The Kerala High Court quashed the levy of the KVAT Act on the display of ‘advertisement on hoardings’ which were erected on the properties and buildings as per the terms of the agreement, observing that the ‘right to use those hoardings’ has not been transferred in this arrangement. The Court found that the expense of erection as well as the responsibility to maintain the hoarding was with the petitioner only, for which he has collected separate charges as well, and the content was to be supplied by the customer.
A Single Judge Bench of Justice Ziyad Rahman A A found from the contents of the Emails and the work orders that the obligations of the petitioner include erection and maintenance of the hoardings, and charges collected by the petitioner for advertising included the charges for erection, printing, and maintenance. The Bench also added that written contracts in a particular format on stamp papers executed between the parties were not necessary if there are other reliable documents to indicate the terms and conditions based on which the consensus has been arrived at between the parties for carrying out a particular work.
In this case, the transactions of the petitioner, engaged in erecting hoardings on properties and buildings owned by third parties, based on agreements between the parties, were subjected to assessment u/s 25 of the KVAT Act. The petitioner submitted that there was no transfer of right to use the hoardings while displaying such advertisements in favour of the third parties, as the petitioner is only displaying the content provided by his customers. Although upon verification of the agreements entered into between the petitioner with the advertiser, the AO accepted the contentions of the petitioner, in respect of the cases where the petitioner could produce a copy of a contract executed on stamp papers, but rejected the same in respect of the transactions where the petitioner could not produce a formal contract.
When the matter reached the High Court, it was found that the AO had merely assumed the occurrence of the transfer of right to use the hoardings, even without any documents to substantiate the same. Since no transaction of that nature took place, the Court quashed the assessment orders to an extent, holding that no taxable event under the KVAT Act had occurred in respect of the transactions referred to in the assessment order.
Appearances:
Advocates Meera V Menon, R Sreejith, and K Krishna, for the Petitioner
Advocate Arun Ajay Shankar, for the Respondent