ITC AVAILABLE ON LIFT INSTALLED IN COMMERCIAL BUILDING GIVEN FOR RENT, Goods and Services Tax - GST

[S.C. WADHWA]

Dear Expert,

We have purchased one lift leving gst and installed in building given on rent for commercial purpose. My query is whether GST paid on Lift in Dec.23 will be available till 30th Sept.24 as we have not show this in any gst return till now. Please give your expert opinion.

REGARDS,

WADHWA

Posts / Replies

[KALLESHAMURTHY MURTHY]

Respected Kasturi Sethi ji,

It is your grace, Sir. Thanks so much.

The ultimate result is indeed left to the taxpayer to prove the burden of availment of ITC as per section 155. 

[KASTURI SETHI]

Dear Sh. Kalleshamurthy Murthy Ji,

Yes. Your observation is correct. The judgement is not a green signal. The person who intends to take ITC is in the 'whirlpool' of terms / conjunctions /words, 'plant' 'machinery', 'building', 'or' 'and ''in the course of business', 'furtherance of business' etc.

 

[Sadanand Bulbule]

Dear all

The Safari Retreat judgement of SC is a candle on the wall. It is not a “ retreat “ to the intending taxpayers. They have to undertake tough “tax safari” in the jungle of complicated litigation. 

[Amit Agrawal]

Apex Court has made it clear that The expression “plant or machinery” used in Section 17(5)(d) cannot be given the same meaning as the expression “plant and machinery” defined by the explanation to Section 17. 

There is difference between treating 'Entire Building including Lift Installed within it' as 'Plant' and 'Only Lift Installed in Building' as 'Plant'. And subject matter under discussion here is latter (i.e. 'Only Lift Installed in Building' & not entire building).

While apex court has remanded back the matter to determine the former (i.e. 'Entire Building including Lift Installed within it'), various reasoning adopted by it to arrive such ruling along-with various cases-laws relied by it makes it clear (at-least to my mind) that 'Only Lift Installed in Commercial Building Given on Rent' is a 'Plant' based on 'functionality' test. This has been explained by me in my post at Sr. No. 77 & 78 above (read with my earlier posts). 

I also believe that Apex Court has made it simpler to take ITC against goods / services used in construction of 'Shopping Mall / Warehouse / Commercial Buildings / Factory to be given on lease / rental / license'. This can be more complicated for 'Income Tax Purpose' (as 'depreciation' related provisions are different with different objectives). But, for GST purpose, this will be relatively simpler. 

All such tax-payer needs is to involve expert consultant to guide. It would be much better to get such an expert during building construction stage itself as well as before entering into lease / rental / license agreements. This in-turn will help tax-payer to prove eligibility of ITC against goods / services used in construction of those buildings using 'functionality' test. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[KALLESHAMURTHY MURTHY]

Dear Sirs,

Well said by Sri Sadanand Bulbule Sir, in simple words but intuitively. 

[Amit Agrawal]

In my last post above at Sr. No. 79, please read relevant line in the third para as follows: This has been explained by me in my post at Sr. No. 71 & 72 above (read with my earlier posts). 

[KALLESHAMURTHY MURTHY]

Sri Amit Agarwal Ji,

Sir,

I read again your expressions in posts 71, 72 and 79 which are close to the Judgement.

Thanks for your views.

[Amit Agrawal]

Dear Shri KALLESHAMURTHY MURTHY Ji,

Thank you for re-reading my posts and putting an unbiased effort with fresh eyes to understand my legal reasoning behind those views!

It is more heartening to know that you find my those views closer to Apex Court ruling!!

[Sadanand Bulbule]

Dear all

With huge respect to recent Hon'ble SC judgement in Safari Retreat - 2024 (10) TMI 286 - SUPREME COURT case, I am of the clear opinion that, it has created more uncertainty than one could imagine. My 4.5 decades experience says that, often " remedy is worse than disease". So one must be very cautious before applying the said judgement. It is likely that tax officers may twist the arms mercilessly if such ITC is taken for granted.

ITC is like a drug that creates in the user a need for larger and larger doses.

