Atria Convergence Technologies Ltd. Vs Deputy Commissioner of Commercial Tax (Karnataka High Court)
Karnataka High Court held that transfer of Set Top Boxes to subscribers amounts to sale within the definition of section 2(29)(d) of the Karnataka Value Added Tax Act, 2003 and hence sales tax leviable on the same.
Facts- All these Petitions by the Assessees call in question orders made by the Karnataka Appellate Tribunal at Bengaluru whereby their Appeals filed under Section 62(6) of the Karnataka Value Added Tax Act, 2003 have been negatived essentially holding that the Assessees have transferred to the subscribers the right to use Set Top Boxes for consideration and therefore, the same amounts to sale within the definition of Section 2(29)(d) of the Act and as a consequence, levy of sales tax is unassailable.
Conclusion- Tripura High Court in BHARATI TELEMEDIA has held that one of the most important elements of determining whether the right to use goods has been transferred or not is by ascertaining who has effective control over the goods. As far as STBs are concerned they are in total control of the customer. Under his effective control the STBs are installed in the house of the customer. He can use the STB when he wants to. He can use the STB to view whichever channel he wants to view. He may or may not use the STB. The company does not even have the power of entering the premises of the customer. Most importantly as per the terms of the agreement, the companies are responsible for the functioning of the STBs only for a period of 6(six) months. The warranty is valid only for six months and thereafter there is no warranty. Therefore, if STB of a customer is spoiled after six months he will have to pay for repair or replacement of the same. We are of the considered view that this amounts to transfer of the right to use goods.
