19December2024
AUTHORITYOFINDIA
[2024]164taxmann.com806(SC)
HistoryandBackground
•Twoconcurrentjudgements(25July)and(14August)oftheLargerBench(“LB”)ofthe SupremeCourt
•IndianCementv.StateofTamilNadu[CivilAppealNo.62(N)of1970,Dated-25-101989]:DistributionoflegislativepowersbetweentheUnionandStatesontaxationof mineralrights.Royaltyistaxandstatelegislatureslackcompetencetolevytaxeson mineralrights-Subject-matteriscoveredbytheMinesandMinerals(Developmentand Regulation)Act,1957(“MMDRAct”)
•StateofW.B.v.KeshoramIndustries[CivilAppealnos.1532-33of1993,Dated15-12004]:IndiaCementjudgementerroneousandroyaltyisnotatax
•Issues:WhetherRoyaltyisinthenatureoftax?ThesubstantiveissuebeforetheSupreme CourtwasascertainingtheambitofConstitutionalpowersoftheStatelegislaturesto imposetaxesonmineralrightsincontrasttotheConstitutionalpowersoftheParliament.
•Ononehand,theParliamenthasthepowertolegislateonthesubjectmatter‘and exercisingthispower,hadenactedtheMMDRAct,whichprovidesforchargingofroyalty ontheholderofminingleaseinrespectofanymineralremovedfromtheleasearea.On theotherhand,Statesalsohavethepowertolegislateonthesubjectmatterunder‘taxes onlandandbuilding’aswellas‘taxesonmineralrights’,subjecttoanylimitationsimposed bytheParliamentbylawrelatingtomineraldevelopment’.
•“Taxesonlandsandbuildings”inEntry49ListIIoftheConstitution:Whetheritcoversatax whichinvolvesameasurebasedonthevalueoftheproduceofland?
•SevenjudgebenchofIndiaCementswascontrastedbyfivejudgebenchinKeshoram whichheldroyaltywasnottax.Beinglargerbench,IndiaCementsstillprevailed,till referredtoninejudgebenchinMarch2011
•PostKesoram,severalStatelegislatures(Rajasthan,UP,Biharetc.),startedexercising legislativepowerstoimposeleviesonmineralbearingland.However,theseleviesfaced constitutionalchallengebeforethestateHighCourtsinlightoftheIndiaCementCase
Findings
•Thejudgementbymajoritydeclaredthatroyaltyonminingisnotinthenature ofataxandoverruledthejudgementinIndiaCementvStateofTamilNadu. Orderwasmadeapplicablefrom1April2005
•SupremeCourtconcludedthat“landsandbuildings”inthetaxation-related Entry49ofListIIoftheSeventhScheduleincludesmineralland.Further,the SupremeCourtalsoheldroyaltyisaconsiderationandnotatax
•TheSupremeCourtheldthattheStateisentitledtotaxroyaltybyvirtueof Entry49whichempowerstheStatestolevytaxesonlandandbuildingsaswell asbyvirtueofEntry50whichempowerstheStatestolevytaxonmineralrights subjecttoanylimitationsimposedbytheParliamentbylawrelatingtomineral development
•Entry49contemplatesthelevyoftaxonlandandbuildingsasaunitandit doesnotallowtheStatetolevytaxondivisionofinterestinthebuildingorland orservicerenderedonorinconnectionwithlandsandbuildings.
DissentofB.V.NagarathnaJ:
•ThenatureofroyaltyundertheMMDRActisthatitisinthenatureofatax underArticle366(28)oftheConstitutionwhichdefinestaxationtoincludethe impositionofanytaxorimpost,whetherlocal,generalorspecial,andtheword taxshouldbeconstruedaccordingly.Royaltyisataxandnotacontractual paymentbutastatutorylevyundertheMMDRAct.
•Entry49–ListIIdealswithtaxationoflandsandbuildings.Itdoesnotcover mineralbearinglands.TaxesonlandandbuildingsunderEntry49ListII contemplatesataxlevieddirectlyonland.
•Unhealthycompetitionbetweenstatesforthederivationofadditionalrevenue. Competitionamongminingcompaniesforminingleasesinstatesthatdonot seektoimposeleviesapartfromroyalty.