[Amit Agrawal]

Deal All,

In M/S SAFARI RETREATS PRIVATE LTD. & ORS (2024 (10) TMI 286 - SUPREME COURT), Supreme Court of India has literally given CRASH-COURSE  about how to interpret taxation statutes which is as under:

(I am sure some will still NOT agree with many points mentioned in below re-produced crash-course despite being well-settled legal position by none other Apex Court of India & they will continue giving vague / general statements, fear-mongering etc., though they will not give any legal reasoning to explain why they do not agree with Apex Court. They will keep interpreting taxation laws based on their own perceived self-serving legislative intendment / assumptions or presumption & so on): 

"RULES REGARDING THE INTERPRETATION OF TAXING STATUTES

25. Regarding the interpretation of taxation statutes, the parties have relied on several decisions. The law laid down on this aspect is fairly well-settled. The principles governing the interpretation of the taxation statutes can be summarised as follows:

a. A taxing statute must be read as it is with no additions and no subtractions on the grounds of legislative intendment or otherwise;

b. If the language of a taxing provision is plain, the consequence of giving effect to it may lead to some absurd result is not a factor to be considered when interpreting the provisions. It is for the legislature to step in and remove the absurdity;

c. While dealing with a taxing provision, the principle of strict interpretation should be applied;

d. If two interpretations of a statutory provision are possible, the Court ordinarily would interpret the provision in favour of a taxpayer and against the revenue;

e. In interpreting a taxing statute, equitable considerations are entirely out of place;

f. A taxing provision cannot be interpreted on any presumption or assumption;

g. A taxing statute has to be interpreted in the light of what is clearly expressed. The Court cannot imply anything which is not expressed. Moreover, the Court cannot import provisions in the statute to supply any deficiency;

h. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature’s failure to express itself clearly;

i. If literal interpretation is manifestly unjust, which produces a result not intended by the legislature, only in such a case can the Court modify the language;

j. Equity and taxation are strangers. But if construction results in equity rather than injustice, such construction should be preferred;

k. It is not a function of the Court in the fiscal arena to compel the Parliament to go further and do more;

l. When a word used in a taxing statute is to be construed and has not been specifically defined, it should not be interpreted in accordance with its definition in another statute that does not deal with a cognate subject. It should be understood in its commercial sense. Unless defined in the statute itself, the words and expressions in a taxing statute have to be construed in the sense in which the persons dealing with them understand, that is, as per the trade understanding, commercial and technical practice and usage."

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

Dear Shri Sadanand Bulbule Sir,

This is with regards to your comments in post at Sr. No. 84.

Are you (being a senior retired Govt. Officer yourself) suggesting that any Department officer will twist the arms of tax-payer, that too mercilessly, just because the tax-payer takes credit ITC by following law as it stands while taking ITC & when such law is duly interpreted by Apex Court?  

ITC is benefit given to tax-payer by our Government/s by passing laws in Parliament / State assembly. How such benefit can be called as 'drug' given by any Government to its citizens (i.e. tax-payers)? 

[KALLESHAMURTHY MURTHY]

Sri Amit Agarwal Ji, 

Sir, 

There is a Judgement by the Hon'ble Apex Court regarding ITC. It is furnished below for the last lines of your postings in Sl. 86. 

Hon’ble Apex Court held In the case of M/S. TVS Motor Company Ltd. vs The State of Tamil Nadu And Others, 2018 (10) TMI 887 - SUPREME COURT, read as under:

“After discussing certain judgments of this Court and other High Courts, the Court has observed that the legal position was that the right to claim ITC is not a vested right or an indefeasible right.” From this perspective, the ITC is a compensatory measure granted by the legislature.  Can this be considered a general Rule?  Thanking you.

[Amit Agrawal]

Dear Shri KALLESHAMURTHY MURTHY Ji,

My post at Sr. No. 86 is purely limited to & in context of what was said in post at Sr. No. 84. Kindly do not read in that post anything beyond that.  

[KALLESHAMURTHY MURTHY]

Sri Amit Agarwal Ji, 

Sir, 

This is a reply to Post 88. 

