In a setback to cellular phone operators, the Supreme Court today ruled that state governments can impose property tax on mobile towers as the levy was not on the use of the plant and machinery but the land and building.
The apex court delivered its judgement to this effect after setting aside the 2013 verdict of the Gujarat High Court holding that the levy of property tax on mobile towers by state government was beyond its competence.
A Bench comprising Justices Ranjan Gogoi and P C Pant held as valid the provision of the Gujarat Provincial Municipal Corporations Act imposing tax on on mobile towers on the ground that they were within the fold of "land and building" as defined in the law.
The apex court said though in common parlance and in everyday life a mobile tower was certainly not a building, there was no reason why it should not be considered as a building for levy of the tax under Entry 49 List II of the Seventh Schedule of the Constitution.
List II of the Seventh Schedule of the Constitution enumerates the items on which a state government can make law and Entry 49 refers to land and buildings.
"If the definition of land and building contained in the Gujarat Act is to be understood, 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, 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," the bench said.
The apex court said, under the Act, the incidence of the
tax was "not on the use of the plant and machinery in the mobile tower but on the use of the land or building, as may be, for purpose of the mobile tower".
It said the fact that the tax was imposed on the person engaged in providing telecommunication services through such mobile towers, "merely indicates that it is the occupier and not the owner of the land and building who is liable to pay the tax".
The Gujarat high court had in 2013 declared Section 145A of the Gujarat Provincial Municipal Corporations Act ultra vires the Constitution and on that basis prohibited levying of property tax on mobile towers.
The high court, however, held that the cabin on a tower is liable to property tax.
The high court's decision was challenged by the state government and municipal authorities to the extent that it prohibited levy of property tax on mobile towers.
The cellular companies had challenged the high court's decision to levy property tax on the cabins on mobile towers.