KeyTakeaways
•TheCourtheldthatroyaltyisaconsiderationforthegrantofaprivilegeforremovingor consumingthemineralswhichispaidintermsofcontractualaswellasstatutoryobligations. Themerefactthatsuchpaymentismadeunderastatutoryobligationwouldnotchangethe natureofsuchpaymenttobe‘tax
•Thelessorchargesroyaltyasaconsiderationforpartingwiththerighttowinminerals, whileataxisanimpositionofasovereign.Royaltyispaidasconsiderationofdoinga particularaction,thatis,extractingmineralsfromthesoil,whiletaxisgenerallyleviedwith respecttoataxableeventdeterminedbylaw.Royaltygenerallyflowsfromtheleasedeed ascomparedtotaxwhichisimposedbyauthorityoflaw
•ThecompetenceoftheStatetolevytaxorcessonroyaltyhasbeenupheld.Hence,States areentitledtolevytaxonroyaltyunderthelawenactedbytheState.Thereisnodirect connectionbetweenthetaxingpowersoftheStatesinrelationtomineralrights,and regulatorypowersoftheParliamentinrelationtominesandminerals
•Theword‘land’includes‘landofeverydescription’andalsocontemplateslandasaunit, irrespectiveoftheusetowhichitisput.ThisallowstheStatestolevytaxonmineral bearinglands.Hence,iflandincludeseverythingbelowandabovethesurface, constitutionallyspeaking,evensub-soilmineralsformpartoftheland,whichessentially encapsulatesthedifferencebetweenStates’powertoimpose‘taxesonlandandbuilding’ vis-à-vis‘taxesonmineralrights’
ImpactonIndustry
•PossibilityofvariousStatesimposingtaxesonmineralrightsatdifferentrates, whichmayhaveabearingonthecomparativecompetitivenessofvarious minesandmineralbasedindustries.
•Unhealthycompetitionamongminingcompaniescouldresultinaslumpin miningactivityincertainmineral-extractingstates,duetoleviesthatthestates arenowauthorizedtoimpose
•Thejudgementwillbealeadingcasetoguidetaxabilityofthetransactions relatedtolandandbuildingunderGST(longtermlease,transferof developmentrightsetc.wherethepowerofCentretolevytaxesonsuch transactionshavebeenquestioned)
•Ifleaseholdrightsareconsideredabenefitconferreduponapersontoenjoy theoccupancyandpossessionoverapieceoflandfortheleaseperiod,then whetherassignmentoflong-termleaseholdrightsamountstotransferofa benefitarisingofland
•Thequestionaboutapplicabilityofleaseofimmovablepropertyispending beforealargerBenchoftheHon’bleSupremeCourtinUnionofIndiav.UTV NewsLtd,[2018]93taxmann.com238(SC)whichwillnowbedecidedbythe SupremeCourt
•Whether“theinterestinland”and“leaseholdrights”[whicharethesaid benefits]areonadifferentfootingfrom“lease”simpliciter.WhetherGSTcanbe madeapplicableonlongtermlease(assignment)transactionswillbethe substantialquestionoflawtobedecided
HistoryandBackground
•[2024INSC607]:14August:WhetherMADAjudgementon25Julyshouldbegiven prospectiveeffect
•MADA(14August):Thedoctrineofprospectiveoverrulingisappliedwhenaconstitutional courtoverrulesawell-establishedprecedentbydeclaringanewrulebutlimitsits applicationtofuturesituations
•DemandsfortaxunderstatelegislationpertainingtoEntries49and50ofListIIofthe SeventhSchedulewerestayedintermsofthelawlaiddowninIndiaCement
•SinceMADA(25July)overruledestablishedIndiaCementsjudgement,questionof prospectiveoverrulingcameup
Findings
•TheSupremeCourtrejectedprospectiveoverruling.Earlierdemandscouldbe leviedonlytotheextentoftaxandnotinterestandpenalty
•BasisMADA(25July)ifstatesweretolevyanydemandoftax,thesamenotto operateontransactionsmadepriorto1April2005
•Installmentpayments(over12years)tobeallowedforsaiddemands commencing1April2026.Levyofinterestandpenaltynotimposedforperiod priorto25July2024
•MADA(25July)hadupheldthelegislativecompetenceofStatesunderEntries 49and50ofListII.Ifthisisgivenaprospectiveapplication,thevalidityofall relevantlegislationenactedbeforethedateofthedecision,thatis25July2024, willbetestedonthetouchstoneofinterpretationofthepreviouslawonwhich conflictexistsbecauseofKeshoram
•Ifappliedprospectively,therelevantstatetaxinglegislationsmaybeinvalidated, requiringthestatestorefundtheamountcollectedtotheassesses
•Importantobservationinthejudgementthatpendencyoflitigationshouldnotbe adetrimenttoassessee
CommissionerofCustomsv.CanonIndia(P.)Ltd[2024]168taxmann.com221(SC)
KeyFindings
•NointerlinkagebetweenSections17and28:TheSupremeCourtheldthatSections17 (assessment)and28(recoveryofduty)servedistinctfunctionsandarenotinherently linked.Section17enablescustomsofficerstoassessdutyatthetimeofimportorexport, whereasSection28grantsspecificofficersthepowertorecoverunpaidorshort-paidduties throughSCNs.