I am not commenting on the post at Sl. No. 86. My doubt is whether the Legislative intent can be generalised in all the cases of ITC availment with the Judgement referred to by me in Sl. No. 87.  

With regards. 

[Amit Agrawal]

Dear Shri KALLESHAMURTHY MURTHY Ji,

Sir, in your post at Sr. No. 87, you have said as follows: 'It is furnished below for the last lines of your postings in Sl. 86.'

Anyway, coming to your query at last post, I do not know the content & context of said ruling. Hence, I can not give any definitive answers.

All I can say that it is well settled position of law that 'the right to claim ITC is not a vested right or an indefeasible right' and tax-payer can take ITC as allowed under law.

Kindly do not equate 'Law' with 'Legislative intent'. And for this, I again draw your attention to sub-Para (a) & (b) of Para 25 (along-with other sub-paras thereunder) of Supreme Court ruling which is re-produced in my post at Sr. 85 above. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

Dear Shri KALLESHAMURTHY MURTHY Ji,

This is in continuation to my last post & in context of answering your query. 

'Some observations made by Courts in particular context & in particular sets of legal provision & dispute before it' can not taken as 'position of law in each & every context & even under different sets of legal provision'.

How to read & apply court rulings and well settled legal principals therefor is explained by me in my earlier post at Sr. No. 26 above.

In that post at Sr. No. 26, I had explained why all these rulings of Apex court / AAR / AAAR (which are also quoted by many contributors in earlier posts) do NOT have any bearing what-so-ever on subject of issue under discussion here what-so-ever (i.e. availability of ITC in context of sub-clauses (c) & (d) of Section 17(5) read with explanations given thereunder). 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Sadanand Bulbule]

Dear Sri.Amit ji

Thank you so much for your response on my last post. 

Clarification to your post at Sl No. 86: ITC per se is the backbone of any ad valorem taxation system and it is a benefit by way of rebate. But it is conditional subject to restrictions imposed. That being the legal position, one can not avail ITC the way he desires. If he does so, it intoxicates him like drug and pushes him in the jaws of law. Therefore the restrictions are imposed. The word “drug” is therefore used by me in this, it being cancerous to economy of the country. It should never be allowed to spread. If one looks at the volume of “improper ITC” these days, it is not easy to imagine its volume. So one must read the word “drug" in broader terms and not in dictionary meaning.

As an ex-taxman, I have been coming across cases where improper ITC is being availed by taking a "chance” and obviously against the law. In tax administration, universally there is “carrot & stick” policy, which echoes there is no way other than twisting the arms of the wrongdoers. Carrot is always assured for 100% law compliants and judiciary is also in favour of it. "Stick"  means twisting the arms of wrong doers, of course not physically.

The decision of the public authorities is supposed to be made solely on the basis of law and in the public welfare. You may visit my expressions critically and find they are purely pro-law/pro taxpayers and not to suit preconceived notions. I am not afraid to highlight the authorities whenever they are found on the wrong side of law.  And I have been doing it on TMI regularly, sometimes in unpleasant words.

So my advice to taxpayers is their decision to avail ITC should be prudent, efficient and economical. Such decisions cost them nothing. This is the ultimate mantra of Hon’ble SC judgement in Safari Retreat case to go by facts alone. Through this discussion, I am placing the expectations and expressions of all the stakeholders to ensure long term equity. There is nothing to please or displease any one. That’s all.

I seek your comments.

[KALLESHAMURTHY MURTHY]

Sri Amit Agarwal Ji, 

Sir, 

This is what I want clarification. AAR and AAAR and in some Court Judgements are confined to particular cases and circumstances. 

Thanks a lot.

[Amit Agrawal]

Dear Shri Sadanand Bulbule Sir,

With respect, I would differ with you on lot many things here and my views are summarized as under:

No officer can twist the arms of tax-payer, that too mercilessly (even in non-physical way). Officer needs to always act within four concerns of law. And tax-payer has right to defend himself judicially in each & every case. 

ITC cannot be equated with Drugs' in any sense. What is allowed under law can be taken by tax-payer, irrespective of what any officer might thinks about intention / equity etc. This is called as 'tax-planning' and not taking drugs.

