New Delhi, May 7: In a setback to the government, a Constitution Bench has ruled that a contract for the installation of elevators or lifts in apartment blocks or institutions cannot be treated as “sale” for the purpose of taxation, but should be considered as a contract.
From now, sales tax authorities across the country cannot tax installation of lifts at apartments, institutions or other public/private places as a “sale” as the installation by the lift manufacturing company has to be considered as a “contract”, which does not entail a higher taxation.
“It is not a plant (lift) which is erected at the site... A lift basically comprises components such as a lift car, motors, ropes and rails, which have their own identity even prior to installation. Without installation, the lift cannot be functional because it is a permanent fixture in the building.
“Therefore, the installation of a lift in a building cannot be regarded as a transfer of a chattel or goods but a composite contract,” Justice Dipak Misra said.
A four-judge bench of Chief Justice R.M. Lodha, A.K. Patnaik, S.J. Mukhopadhyaya and Dipak Misra passed the ruling, while allowing a batch of appeals filed by lift manufacturers challenging the tax authorities’ move to tax the installation of lifts by treating them as “sale of goods”.