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Bharat Sanchan Nigam Ltd v. Commisisoner, Trade Tax, U.P., Lucknow - SALES/TRADE TAX REVISION No. 228 of 2005  RD-AH 17671 (13 October 2006)
TRADE TAX REVISION NO.228 OF 2005
TRADE TAX REVISION NO.229 OF 2005
TRADE TAX REVISION NO.230 OF 2005
TRADE TAX REVISION NO.231 OF 2005
Bharat Sanchar Nigam Limited. ....Applicant
Commissioner, Trade Tax U.P., Lucknow. .Opp.party
Hon'ble Rajes Kumar, J.
These four revisions under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") are directed against the order of Tribunal dated 26th February, 2005 relating to the assessment years 1997-98, 98-99, 99-2000 and 2000-01.
Applicant provides telecom services and had admittedly charged rental charges from its subscribers. Applicant had also provided Internet connections. Such rental charges have been assessed to tax under section 3-F of the Act under "transfer of right to use the goods." First appeals filed by the applicant have been rejected. By the impugned order, Tribunal has also rejected the second appeals. All the authorities have mainly assessed the tax relying upon the decision of the Apex Court in the case of State of U.P. and another Vs. Union of India and another, reported in 2003 NTN (Vol.22), 175. Perusal of the assessment orders show that the tax has been assessed for providing telecom and Internet system.
Heard learned counsel for the parties.
Learned counsel for the applicant submitted that the earlier decision of the Apex Court in the case of State of U.P. Vs. Union of India (Supra) has been over ruled by the Larger Bench of the Apex Court in the case of Bharat Sanchar Nigam Ltd. and another Vs. Union of India and others, reported in JT 2006 (6) SC, 114. He submitted that the Apex Court has held that the electromagnetic waves are not goods within the meaning of the word in Article 366 (12) and thus, the telephone system including telephone exchange was not the goods but immovable property. In the circumstances, levy of tax on the telephone connections and Internet connections is wholly unjustified. Learned Standing Counsel submitted that the tax has been levied not only on the rental charges for providing the telephone connections but also for providing the telephone instruments. He submitted that the Apex Court in the same decision has also held that the telephone instrument is goods and rental charges charged for providing telephone instrument is liable to tax under section 3-F of the Act.
Having Heard learned counsel for the parties, I have perused the order of Tribunal and the authorities below.
Tax has been levied mainly relying upon the decision of the Apex Court in the case of State of U.P. Vs. Union of India (Surpa). The said decision is no more a good law in view of the decision of the Larger Bench of the Apex Court in the case of Bharat Sanchar Nigam Ltd. and another Vs. Union of India and others (Supra) Thus, in my opinion, matter requires reconsideration by the assessing authority.
Before parting with the case, it is necessary to refer that the Apex Court in the case of Bharat Sanchar Nigam Ltd. and another Vs. Union of India and others (Surpa) held as follows:
"For the reasons aforesaid, we answer the questions formulated by us earlier in the following manner :
A) Goods do not include electromagnetic waves or radio frequencies for the purpose of Article 366 (29A)(d). The goods I telecommunication are limited to the handsets supplied by the service provider. As far as the SIM cards are concerned, the issue is left for determination by the Assessing Authorities.
B) There may be a transfer of right to use goods as defined in answer to the previous question by giving a telephone connection.
C) The nature of the transaction involved in providing the telephone connection may be a composite contract of service and sale. It is possible for the State to tax the sale element provided there is a discernible sale and only to the extent relatable to such sale.
D) The issue is left unanswered.
E) The aspect theory would not apply to enable the value of the services to be included in the sale of goods or the price of goods in the value of the service."
Assessing authority is also directed to make the assessment orders afresh in the light of the observations made above.
In the result, all the four revisions are allowed. Order of the Tribunal is set aside and the matter is remanded back to the assessing authority to pass the assessment orders afresh in the light of the observations made above.
Since the matters are quite old, assessing authority is directed to pass the assessment orders afresh expeditiously preferably within a period of three months from the date of presentation of the certified copy of the order before him and the applicant is directed to serve the certified copy of the before the assessing authority within a period of fifteen days.
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