•InterpretationoftheTerm‘theProperOfficer’inSection28:TheCourtinthereview judgmentheldthat‘theproperofficer’doesnotimplyexclusivitytoauthorityinvolvedin initialassessments.Instead,itreferstotheofficerappointedundertheCustomsActtofulfill Section28’sspecificfunctionofissuingSCNsforrecoveryofduty.
•DRIasProperOfficersandtheInterplaybetweenSections2(34),3,4,5,and6ofthe CustomsAct:TheCourtanalyzedtheschemeof‘officersofcustoms’appointedunder Sections2(34),3,4,5,and6indetailandheldthatDRIofficers,alreadypartofthe customsstructureas‘officersofcustoms’,derivetheirauthorityfromSections2(34)and5 directly.
•ValidationofSection28(11)oftheFinanceAct:TheSupremeCourtupheldthe constitutionalityofSection28(11)oftheCustomsAct,whichwasintroducedbythe Customs(AmendmentandValidation)Act,2011,effectivefrom16.09.2011,tovalidatepast actionsbyDRIofficersinlightofSayedAli(supra).Accordingly,thedecisionofthe BombayHighCourtinSunilGupta(supra)wasaffirmed,andthedecisionoftheDelhiHigh CourtinMangaliImpex(supra)wasoverruled.
ImpactonIndustry
•Allpendingcaseswillnowberequiredtobeadjudicatedonmeritsandother issuessuchaslimitationbeforetherelevantforums,suchasadjudicating authorities,CESTATetc.
•TheimpactoncaseswhereDRISCNswerequashedonthegroundsof jurisdictionandthattheDepartmenthasnotfiledappealwillnowberequiredto beanalyzedtoassesswhethersuchcasescanbereopenedbythe Department.
•ThisdecisionalsoraisesquestionsaboutitsimpactonSupremeCourtrulingin ITCv.CCE,[[2019]111taxmann.com105(SC)]whichrecognizedselfassessmentasanassessmentorderbytheofficerunderamendedSection17 whereasthepresentdecisionmakesasignificantdeparturebyholdingthatrole ofproperofficerunderSection17islimitedto‘reassessment’incertain specifiedsituationsandthesamemustbedistinguishedfromself-assessment donebytheassessee.
•Furthermore,thedecisionaffirmsthelegislativepowertorectifyjurisdictional gaps,settingaprecedentthatmayinfluencefuturejurisdictionalchallenges withinthelegalframework.Italsounderscoresthatthemeritsofamattertake precedenceoverjurisdictionalarguments,assuchissuescanalwaysbe retrospectivelycuredbytheDepartment.
HistoryandBackground
•ConflictingviewsofBombayHighCourt(BHC)inBhartiAirtel’scaseandDelhiHighCourt (DHC)inVodafoneMobileCaseonwhethermobiletowersandpre-fabricatedbuildings (PFB)/structureswillbecoveredunderthedefinitionofcapitalgoodsandareinputsas definedunderCENVATRules.Consequently,whethermobileserviceproviderswillbe entitledtocredit.BHCtooktheviewthat:
‒towerandpartswhicharefixedtotheearthandbecomeimmovableproperties.These arenotgoodsandconsequently,not“capitalgoods”underCENVATRules.
‒towerandpartsinCKD/SKDwouldfallunderChapterHeading7308oftheCentral ExciseTariffActwhichisnotspecifiedinRule2(a)(A)(i)or(ii)oftheCENVATRules tobetreatedas“capitalgoods”.
‒towersandPFBareneithercomponents,sparesandaccessoriesofgoodsfalling underanyoftheChaptersorHeadingsoftheCentralExciseTariffScheduleas specifiedinRule2(a)(A)(i),thegoodsinquestionwouldnotbe“capitalgoods”
‒didnotagreethattowerisanaccessoryofantenna
•DHCheldthat:
‒appliedthepermanencytestandheldthattowersarefastenedtothecivilfoundation tomakethesewobblefreeandstable.Theycanbeunboltedandreassembledwithout anydamageandrelocatedtoanewsiteandarenotpermanentlyannexedtothe earth.
