SC upholds Delhi HC ruling favouring Airtel, Indus Towers, says telecom towers eligible for ITC

Time of India

7 hours ago

The Supreme Court on Friday upheld a
Delhi High Court
's December ruling that favoured
Bharti Airtel
and Indus Tower, holding that telecom towers qualify as "movable" property and, thus eligible for
input tax credit
(ITC) under the income tax laws.
Reaffirming pre-GST position on mobile towers ceasing to be an 'immovable property,' a Bench comprising Justice Pankaj Mithal and Justice Prasanna B Varale dismissed the income tax department's appeal and upheld the HC December 12 decision that held that telecom towers fall within the scope of plant and machinery and do not fall within the ambit of Section 17(5)(d) of the Central Goods and Services Tax Act, 2017, and therefore, were eligible for ITC. It also upheld the high court decision to quash the demand and show cause notices issued to Bharti Airtel and
Indus Towers
.
The top court refused to accept the Revenue's stand to differentiate between the service tax regime and the GST framework in the treatment of such infrastructure, stating that it would not permit such 'hair-splitting' interpretations.
The department had challenged the HC ruling that refused to characterise mobile towers as immovable property, thereby granting ITC on inputs and input services used for setting up such passive infrastructure. It stated that the explanation at the end of Section 17(5) of the CGST Act had excluded the
telecommunication towers
specifically from plant and machinery.
Senior counsel Arvind P. Datar, appearing for Airtel, argued that the intent of the law, both in the pre-GST and post-GST regime, had been consistent in denying the credit to be only in the context of immovable property, whether pre-GST or post-GST.
The telecos stand was that the telecommunication towers were moveable items of essential equipment used in telecommunications, which can be dismantled at site and, thus, capable of being moved. It is only the concrete structure on which those telecommunication towers were placed which could be treated as an immovable element of that equipment whereas steel or metal structures were capable of being shifted to other locations, they said, adding that the assumption that the installation of these towers results in the establishment of an immovable structure is misconceived, said the telecom companies.
Welcoming the SC decision, Sandeep Sehgal, Partner-Tax, AKM Global, a tax and consulting firm, said that 'the judgment ensures consistency with earlier service tax rulings and avoids unnecessary technical interpretations. This is a welcome relief for the telecom sector and other industries that invest heavily in fixed infrastructure, reinforcing the principle that legitimate business inputs should not be blocked from credit.'
The HC had held that the denial of input tax credit based on the department's stand that towers should be categorised as "immovable" property was "wholly untenable." It ruled that the specific exclusion of telecommunication towers from 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 pre-condition 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 immoveable," the HC had said.