The Supreme Court said that telecom companies can avail tax credit for duty paid on towers, tower parts, shelters and service tax paid for cellular services. The apex court has given relief to telecom companies like Bharti Airtel, Vodafone Idea, Indus Towers, Reliance Communications and Mahanagar Telephone Nigam Limited.
Bombay High Court order rejected
This decision has been given by a two-judge bench of BV Nagarathna and N Kotishwar Singh. By accepting the appeal filed by the telecom companies, the apex court has rejected the 2014 order of the Bombay High Court in which it had refused to avail the benefit of CENVAT on service tax paid for providing services.
Generally, a tax credit is an amount that taxpayers are allowed to deduct from their final tax liability. This credit helps businesses reduce their tax liability.
The question is basically whether telecom companies can claim tax credit for duty paid on the purchase of tower parts, shelters or prefabricated buildings, office chairs and printers.
What did Bombay HC say?
In 2014, the Bombay High Court had said that credit cannot be allowed as these items such as shelters, office chairs, towers have independent operations and hence cannot be classified as a single unit. It had said that only those items which are directly connected to the output service, that is, providing cellular service, will be eligible for credit.
According to the High Court, the towers and parts are attached to the ground and once installed, they cannot be moved and hence they are not goods.
