tests t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the Company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. 16. Tested on the aforesaid precepts, it becomes apparent that the stand taken by the respondents, namely, of telecommunication towers being liable to be viewed as immovable property is rendered wholly untenable. As the Supreme Court held in Bharti Airtel, telecommunication towers would clearly not qualify the five fundamental precepts which define an immoveable property. It was found that they neither qualify the test of permanency nor can they be said to be attached to the earth . Mobile towers, it was held, could be dismantled and moved and that they were never erected with an intent of conferring permanency. Their placement on concrete bases was only to enable those towers to overcome the vagaries of nature. Therefore, there cannot possibly be a doubt with respect to telecommunication towers being moveable property. 17. Turning then to the provisions of Section 17 (5) its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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