The Delhi High Court has allowed the Input Tax Credit (ITC) to Bharti Airtel and held that telecom towers are movable properties.
The bench of Justice Yashwant Varma and Justice Girish Kathpalia has observed that the specific exclusion of telecommunication towers from the scope of the phrase “plant and machinery” would not lead one to conclude that the statute contemplates or envisages telecommunication towers to be immovable property. Telecommunication towers would in any event have to qualify as immovable property as a precondition to fall within the ambit of clause (d) of Section 17(5). Their exclusion from the expression “plant and machinery” would not result in it being concomitantly held that they constitute articles which are immovable.
Three writ petitions assail the proceedings drawn by the respondents under the Central Goods and Services Tax Act, 2017 and essentially question the characterization of telecommunication towers as immovable property and thus falling within the ambit of Section 17(5) of the GST Act and being eligible for input tax credit.
While Bharti Airtel assails the validity of an Order as affirmed in appeal in terms of the order dated 31 May 2024 passed by the Commissioner of Central Tax Appeals-1, the writ petitions preferred by Indus Towers Limited and Elevar Digitel Infrastructure Pvt Ltd3, impugn Show Cause Notices laying similar allegations.
The show cause notice 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 registrations of the writ petitioner. Indus Towers explains that it is engaged in the business of providing passive infrastructure services to telecommunication service providers.
The SCNs’ sought to deny input tax credit on inputs and input services used for setting up passive infrastructure on the ground that it was 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 petitioners contended that telecommunication towers are moveable items of essential equipment used in telecommunications which can be dismantled at site and thus capable of being moved. It is explained that it is only the concrete structure on which those telecommunication towers are placed which could be treated as an immovable element of that equipment whereas the steel/metal structures are capable of being shifted to other locations.
The petitioner argued that the errection of those towers on a concrete base is essentially for the purposes of according stability to the towers and that in itself would not detract from their basic characteristic of being items of equipment which are principally moveable. The assumption that the installation of these towers results in the establishment of an immovable structure is misconceived.
Clause (d) of Section 17(5) of the CGST Act states that the CGST Act intends to block the input credit in respect of goods or services or both received by a taxable person for construction of an immovable property on his own account for the purposes of renting or leasing out.
The court held that telecommunication towers does not qualify test of permanency, they are not ‘attached to earth’, they can be dismantled and moved and are never erected with an intent of conferring permanency and their placement on concrete bases was only to enable those towers to overcome vagaries of nature, they can be considered as moveable property eligible for ITC.
Case Details
Case Title: M/S Bharti Airtel Limited Versus Commissioner, Cgst Appeals-1 Delhi
Case No.: W.P.(C) 13211/2024
Date: 12.12.2024
Counsel For Petitioner: Sr. Adv. Sujit Gosh, V. Lakshmikumaran
Counsel For Respondent: Avshreya Pratap Singh
