2010 Supreme(Kar) 142

High Court of Karnataka
THE HONOURABLE MR. JUSTICE V. GOPALA GOWDA & THE HONOURABLE MRS. JUSTICE B.V. NAGARATHNA
M/s. Antrix Corporation Ltd. Rep by its Accounts Officer
Versus
The Assistant Commissioner of Commercial Taxes Bangalore & Others
Writ Appeal No.882 to 885 of 2009 (T-RES)
Decided On : 06-02-2010

Headnote:CONSTITUTION OF INDIA - Articles 366 (29A)(d): [V. Gopala Gowda & B.V.Nagarathna, JJ] Allotment of "Space Segment Capacity" in the transponders and bandwidth of a communication satellite having different frequency - Whether amount to "Sale or Purchase of Goods" within the meaning of Article 366 (29-A) (d) of the Constitution of India as well as Section 2(29) (d) of the Karnataka Value Added Tax Act, 2003 ? Held, Transfer is sine qua non for the right to use any goods and when the contract is executed, the right is vested in the lessee under Clause (d) of Section 29(A) of Article 366. Hence, the taxable event on such a deemed sale would be the execution of the contract for transfer of right to sue the goods. The transfer of right to use would take place, where the agreements are executed, but the goods must be available at the time of transfer that is at the time of execution of agreement of transfer of right to use the goods, the same must be available and deliverable and when they are not deliverable, question of right to use the goods would not arise. Therefore, if there is no deliverable goods in existence, there is no transfer of goods to the user at all. Thus, whether the goods are tangible or intangible, they must be deliverable. There is a transfer of right to use the "leased capacity" under the contract of agreement executed by the Department of Space with the customers and that the leased capacity which is the subject matter of the agreement in a satellite which is a space segment capacity in a transponder of a satellite is, "goods" within the meaning of Article 366 (12) of the Constitution and therefore, the transaction in question is one which comes within the scope of sub-Clause (d) of Clause 29-A of Article 366 of the Constitution, in as much as, there is a delivery of possession of the goods by the transferor (Department of Space) to the transferee (customer) and in law, the transferee has the effective control over the goods i.e., "Space Segment Capacity" in the transponder of satellite, though its technical operation is handled by the Department of Space. Further, there is dedicated, effective and general control of the SBAS given to the customers who has the freedom of choice of selecting the manner, time and nature of use of the equipment, though within the frame work of the agreement of lease and hence, the right to use "space segment capacity" falls within the extended definition of "Sale", inasmuch as, there is delivery of possession in the said lease and there is a clear identification of the "space segment capacity" been delivered to the customer and the customer is given the right to use it in any manner as he deems fit. Of course, subject to terms of the lease agreement during which period, the appellant herein or the Department of Space has no right to use the "Space Segment Capacity" either for its own or to transfer the same to any other customers. Therefore, the transaction involved in this case is a "deemed sale" coming within the definition of "Sale" under Section 2(29) (d) of the K.A.V.T. Act. Section 6 of the K.A.V.T. Act particularly, sub-Section (4) cannot come in the way of holding that the agreement entered into between the appellant and the Department of Space in the present case is outside the scope of provisions of Section 6 of the Act. So long as the sale is not in the course of inter-State trade or export or import, irrespective of the place where the transaction has taken place, Section 6 brings such transaction under the purview of KVAT Act by way of fiction. The Respondent was therefore, fully justified in issuing the impugned proposition notices to the appellant who is liable to pay the tax on the ’deemed sale’ in terms of KAVT, Act.

       KARNATAKA VALUE ADDED TAX ACT, 2003 - Section 2(29) & Section 6: [V. Gopala Gowda & B.V.Nagarathna, JJ] Allotment of "Space Segment Capacity" in the transponders and bandwidth of a communication satellite having different frequency - Whether amount to "Sale or Purchase of Goods" within the meaning of Article 366 (29-A) (d) of the Constitution of India as well as Section 2(29) (d) of the Karnataka Value Added Tax Act, 2003 ? Held, Transfer is sine qua non for the right to use any goods and when the contract is executed, the right is vested in the lessee under Clause (d) of Section 29(A) of Article 366. Hence, the taxable event on such a deemed sale would be the execution of the contract for transfer of right to sue the goods. The transfer of right to use would take place, where the agreements are executed, but the goods must be available at the time of transfer that is at the time of execution of agreement of transfer of right to use the goods, the same must be available and deliverable and when they are not deliverable, question of right to use the goods would not arise. Therefore, if there is no deliverable goods in existence, there is no transfer of goods to the user at all. Thus, whether the goods are tangible or intangible, they must be deliverable. There is a transfer of right to use the "leased capacity" under the contract of agreement executed by the Department of Space with the customers and that the leased capacity which is the subject matter of the agreement in a satellite which is a space segment capacity in a transponder of a satellite is, "goods" within the meaning of Article 366 (12) of the Constitution and therefore, the transaction in question is one which comes within the scope of sub-Clause (d) of Clause 29-A of Article 366 of the Constitution, in as much as, there is a delivery of possession of the goods by the transferor (Department of Space) to the transferee (customer) and in law, the transferee has the effective control over the goods i.e., "Space Segment Capacity" in the transponder of satellite, though its technical operation is handled by the Department of Space. Further, there is dedicated, effective and general control of the SBAS given to the customers who has the freedom of choice of selecting the manner, time and nature of use of the equipment, though within the frame work of the agreement of lease and hence, the right to use "space segment capacity" falls within the extended definition of "Sale", inasmuch as, there is delivery of possession in the said lease and there is a clear identification of the "space segment capacity" been delivered to the customer and the customer is given the right to use it in any manner as he deems fit. Of course, subject to terms of the lease agreement during which period, the appellant herein or the Department of Space has no right to use the "Space Segment Capacity" either for its own or to transfer the same to any other customers. Therefore, the transaction involved in this case is a "deemed sale" coming within the definition of "Sale" under Section 2(29) (d) of the K.V.A.T. Act. Section 6 of the K.V.A.T. Act particularly, sub-Section (4) cannot come in the way of holding that the agreement entered into between the appellant and the Department of Space in the present case is outside the scope of provisions of Section 6 of the Act. So long as the sale is not in the course of inter-State trade or export or import, irrespective of the place where the transaction has taken place, Section 6 brings such transaction under the purview of KVAT Act by way of fiction. The Respondent was therefore, fully justified in issuing the impugned proposition notices to the appellant who is liable to pay the tax on the ’deemed sale’ in terms of KAVT, Act.