‒towersandsheltersactascomponentsandpartsandinalternativeasaccessoriesto theBTSandantenna,thusfallunder“capitalgoods”.
‒appliedfunctionalutilitytestandheldthateachcomponentofBTShastoworkin tandemwithoneanotherandbecauseoftheseutilityandfunctions,theseitemswould beconsideredtobe“inputs”withintheambitofRule2(k)oftheCENVATRules.
‒thattheAssesseeisentitledtothecreditimmediatelyonreceivingtheinputs irrespectiveofthesubsequenttreatmenti.e.bywayoffastening,boltingetc.
Findings
•Summarizedtheprinciplestodeterminethenatureofpropertyinpara11.8 (whethermovableorimmovable)andheldthatonthebasisofthepermanency, intendment,functionalityandmarketabilitytests,towersandPFBdonotqualify tobeimmovablepropertybutaremovableproperties,hence‘goods’.
•ThetowersandPFBarenotpermanentlyannexedtothelandorthebuildingas thetowercanberemovedorrelocatedwithoutcausingdamagetoit.The attachmentofthetowertothebuildingorthelandisnotforthepermanent enjoymentofthebuildingortheland.Thetowerisfixedtothelandorbuilding forenhancingtheoperationalefficacyandproperfunctioningoftheantenna whichisfixedonthetowerbymakingitstableandwobblefree.Thefactthat thetower,ifrequiredcanberemoved,dismantledintheCKDandSKDand soldinthemarketisnotdisputed.
•WithouttowerandPFB,antennaandBTScannoteffectivelyfunctionandthere canbenodoubtthattoweristobeconsideredasanaccessoryofantenna. SincetheysupporttheBTS/antenna(whichareadmittedlycapitalgoods)for effectivetransmissionofmobilesignals,theseitemsarecoveredbythe definitionof“capitalgoods”underRule2(a)(A)(iii).
•Withoutanydoubt,towerandPFBsareusedforprovidingoutputserviceby wayofinputs.WithouttheuseoftowerandPFB,itisinconceivablethatthe serviceprovidercanprovidemobileserviceseffectively.
KeyTakeaways
•MobiletowersandPFBwillnotqualifyasimmovablepropertymerelybecausetheyare attachedtotheearth.Thesestructuresareneverintendedtobepermanentandthe attachmentbywayofnutsetc.isonlyforprovidingsupportandeffectivefunctioningtothe antenna.Theycanbeeasilydismantledandmovedtoanyotherplacewithoutany substantialdamage.Thus,theyare“goods”.
•MobiletowersandPFBareaccessorytotheantennaastheyarenecessaryforproviding heightandstabilitytotheantennaforefficientworking.Theycanbeconsideredasan accessorytoantennaandBTSwhichare“capitalgoods”fallingunderChapter85ofthe ScheduletotheCentralExciseTariff.Thus,theyarealso“capitalgoods”.
•MobiletowersandPFBare“usedfor”providingoutputservice.Theirusageinproviding outputserviceisnotremotebutproximate.Thus,theyarealso“inputs.
ImpactonIndustry
•Thisjudgmentwillsignificantlyimprovethetelecomindustry'sfinancialhealth, enablingaccelerateddeploymentofdigitalinfrastructureacrossIndia.Thiswill alsohelptoreleasesubstantialworkingcapitalthatwillbefurtherreinvestedin infrastructuredevelopmentbytheTelecomindustry.
•Reductionintheoverallcostofservicedeliveryacrossthesector.
•However,thejudgmentalsobringstolightcriticalchallengesand inconsistencies.TheGSTlawexplicitlyexcludestelecommunicationtowers fromthedefinitionofplantandmachineryforITCpurposes.
[[2024]167taxmann.com73(SC)]
HistoryandBackground
•Toprovideabriefbackground,thepetitioner,SafariRetreatsPrivateLtd.isacompany engagedinconstructingshoppingmallsandthereafterrentingoutsuchconstructed unitstotenants.ThecompanyaccumulatedITCongoodsandservicesusedinthe constructionofthesemalls,includingcement,steel,andprofessionalservices.However, whenthecompanysoughttooffsettheITCagainstGSTpayableonrent,theauthorities deniedtheclaim,citingtheembargounderSection17(5)(d)oftheCGSTAct,2017. ThisprovisionblocksITCongoodsandservicesusedintheconstructionofimmovable propertyunlessitrelatestoplantandmachinery.Petitionerchallengedtheaforesaid embargounderSection17(5)(d),arguingthatITCshouldnotbeblockedwhen immovablepropertyisusedforfurthertaxablesupplies,suchasrentingorleasing.
