The Supreme Court has dismissed the appeal of Reliance Communication, challenging the Gujarat government’s demand notices seeking to levy Rs 13-crore property tax on cell towers and telecom equipment installed on rooftops and building terraces in the state. A bench led by Justice Ranjan Gogoi, while dismissing the appeal, said, “If a competent court has passed the order, you (RCom) can not drag on for a year.”
Earlier, it had directed that the RCom’s appeal along with other appeals “will be listed only after deposit of the full amount of tax with the concerned authority under the Act”.
RCom in its appeal said the state government had not prescribed any rates by any order in writing and thus the demand notices were raised in contravention with the procedure prescribed under Section 145A of the Gujarat Provincial Municipal Corporations Act 1949. It further stated that the demand notices were not with respect to tax on mobile towers, rather the tax which is sought to be imposed is property tax and this cannot be levied on mobile towers as a different procedure has been prescribed under the Act for the computation of both the taxes – property tax and the tax on mobile towers. The demand notices pertained to the period of 2012-17.
Counsel Shally Bhasin on behalf of RCom sought more time to pay the tax, saying the money was supposed to come in from sale of its tower business to RJio, but the transaction has been stalled by the NCLAT and “our money is stuck”.
In December 2016, the Supreme Court had held that municipal bodies can levy property tax on mobile towers and equipment on rooftops and building terraces as “the incidence of the tax is not on the use of the plant and machinery in the mobile tower; rather it is on the use of the land or building, as may be, for purpose of the mobile tower”.
It had set aside the April 2013 order of the Gujarat High Court that held contrary to its view. According to the SC, under the relevant laws including the Gujarat Provincial Municipal Corporations Act 1949, tax on mobile towers is “levied on the yield from the land and building, calculated in terms of the rateable value of the land and building. Also the incidence of the tax is not on the use of the plant and machinery in the mobile tower; rather it is on the use of the land or building, as may be, for purpose of the mobile tower,” the judge said, adding that the tax imposed on the “person engaged in providing telecommunication services through such mobile towers” (Section 145A of the Gujarat Act) merely indicates that it is the occupier and not the owner of the land and building who is liable to pay the tax.”
Cross-appeals were then filed by various companies including Reliance Communications, Idea Cellular, Viom Infra Networks and GTL Infrastructure, and various municipal bodies from Gujarat.
The companies had challenged the levy of property tax for cell towers and equipment installed on rooftops and building terraces on the grounds that telecom towers are temporarily installed for functioning and operation of a mobile telephone system.