India – Deduction of tax relating to telecommunication towers

The Supreme Court issued a landmark ruling that concerns the pre-GST era but can have implications to the current GST deductibility on works relating to telecommunication towers.

The decision resolved a long-standing tax dispute by allowing telecom service providers to claim Central Value Added Tax (CENVAT) credit under the CENVAT Credit Rules, 2004 (CCR) in respect of mobile towers and prefabricated buildings (PFBs).

Telecom companies had sought credit of excise duty paid on parts of such towers and PFBs, arguing that these were integral to providing telecom services. Previously, the Bombay High Court had rejected the claim, considering the towers and PFBs to be immovable property, while the Delhi High Court had allowed the credit, stating that these were movable property covered within the definition of ‘capital goods’ as well as ‘inputs’ as per CCR.

Below there is a summary of the decisions previously held by the Bombay and Delhi High Courts, followed by the reasoning of the Supreme Court.