No KVAT Levy On Advertisement Hoardings Where Right To Use Has Not Been Transferred: Kerala High Court

No KVAT Levy On Advertisement Hoardings Where Right To Use Has Not Been Transferred: Kerala High Court

Introduction

The Kerala High Court has held that transactions involving the display of advertisements on hoardings are not taxable under the Kerala Value Added Tax Act (KVAT) where the right to use the hoardings has not been transferred.

Factual Background

Justice Ziyad Rahman A.A. concurred with the assessee’s argument that the charges collected for advertising included costs for erection, printing, and maintenance, and thus, the responsibility to maintain the hoarding remained with the assessee. Separate charges were also collected for these services.

Case Background

In the present case, the assessee/petitioner was engaged in erecting hoardings on properties and buildings owned by third parties based on agreements. These hoardings were fixed either on land or rooftops and used to display client advertisements for a specific period based on mutually agreed terms and conditions.

The transactions were assessed under Section 25 of the KVAT Act by the Assistant Commissioner, and an assessment order was passed, deeming them taxable.

Contentions of the Assessee

The assessee argued that, due to the specific nature of the transactions, no taxable event had occurred under the KVAT Act. It was contended that there was no transfer of the right to use the hoardings, as the assessee retained complete control and possession over them. The assessee merely displayed content provided by the clients.

Court’s Observations

The Court observed that the erection and maintenance of the hoardings were the responsibility of the assessee. As per the contractual terms, the assessee erected the hoardings at its own expense, and the customers only provided the content to be displayed.

Ruling

The bench concluded that no transfer of the right to use the hoardings had occurred, and thus, no taxable event under the KVAT Act could be established. The assessment orders were held to be unsustainable in law.

Outcome

The Court allowed the petition and quashed the assessment orders.

In this case the petitioner was represented by Ms. Meera V. Menon, Mr. R. Sreejith, and Ms. K. Krishna, Advocates. Meanwhile the respondent was represented by Mr. Arun Ajay Sankar, Advocate.