The Supreme Court has ruled that the mobile towers fall under the purview of state legislation and hence liable to pay taxes

By Parsa Venkateshwar Rao Jr

The Supreme Court has on December 16, ruled that municipalities, panchayats and other local bodies can impose a tax on mobile towers.

The Court has also said that the tax will be payable by the service provider and not the owner of the land or building where the tower is situated.

Disposing of a bunch of Special Leave Petitions (SLPs) in the Ahmedabad Municipal Corporation vs GTL Infrastructure Ltd and Others case, the court set aside an earlier Gujarat High Court verdict which declared the Ahmedabad Municipal Corporation’s ‘property tax’ on mobile towers as ultra vires. There was however a complication that arose out of the High Court’s judgement because it distinguished between the land where the tower stands, which it said cannot be taxed, and the Base Transceiver Station (BTS), which comprises of a prefabricated shelter, electronic panel, radio transmission and reception equipment, a diesel generator set, six poles of 6 to 9 metres length steel galvanized pipes, and which constitutes a building that can be taxed.

The petitioner’s contention, which was mainly from the mobile phone service providers, was that that the service provided comes under the ‘telegraph’, and therefore it cannot be deemed a property, and that it does not come under the purview of local authorities.

The petitioner’s contention, which was mainly from the mobile phone service providers, was that that the service provided comes under the ‘telegraph’, and therefore it cannot be deemed a property, and that it does not come under the purview of local authorities.

What was challenged in the Gujarat High Court was Section 145A of the Gujarat Provincial Municipal Corporations Act, 1949, which said, “(1) A tax at the rates not exceeding those prescribed by order in writing by the State Government in this behalf from time to time shall be levied on mobile towers from the person engaged in providing telecommunication services through such mobile towers. (2) The Corporation shall from year to year, in accordance with Section 99, determine the rates at which the tax shall be levied.”

Through the Gujarat Local Authorities Laws (Amendment) Act, 2011, similar provisions have been inserted the power to levy tax on mobile towers in the Gujarat Municipalities Act, 1963 and the Gujarat Panchayats Act, 1993.

The cellular operators who challenged the law contended that the levy is beyond the scope of Entry 49 of List II of the Seventh Schedule to the Constitution. The Seventh Schedule contains the three lists about the legislative powers of the Centre (List I), the States (List II) and the Concurrent (List III). There the provision that the laws made by Parliament shall prevail over those made by state legislatures in the case of List III. Entry 49 relates to levying of tax on land and property. They argued that “telegraphs” which is heading under which the function of the mobile towers is to be construed is Entry 31 in List I or the Central list. The court has said that if the mobile towers can be shown to be falling under the heading of “land and property”, then the local bodies can levy the tax as under Entry 49 of List II.

The court considered the definitions of ‘land’ and ‘building’ defined in the various legal lexicons, Stroud’s Judicial Dictionary, Black’s Law Dictionary and P Ramanatha Aiyar’s Law Lexicon. It also referred to two of its earlier decisions. First, in Goodricke Group Ltd and Others vs. State of W.B. (West Bengal) and others, it held that the “cess imposed on green tea (leaves) by weight was held to be a tax on land and not on the produce. In Ajoy Kumar Mukherjee vs. Local Board of Barpeta “a levy on holding a market was held to be essentially a levy on land and, therefore, authorised by Entry 49 of List II though the levy was imposed only on the days when the market was held.”

The court explained that “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 the purpose of the mobile tower”.

The cellular operators were told that they could challenge in the relevant court about whether the tax could be retrospective, or about the quantum of the levy: “…we leave it open, so far as the cellular operators in the Bombay cases are concerned, to agitate the issue with regard to the retrospective operation of the assessment/demand of tax and the quantum thereof before the appropriate forum, if so advised.”

Lead picture: The apex court has ruled that the tax will be paid by service provider and not the owner of the land or building where the mobile tower is situated. Photo: UNI