•TheHon’bleSupremeCourtonanalysisoftheadmissibilityofinputtaxcreditasper GSTlawsdelivereditslong-awaitedverdictinthiscase.Thejudgementaddressesthe keyissueofwhetherthedefinitionof“plantandmachinery”intheexplanation appendedtoSection17oftheCGSTAct,2017(“CGSTAct”)equallyappliestothe expression“plantormachinery”usedinclause(d)ofsub-section(5)ofSection17and whethertheconstructionofbuildingnecessaryforprovidingaservice,isa“plant”, qualifyingundertheexceptionprovidedunderSection17(5)(d)oftheCGSTActand accordinglygoodsorservicesorbothreceivedforthispurposeareeligibleforinputtax credit.Thejudgementfinallyalsogaveitsrulingontheconstitutionalvalidityofclause (c)and(d)ofSection17(5)andSection16(4)oftheCGSTAct.
Findings
•TheSupremeCourthasheldthatthetermsusedinSection17(5)(d)haveto bereaddifferentlyfromthewords“plantandmachinery”usedelsewhereinthe CGSTAct,andanydifferentinterpretationwouldcauseviolencetotheintention ofthelegislaturewhendraftingthissectionoftheCGSTAct.Thewordsinthe aforesaidSectionshouldnecessarilybeinterpretedpertainingindividuallyto “plant”or“machinery”.
•Accordingly,theSupremeCourtheldthata“functionalitytest”ineachcase shouldberesortedtoassesswhetherabuildingqualifiesasa'plant'(for example–ifitisconstructedforaspecializedpurpose).Ifthesameistrue, thensubjecttootherconditionsundertheCGSTActpertainingtotheavailing inputtaxcreditbeingfulfilled,andthesupplybeinga“service”,theinputcredit ofgoodsorserviceorbothusedforsuchconstructionmaybeeligibletobe taken.ForworkscontractserviceunderSection17(5)(c),theSupremeCourt heldthatbenefitofinputtaxcreditwasnotavailableexceptfortheexceptions providedinthesaidsub-clause.
•OntheissueofconstitutionalvalidityoftheSections17(5)(candd)and Section16(4),theSupremeCourtheldtherewasnoambiguityandaccordingly thequestionofreadingdowntheprovisionsdidnotarise.
[[2024]167taxmann.com73(SC)]
KeyTakeaways
•TheSupremeCourtupheldtheRevenue'sstancethatSection17(5)(d)blocksITCfor goodsandservicesusedinconstructingimmovableproperty,evenwhenthepropertyislet out.
•TheCourtruledthatthisrestrictionisinlinewiththelegislativeintenttopreventthemisuse ofITCanddoesnotviolateconstitutionalprovisions.
•TheCourthoweveralsoprovidedanuancedinterpretation,suggestingthatITCmaybe availableiftheimmovablepropertyqualifiesas'plantormachinery'undertheCGSTAct.
•Thatbeingso,thecommercialpropertieslikeshoppingmallstypicallydonotfallintothis categoryunlesstheymeetthefunctionalitytest.
ImpactonIndustry
•Businessesmustcarefullyanalyzetheiroperationstodeterminewhethertheir buildingsplayanessentialfunctionalroleandcanqualifyas'plant'forthe purposeofclaimingITCunderGSTlaw.Thejudgmenthighlightsthefine balancebetweenpreventingtaxavoidanceandmaintainingtheseamlesscredit systemcentraltotheGSTregime.
•Nonetheless,thejudgementprovidesawindowofopportunitytorealestate, hospitality,malls,co-workingspacesandotherlikesectors,wherethe constructioncannowbeassessedintermsoftheSupremeCourtjudgement, andinputcredit,whichwaspreviouslyheldtobeab-initiounavailable,be allowedtobeavailedleadingtotaxefficiencyinthesesectors.
K.P.Mozikav.OilandNaturalGasCorporationLtd[2024]158taxmann.com340(SC)
HistoryandBackground
•Thiscaseanalyzeswhethercertaintransactionsrelatedtotheleasingofmotorvehicles, cranes,andtankersconstitutesales(hencesubjecttosalestax)orservices(subjectto servicetax).
