TELECOM COMPANIES WILL PAY SERVICE TAX ON SALE OF SIM CARDS: SUPREME COURT

The Supreme Court has held that telecom operators will have to pay service tax on the sale of SIM cards as these transactions entail their processing and activation for providing cellphone services.
Upholding the judgement of the Kerala high court, a bench of justices Mukundakam Sharma and A R Dave said the sale of SIM cards was part of the activation and processing fee, on which the telecom firms pay service tax.

ANTI TAX AVOIDANCE MEASURES

Westminister’s Law

“Avoidance of tax is not evasion and carries no ignominy” has been held in famous English decision IRC Vs. Duke of Westminister and famously known as Westminister’s law. It further said “Every citizen has legal right to dispose of his capital and income so as to attract upon himself the least amount of tax……. Given a document of transaction is genuine the court can not go beyond it to some underlying substance”

Analysis of Mcdowell’s Case

However the Mcdowell’s case upheld by Supreme Cout in 1985 did not find favour with tax planning resulting tax avoidance.Justice Ranganatha Mishra however in this case stated tax planning is legitimate provided it is with in framework of law, colourable devices can not be part of tax planning and it is wrong to promote avoidance of tax by resorting to dubious methods” In this judgement certain facts were misstaed by Justice Chinnappa Reddy like it was said that westminister principle is not applicable now even in England.

However just three years later English law upheld the validity of westminister principle in 1988 in “Craven v. White” and then again in 2001 in Mac Niven v. West Morland Investments Ltd.