ITC Denial Under Section 17(5)(d) Crumbles in Landmark Ruling

CASE: CGST Appeal-I, Delhi vs. Bharti Airtel Ltd. & Ors. |
CITATION: 2026 Taxo.online 2494

1. BACKGROUND
The classification of telecommunication towers under the Central Goods and Services Tax (CGST) Act, 2017 has long been a contentious issue, particularly concerning their eligibility for Input Tax Credit (ITC). The dispute turns on whether telecom towers qualify as immovable property — thereby attracting the ITC denial under Section 17(5)(d) of the CGST Act — or as movable assets, which would entitle the assessee to claim ITC. This case marks the final judicial resolution of the matter, with the Supreme Court dismissing the Revenue’s review petition and thereby upholding the Delhi High Court’s ruling that telecom towers are movable assets and eligible for ITC.

2. FACTS OF THE CASE
Network Installation: Bharti Airtel Limited and other telecom operators (the assessee) installed telecommunication towers across India to support their network infrastructure.
Revenue’s Denial: The Revenue authorities denied ITC on these towers, contending they were immovable property under Section 17(5)(d) of the CGST Act, which restricts ITC on works contract services and goods or services used for construction of immovable property.
High Court Ruling: The Delhi High Court, in its earlier judgment, ruled in favour of the assessee, holding that telecom towers are movable assets and not immovable property. Consequently, the ITC denial under Section 17(5)(d) was set aside.
Supreme Court Challenge: Aggrieved by the High Court’s decision, the Revenue filed a Special Leave Petition (SLP) under Article 136 of the Constitution, followed by a review petition — both of which were dismissed by the Supreme Court.

3. ISSUES BEFORE THE COURT
1. Whether telecommunication towers qualify as immovable property under the CGST Act, thereby attracting the ITC restriction under Section 17(5)(d).
2. Whether the Revenue’s review petition against the High Court’s decision was maintainable, given the finality of the earlier order.

4. RELEVANT LEGAL PROVISIONS SECTION 17(5)(D) OF THE CGST ACT, 2017

“Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of — (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.”

Explanatory Note: This provision restricts ITC on goods or services used for construction of immovable property, except for plant and machinery.

The dispute centred on whether telecom towers fall under “immovable property” or “plant and machinery.”

5. ARGUMENTS & CONTENTIONS

PETITIONER (REVENUE)

• Telecom towers are immovable property as they are permanently affixed to land and cannot be relocated without dismantling.
• The ITC denial under Section 17(5)(d) applies since the towers are constructed on land and form part of the real
• The High Court erred in classifying telecom towers as movable assets, as their physical and functional integration with land renders them immovable.
• The review petition was maintainable as the High Court’s order suffered from an “error apparent on the face of the record,” warranting reconsideration.

RESPONDENT (BHARTI AIRTEL & ORS.)

• Telecom towers are movable assets as they are not permanently embedded in land and can be dismantled and relocated without destroying their utility.
• The ITC restriction under Section 17(5)(d) does not apply since the towers are “plant and machinery” used in the course of business (telecom services).
• The High Court’s decision was correct and well-reasoned, relying on established judicial precedents that distinguish between movable and immovable property based on functional mobility.
• The Revenue’s review petition was frivolous and devoid of merit, as no error apparent existed in the High Court’s order.

1.    SUPREME COURT RULING & HOLDINGS

The Supreme Court dismissed the Revenue’s review petition, upholding the Delhi High Court’s decision that telecom towers are movable assets and eligible for ITC. Key observations include:

Key Judicial Findings:

• No Error Apparent on Record: The Court held that the High Court’s order did not suffer from any error apparent warranting reconsideration. The classification as movable assets was legally sound and aligned with GST principles.
• Finality of Judicial Orders: Since the High Court’s order had attained finality and was not challenged in a timely manner, the review petition was dismissed. The Court declined to interfere under Article 136.
• Movable Asset Status Endorsed: The Supreme Court implicitly endorsed the view that telecom towers are not immovable property, thereby removing the Section 17(5)(d) ITC bar.
• Disposal of Applications: All pending applications related to the review petition were disposed of in line with the dismissal.

1.    KEY TAKEAWAYS & CONCLUSION

The Supreme Court’s dismissal of the Revenue’s review petition in Commissioner, CGST Appeal-I, Delhi vs. Bharti Airtel Limited marks a landmark victory for telecom operators, affirming that telecom towers are movable assets and eligible for ITC. This ruling settles the long-standing classification dispute, providing much-needed clarity on Section 17(5)(d) of the CGST Act. The decision also reinforces judicial finality, as the Court declined to interfere with the High Court’s well-reasoned order, underscoring the importance of adhering to established legal principles in GST disputes.

For businesses relying on telecom infrastructure, this judgment removes a significant tax hurdle, ensuring ITC eligibility and reducing litigation risks. The ruling also serves as a cautionary tale for Revenue authorities, emphasising that review petitions must be grounded in substantive legal errors, not mere disagreements with judicial outcomes.