Technically, mobile towers are not buildings. But for taxation purpose, they will be treated so, held the Supreme Court in a significant ruling last week. The decision paves the way for State Governments and civic bodies to levy property tax on mobile towers. This will rake in lots of moolah, considering that there are close to four lakh mobile towers in the country.
Gujarat had passed the Gujarat Provincial Municipal Corporations Act 1949 to specifically tax mobile towers, while Maharashtra levied tax on mobile towers under the Bombay Provincial Municipal Corporations Act 1949.
The cellular operators challenged the above laws on the ground that mobile towers, as an apparatus, are part of “telegraph”, which is covered by a Central Act on which States have no power to regulate or frame laws. On the other hand, States contended that mobile towers fall under “land and building”, taxation on which is permitted under Entry 49 of the State list. Faced with the opposing contentions, the apex court had to determine whether mobile towers are indeed “building” in order to be taxed.
The Bench of Justices Ranjan Gogoi and PC Pant, while dealing with the issue, said, “We do not find any reason as to why, though in common parlance and in everyday life, a mobile tower is certainly not a building, that it would also cease to be a building for the purposes of Entry 49 list II so as to deny the State legislature the power to levy a tax thereon.”
Much to the chagrin of the cellular companies — Idea, Reliance Communications, BSNl — and tower developers — Viom Infra Networks, Indus Towers, GTl Infrastructure, Chennai Network Infrastructure, ATC Telecom Tower Corporation — the Bench upheld the power of State Governments to levy tax on mobile towers.
It was a setback for telecom companies who had won the battle against the State in the Gujarat High Court, although partially. The HC had held that the tower cannot be taxed but the cabin which houses the equipment of the tower will be a “building” and hence only that part is taxable.
The court preferred to broadly interpret the term “land and building” and held that these terms contained in the Constitution’s text must be understood keeping a “dynamic” view. Only then, the court said will the Constitutional document be able to meet the “challenges of a fast developing world throwing new frontiers of challenge and an ever changing social order.”
While cellular companies had threatened that any burden of tax imposed on them will be passed on to the consumers, the bench made it clear that the liability to pay tax is on the occupier of the land or building in question and not the owner. The tax burden thus squarely rests on the telecom companies. The Bench, however, allowed the companies to agitate against retrospective demand of tax and its quantum before the appropriate forum.