By TIOL News Service

NEW DELHI, DEC 17, 2016: THE issue before the Apex Court is - Whether, for the purpose of levy of property tax, mobile towers are akin to land and building as per Entry 49 of List II of Seventh Schedule of Constitution. And the verdict favours the State.

Facts of the case

A bunch of appeals were filed challenging the judgement of the Gujarat High Court declaring Section 145A of the Gujarat Provincial Municipal Corporations Act, 1949 as ultra vires the Constitution and on that basis interdicting the levy of property tax on "mobile towers". The High Court took the view that the Cabin in a mobile tower in which BTS system is located, would be a building and, therefore, exigible to tax under the Gujarat Act.

The Bombay High Court had, in similar cases, taken the view that the writ petitions challenging the levy of property tax on mobile towers should not be entertained and the aggrieved writ petitioners should be left with the option of exhausting the alternate remedies provided by the Act. In the Bombay Provincial Municipal Corporations Act, 1949, the charging section does not specifically contemplate levy of taxes on mobile towers as in the Gujarat Act. The impugned levy, nevertheless, was imposed on the reasoning that mobile towers are buildings as defined in the Act. At this stage, it must also be noticed that the Bombay Provincial Municipal Corporations Act, 1949 was applicable to the State of Gujarat also until the year 2011 when by the Gujarat Short Titles (Amendment) Act, 2011 the word 'Gujarat' had been inserted in place of the word 'Bombay'.

Held that,

++ to answer the question as to whether such mobile towers can come within the fold of 'land and building' appearing in Entry 49 List II of the Seventh Schedule it will be useful to take notice of the meanings of the two expressions as appearing in the leading judicial and English dictionaries;

Whether while interpreting a legislative entry of the constitution, a more dynamic rather than a pedantic view should be taken by a court - YES: SC

++ a cardinal principle of interpretation of a Legislative Entry in any of the Lists of the Seventh Schedule is to treat the words and expressions as inclusive in meaning and give the same all possible flexibility instead of restricting such meaning to the perceptions contemporaneous with the times when the Constitution was framed. The Constitution, an organic document, has to be allowed a natural growth by such a process of interpretation. Interpretation of a Legislative Entry has to grow and keep up with the pace of times;

Whether, for the purpose of levy of property tax, mobile towers are akin to land and building as per Entry 49 of List II of Seventh Schedule of Constitution - YES: SC

++ coming specifically to the expression "building" appearing in Entry 49 List II of the Seventh Schedule in view of the settled principles that would be applicable to find out the true and correct meaning of the said expression it will be difficult to confine the meaning of the expression "building" to a residential building as commonly understood or a structure raised for the purpose of habitation. In Government of Andhra Pradesh and Others vs. Hindustan Machine Tools Ltd. AIR 1975 SC 2037 = (1975) 2 SCC 274 a tax on a building housing a factory has been understood to be a tax on building and not on the factory or its plant and machinery. A general word like 'building' must be construed to reasonably extend to all ancillary and subsidiary matters and the common parlance test adopted by the High Court to hold the meaning of levy of tax on building and machinery does not appear to be right keeping in mind the established and accepted principles of interpretation of a constitutional provision or a Legislative Entry. A dynamic, rather than a pedantic view has to be preferred if the constitutional document is to meet the challenges of a fast developing world throwing new frontiers of challenge and an ever changing social order;

++ the regulatory power of the Corporations, Municipalities and Panchyats in the matter of installation, location and operation of 'Mobile Towers' even before the specific incorporation of Mobile Towers in the Gujarat Act by the 2011 Amendment and such control under the Bombay Act at all points of time would also be a valuable input to accord a reasonable extension of such power and control by understanding the power of taxation on 'Mobile Towers' to be vested in the State Legislature under Entry 49 of List II of the Seventh Schedule;

Whether tax on mobile towers is levied on the yield from the land and building calculated in terms fo rateable value - YES: SC

++ the measure of the levy, though may not be determinative of the nature of the tax, cannot also be altogether ignored in the light of the views expressed by this Court in Goodricke. Under both the Acts read with the relevant Rules, tax on Mobile Towers is levied on the yield from the land and building calculated in terms of the rateable value of the land and building. Also the incidence of the tax is not on the use of the plant and machinery in the Mobile Tower; rather it is on the use of the land or building, as may be, for purpose of the mobile tower. That the tax is imposed on the "person engaged in providing telecommunication services through such mobile towers" (Section 145A of the Gujarat Act) merely indicates that it is the occupier and not the owner of the land and building who is liable to pay the tax. Such a liability to pay the tax by the occupier instead of the owner is an accepted facet of the tax payable on land and building under Entry 49 List II of the Seventh Schedule;

++ 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. Such a law can trace its source to the provisions Entry 49 List II of the Seventh Schedule to the Constitution;

++ we set aside the judgment passed by the Gujarat High Court and answer the appeals arising from the order of the Bombay High Court; transferred cases and the writ petitions accordingly. However, we leave it open, so far as the cellular operators in the Bombay cases are concerned, to agitate the issue with regard to the retrospective operation of the assessment/demand of tax and the quantum thereof before the appropriate forum, if so advised. Consequently, and in the light of the above all the appeals, writ petitions and the transferred cases are disposed of.

(See 2016-TIOL-230-SC-MISC)