•Theprimaryissuerevolvesaroundwhethertheseagreementsconstituteatransferofthe righttousegoods,asperArticle366(29A)(d)oftheConstitutionofIndia,whichwould renderthemdeemedsalesandliableforsalestaxundertheAssamGeneralSalesTaxAct, 1993(‘theSalesTaxAct’)andtheAssamVATAct,2003(‘theVATAct’).Conversely,if thesetransactionsaredeemedtobeservicecontracts,theywouldattractservicetaxunder theFinanceAct,1994(“FinanceAct”).
•Theappellant,K.P.Mozika,engagedincontractstoprovidevariousvehiclestoOiland NaturalGasCorporationLtd.(“ONGC”)andIndianOilCorporationLimited(“IOCL”)for specificoperationaluse.TheHighCourt’sinterpretationheldtheseasdeemedsales, therebysubjectingthemtoVAT.
•Theappellantcontendedthatthecontractsdidnotinvolveatransferoftherighttouse sincecontrolandpossessionovertheequipmentwerenotpassedtoONGCorIOCL.They retainedresponsibilityforthecrew,maintenance,andotheroperationalaspects,ensuring thateffectivecontrolremainedwiththem.Sinceeffectivecontrolandpossessionremained withthecontractor,thesetransactionsshouldbeclassifiedasservices.
Findings
•TheCourthasinterpretedsub-clause(d)ofClause29Ainvariousdecisions andreferredtothedecisionoftheConstitutionBenchinthecaseof20th CenturyFinanceCorporationLtd.v.StateofMaharashtra[2000 taxmann.com1581(SC)]toemphasizethattransferoftherighttousegoods necessitatesexclusivepossessionbythetransferee,aconditionnotsatisfiedin theircontracts.
•Toresolvethecontroversy,theCourtinvokedthefivetestslaiddownbyDr.AR Laxmanan,JinthecaseofBharatSancharNigamLimitedv.UnionofIndia [[2006]3STT245(SC)].Thesetestsarepivotalindeterminingwhethera contractconstitutesatransferoftherighttousegoods.
•TheCourthighlightedthatthecontractsinquestiondidnotintendtotransfer therighttousespecificgoodstoONGC.Instead,theyaimedtoprovide services,suchastheuseofcranesandtanktrucks.Asthecontroloverthese assetsremainedwiththecontractor,theCourtheldthatthecontractsdidnot fallundertheSalesTaxActandtheVATAct.
•Initsconclusiveremarks,theCourtclarifiedthatifthesubstantialcontrol remainswiththecontractorandisnottransferredtotheuser,therecanbeno transferoftherighttousethegoods.Insuchcases,thetransactionis consideredaservicewithinthemeaningofSection65(105)(zzzzj)ofthe FinanceAct.
KeyTakeaways
•TheCourt’sdecisionemphasizestheimportanceofeffectivecontrolandpossessionin determiningwhetheracontractconstitutesadeemedsaleorserviceagreement.
•TheCourt’sinterpretationreinforcestheprinciplethatlegalcontrolandpossessionmust entirelyshifttothehirerforatransactiontoqualifyasasaleunderArticle366(29A)(d).
•Furthermore,theCourtpointedoutthattheownership,maintenance,andlegal consequencesofusingthegoodsrestedwiththecontractor,indicatingthatthecontrol remainedwiththecontractor.Thisobservationreinforcedthenotionthatthecontractswere primarilyforprovidingservices,ratherthantransferringtherighttousegoods.
•Accordingly,thetransactionwillbeofrenderingservicewithinthemeaningofSection 65(105)(zzzzj)oftheFinanceActafterthesaidprovisioncameintoforce.
ImpactonIndustry
•Thisjudgmentunderscorestheimportanceofmeticulouslyexaminingtheterms ofcontractstodeterminewhethertheyconstitutetransfersoftherighttouse goods,asdefinedunderArticle366(29A)(d)oftheConstitution.Itprovides clarityandguidancetobusinessesandlegalpractitionersinunderstandingthe taximplicationsofsuchtransactions.
•Thisjudgmentdelineatestheboundarybetweensalestaxandservicetax, providingclarityoncontractualarrangementsinservice-orientedindustries.The decisionisinstrumentalinguidingfuturecasesinvolvingequipmentleasingand servicecontracts,establishingaprecedentintaxationmatters
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