The AAAR said that transaction between the corporation and the contractor is an activity undertaken by the local authority, engaged as public authority. The requirements explicitly stated in section 7(2)(b) are met. This transaction/activity under SI. No. 1 to 9 and 13 listed by the AAR as neither a supply of goods nor a supply of service is available to contractors also provided the same are rendered as hack to back services to the appellant.

The AAAR further said in respect to the question pertaining to whether the charges obtained for the service of road cutting for the purpose of laying cables by telephone companies alongside roads on contract basis are a composite supply, the question is answered in affirmative. Though two charges are collected by the appellant for road cutting and annual rent for cables running across the road, it can be seen that unless road is cut, cables cannot be laid and mere road cutting without laying of cables is useless.

Therefore, both the services have to run in tandem with respect to the telephone companies and the methodology of collection of money is immaterial to the fact of the activities of road cutting and laying of cables, which is indeed a composite supply, it must also be noted that this is a factual question and is restricted to the particular activity of road cutting followed by laying of cables by telephone companies and therefore, the same is not to be extended to all the types of road cutting activities.