Madras HC asks Aircel to approach tax appellate authority on tax dispute

The dispute was related to the company's sale of tower assets to GTL Infra in 2010

The Madras High Court has asked Aircel Ltd to approach the Appellate Authority for its dispute against the State Commercial Tax Department related to the company's sale of tower assets to GTL Infrastructure in 2010.

The division bench dismissed the writ appeal of Aircel and its arm Dishnet Wireless against the Department, and upheld the order of a single Judge on the issue.

A mail sent to the Aircel Ltd seeking its comment on the order is yet to elicit a response with its comments.

A Division Bench comprising of Justice N Paul Vasanthakumar and Justice P Devadas, which heard the writ appeal on this, in their order said “......both the writ appeals are liable to be dismissed. The appellants have to approach the appellate authority under Section 51 of the Tamil Nadu Value Added Tax Act, 2006.”

The order further added, “In fine, both the writ appeals are dismissed. The common order of the learned single Judge dated November 28, 2013 is confirmed.” The companies were granted liberty to file appeal before the Appellate Authority as ordered by the single Judge.

In 2010, Aircel and its subsidiary Dishnet Wireless Ltd entered into an agreement with Chennai Network Infrastructure Limited to sell their tower assets for a consideration of Rs 2,329 crore, according to the Order of Madras High Court.

As per earlier reports, the shared passive telecom infrastructure major GTL Infrastructure acquired the the tower assets of Aircel and Dishnet Wireless in an all cash deal worth over Rs 8,000 crore through the special purpose vehicle Chennai Network Infrastructure Ltd and merged it into the company later.

The Commercial Tax Officer has issued a show cause notice to the sellers in July 2013, as to why the entire sale value of the assets should not be assessed at 12.50 per cent for the assessment year 2010-2011. The company contended that by the Business Transfer Agreement they have only transferred the passive infrastructure to the transferee Company and there was no contract for sale of goods.

After hearing the companies, the Assessing Officer orders in September demanding a total of around Rs 603 crore from the companies (Aircel and Dishnet Wireless). The amount include Rs 241.55 crore as tax and Rs 362.14 crore as penalty.

These orders were challenged in the writ petitions by the companies with a single Judge at Madras High Court. The companies argued that the Department has no jurisdiction to initiate the proceedings insofar as the appellant's transaction are concerned, as the whole transaction had taken place outside Tamil Nadu, as the appellant's equipments are located outside Tamilnadu.

Opposing the writ petition, the Advocate General who appeared for the Department and Tamil Nadu Government, argued that the very same issue has been pending before the Appellate Deputy Commissioner at the instance of Aircel Cellular Limited on similar grounds and the orders challenged before the single Judge are appealable before the very same Appellate Authority.

The single Judge, accepting the submission of the Advocate General, ordered that the transaction in question should be considered by the Appellate Authority before whom the very same issues are pending and there cannot be any piecemeal consideration of the matter by the Appellate Authority as well as by the Court.