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Abstract<\/span><\/strong><\/span><\/p>\n India\u2019s commitment to achieving net-zero carbon emission status by 2070 is expected to give a boost to the renewable energy sector in India. Renewable energy projects are typically established for a long tenure and entail significant costs. During such long tenure, on occasions, due to various internal and external reasons, restructuring of the ownership structure of such projects is required. In such high-value projects, from the efficacy perspective of restructuring, stamp duty and registration fees involved in restructuring become pertinent. In this context, one debate that always arises is whether, in a transaction of transfer of solar\/wind power projects, the solar \/ wind power projects infrastructure is chargeable to stamp duty as \u2018movable property\u2019 or \u2018immovable property\u2019. The answer to this question substantially impacts the transaction cost as in most of the Indian states, the stamp duty leviable on the transfer of \u2018movable property\u2019 is significantly lower than \u2018immovable property\u2019.<\/span><\/p>\n <\/strong><\/span><\/p>\n Introduction<\/strong><\/span>\u00a0<\/p>\n Climate change is one of the most urgent and complex challenges of the current time. No discussion on climate change is complete without clean energy solutions that would help to cope with the side effects of the rising temperature, lower consumer energy bills, create jobs, and build the economy.<\/span><\/p>\n India has committed to the reduction of carbon emissions by a billion tonnes by 2030 as a part of its COP26 Commitments, and by 2070, India is aiming to achieve a net-zero carbon emission for a sustainable future. To implement these targets, the government is aggressively campaigning and promoting the establishment of renewable energy sources such as solar and wind power projects. More and more MNCs and domestic establishments are investing in these projects on account of ESG audit requirements too.<\/span><\/p>\n Ordinarily, setting up any renewable project, including solar and wind power projects for business, entails a significant upfront cost and benefits are reaped over a long tenure. During such long tenure, on account of various internal and external reasons, businesses are required to restructure the ownership structure of such projects. In such high-value restructuring transactions, examining the impact of stamp duty and registration fees becomes significant from a feasibility perspective.<\/span><\/p>\n In this context, one question that always attracts debate is whether in a transaction of transfer of solar\/wind power projects, solar\/wind power projects infrastructure is chargeable to stamp duty as \u2018movable property\u2019 or \u2018immovable property\u2019. Notably, in India, stamp duty is a state matter and is governed by the respective state legislations. However, in most of the Indian states, the stamp duty leviable on the transfer of \u2018movable property\u2019 is significantly lower than \u2018immovable property\u2019. Thus, classifying solar\/wind power projects infrastructure as \u2018movable property\u2019 or \u2018immovable property\u2019 would substantially impact the transaction cost. For example, in the State of Rajasthan, which is home to several solar and wind power projects, stamp duty on the transfer of \u2018immovable property\u2019 is 6% (+30% cess), whereas stamp duty on the transfer of \u2018movable property\u2019 is 0.5% which has been even further reduced by the State government.<\/span><\/p>\n <\/strong><\/span><\/p>\n The Conundrum of Movable or Immovable Property<\/strong>\u00a0<\/em><\/span><\/p>\n Immovable property in India can be categorized as per the definitions available in the Transfer of Property Act, 1882, General Clauses Act, 1897 and the Indian Registration Act, 1908. Stamp legislations define \u2018immovable property\u2019 similar to the definition given under the Transfer of Property Act, 1882. The term \u2018movable property\u2019 means property of every other description, except immovable property. Definition of \u2018immovable property\u2019 includes (a) land; (b) benefits to arrive out of land; and (c) things attached to the Earth or permanently fastened to anything attached to the Earth. In the context of solar\/wind power plants, the question arises whether such plants fall under the description of the expression \u2018things attached to the earth or permanently fastened to anything attached to the earth\u2019. The expression \u2018attached to the earth\u2019 is defined under Section 3 of the Transfer of Property Act, 1882 to mean (a) rooted in the Earth, as in the case of trees and shrubs; imbedded in the Earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached.<\/span><\/p>\n However, the mere fact that a system is being attached to the Earth and hence should be classified as immovable property is a fallacy. The essence of the objective behind the attachment, along with the degree and indentment of attachment, is pertinent. In the event of any system or property being attached with the purpose of harvesting the permanent benefit from the land to which it is attached, then in such cases, it would be treated as immovable property. Also, when any system is attached with such an intention that it cannot be removed again without suffering structural damage, then it is classified as immovable property. However, if the attachment is temporary, it cannot be a reason for classification as immovable property.<\/span><\/p>\n The Hon\u2019ble Supreme Court, in the case of<\/span>T.T.G. Industries Ltd. v. Collector of Central Excise<\/strong><\/a>, while considering the question of whether the hydraulic mud guns and tap hole drilling machines required for blast furnaces can be regarded as immovable property, held that the mud guns and the drilling machines erected at the site by the appellant on a specially made concrete platform at a level of 25 feet above the ground on a base plate secured to the concrete platform, will be considered as immovable properties since the whole structure cannot be shifted without dismantling it and then re-erecting it at another site.<\/span><\/span><\/p>\n In the case of<\/span>Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works and Ors<\/strong><\/a>.<\/strong>, the Hon\u2019ble Division Bench of the Supreme Court considered whether the asphalt drum mix plant would be considered movable property or immovable property. The Hon\u2019ble Supreme Court held that the plant in question is not an immovable property for the following reasons: (a) the purpose of fixing the plant to the foundation is only for providing stability to the plant; (b) setting up of the plant itself is not intended to be permanent at a given place as it can be moved and is indeed moved after the road construction or repair project for which it is set-up is complete, and (c) the plant cannot be said to be \u2018attached to earth\u2019 within the meaning of that expression.<\/span><\/span><\/p>\n Hon\u2019ble Madras High court, in the case of<\/span>Board of Revenue, Chepauk, Madras v. Venkataswami, (FB<\/strong>)<\/strong><\/a>, held that the lease of properties relating to a touring cinema (tent, machines etc.),\u00a0which were collapsible and capable of being removed; however was permanently fastened to the Earth when in use, could not be charged to the to stamp duty under Section 30(a)(1) of Schedule 1A of that Act since the nature of these products was not immovable. It was further observed that the poles of the tent and the machines were annexed to the ground only temporarily and not permanently, thereby not chargeable to Stamp Duty as immovable property.<\/span><\/span><\/p>\n In the matter of<\/span>Shri <\/strong>Velayuthaswamy Spinning Mills (P) Ltd. v. The Inspector General of Registration and Ors<\/strong><\/a>., the Hon\u2019ble Madras High Court considered the question of whether \u2018windmills\u2019 are to be treated as \u2018movable property\u2019 and, therefore, could be sold by delivery and the sale deed executed was in respect of the land-only upon which the windmills were situated. The Hon\u2019ble Madras High Court held that since the \u2018windmills\u2019 are only installed on the cemented platform on the land for running of \u2018windmills\u2019 and not for the benefit of the land, they are movable property, and therefore, no stamp duty was payable on the value of \u2018windmills\u2019. However, the judgement of the Madras High Court was challenged in appeal before the Hon\u2019ble full bench of Madras High Court. The Hon\u2019ble full bench of Madras High Court in<\/span>Inspector General<\/strong> of Registration Santhome and Ors. v. Sri Velayuthaswamy Spinning Mills (P) Ltd<\/strong><\/a>.<\/strong>, held that the windmill has no existence without immovable property and should be attached to the Earth, and the attachment should be of a permanent nature. Hence, the said sale deed was for the sale of immovable property which included the land as well as a windmill.<\/span><\/span><\/p>\n