Mobile Towers Are Not Immovable Property, They Are Eligible For Input Tax Credit: Delhi High Court Allows Airtel's Plea

A division bench of Justices Yashwant Varma and Girish Kathpalia further held that telecom towers fall outside the scope of Section 17(5) of the CGST Act which sets out various goods and services which are not liable to be taken into consideration for the purposes of availing input tax credit.

Section 17(5) includes goods and services received by a taxable person for construction of an immovable property. Thus, the determination of whether telecom towers are movable or immovable property, was relevant.

The bench was considering three petitions, one of which was moved by telecom service provider Bharti Airtel.

The petitioners were aggrieved by characterization of telecom towers as immovable property by the GST Department.

It was argued that telecom towers are moveable items of essential equipment used in telecommunications, which can be dismantled at site and thus capable of being moved. It was thus contended that they are liable to be treated as capital goods, entitled to be viewed as inputs under Rule 2(k) of the Cenvat Credit Rules 2004.

Agreeing, the High Court cited Vodafone Mobile Services Limited vs. Commissioner of Service Tax, Delhi (2018) whereby the Delhi HC had found that it would be incorrect to characterize mobile towers as immovable property since they would not satisfy the 'test of permanency' or be liable to be viewed as something 'attached to the earth'.

In Bharti Airtel Ltd vs. Commissioner of Central Excise, Pune (2024), the Supreme Court conclusively held that telecommunication towers cannot be construed as being immovable property.

It applied tests of permanency, intendment, functionality and marketability and held that telecom towers are movable. It reasoned,

“The tower, after being assembled and fixed to the earth or a building can be dismantled without any change in the nature of the tower, and the tower can be removed and shifted to any other location as per the needs and requirements of the service provider and also can be re-sold in the market in the same form…”

Significant to note that the Respondents had relied on Section 17(5)(d) of the Act which excludes “plant or machinery” from immovable property. This means that plant or machinery are not immovable property. However, the Explanation appearing in Section 17(5) specifically excludes telecom towers from the ambit of plant and machinery.

It was thus the Respondent's contention that specific exclusion of telecom towers from the scope of the phrase “plant and machinery” would lead one to conclude that the statute contemplates or envisages telecommunication towers to be immovable property.

The High Court however said that for this contention to hold water, telecom towers will first have to qualify as immovable property, to fall within the ambit of Section 17(5)(d).

Since the Supreme Court has already held that telecom towers are movable properties, High Court concluded, “Their exclusion from the expression “plant and machinery” would not result in it being concomitantly held that they constitute articles which are immoveable.”

The matter was led by V. Lakshmikumaran along with Mr Yogendra Aldak, Mr Agrim Arora and Mr Sumit Khadaria, Advocates from Lakshmikumaran and Sridharan Attorneys who represented three out of two Petitioners.

Case title: M/S Bharti Airtel Limited v. Commissioner, CGST Appeals-1 Delhi (and batch)

Case no.: W.P.(C) 13211/2024

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