Of-course, if any ITC is wrongly taken, action as permitted under law can be & must be taken by departmental officer. 

W.r.t. subject matter under discussion & associated issues including implications of M/S SAFARI RETREATS PRIVATE LTD. & ORS (2024 (10) TMI 286 - SUPREME COURT), ITC in given situations can be legally defended in my view which are explained thoroughly in my earlier posts. 

And in my post at Sr. No. 78 above, I also explained need to have 'expert consultant' since beginning if any tax-payer wants to take ITC in those situations. 

And till this moment, no-one else have not given me any legal reasoning or argument to change them in any way. And I cannot argue on generic comments of 'facts' (or some other open-ended comments) when I know how to pass 'functionality' test' explained by Apex Court in the various situation discussed earlier. 

So, I do not find any need what-so-ever to fear about Dept's officer's potential legal actions (say, proceedings u/s 73 or 74) while taking such ITC what-so-ever. I would imagine that any expert consultant / lawyer will defend his client taking such ITC through judicial means (why I feel so, because I am myself confident defending such clients).

Now, after this Apex Court, I become much more certain in successfully defending my client taking such ITC under current laws specially after understanding what Apex Court ruled in above case and knowing fully well how to pass 'functionality' test' & prove 'Shopping Mall / Warehouse / Commercial Buildings / Factory to be given on lease / rental / license' as 'Plants'.

With warm regards.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

Please read relevant lines from my above post as follows: And till this moment, no-one has given me any legal reasoning or argument to change them in any way. And I cannot argue on generic comments of 'facts' (or some other open-ended comments) when I know how to pass 'functionality' test' explained by Apex Court in the various situation discussed here. 

[Sadanand Bulbule]

Dear Sri. Amit ji

I have lot to post on abuse of ITC even by so called elite class of people. TMI being public forum, I restrain myself to make further statements about it. 
By the way I respect the right of freedom of expression. Unless there are dissent opinions, there is no salt & pepper in discussion. Keep posting your  perceptions.  Let the visitors gain more knowledge from all windows. 

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, This is with reference to your post at serial no.96 dated 7.10.24.

A perusal of your replies posted in this forum till date proves that you are synonymous with congenial atmosphere, discipline, sportsman spirit, brotherhood, friendly attitude, egolessness, altruism, patriotism. Your replies stand for achieving fair justice for the Trade & industry and at the same time these are meant for safeguarding revenue in the interest of nation also.

Nobody can deny this. Your replies speak volumes of the above.

[Amit Agrawal]

Dear Shri Sadanand Bulbule Sir,

W.r.t. your response in post at Sr. No. 96 read with 92 & 84, my views are as under:

A. You could not point any abuse of ITC what-so-ever by the tax-payer in subject matter/s under discussion here. 

B. 'Tax Terrorism' is something India is infamous for. And despite Apex court ruling favoring tax-payer, using the the words like ' twisting the arms of tax-payer', 'ITC is like drug' (that too, openly on a public forum) reminds me that 'Tax Terrorism' still exist in India.

B1. But, I do know how deal with such threats professionally using judicial means and same will not scare me helping clients to take all benefits allowed under law. I believe every other expert worth his salt in this field feels the same way. 

C. Right of freedom of expression is granted to everyone by our Constitution. And I just exercised that right while positing this. 

With warm regards.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Amit Agrawal]

Please read Para B from my last post as follows: 

B. 'Tax Terrorism' is something India is infamous for. And despite Apex court ruling favoring tax-payer, using the the words like 'twisting the arms of tax-payer mercilessly', 'ITC is like drug' by a senior retired government official (that too, openly on a public forum) reminds me that 'Tax Terrorism' still exist in India.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, Please refer to your post at serial no.84 dated 07.10.24.

From the above post, I infer that you have sincerely and truly cautioned all the stake holders to be more careful while availing ITC on the basis of the judgement of Hon'ble Supreme Court in the case of Safari Retreat reported as 2024 (10) TMI 286 - SUPREME COURT. There is nothing wrong in advising the tax payers to be pro-active so that none should be a victim of avoidable litigation. We cannot forget that the ultimate purpose of every querist here is to avoid litigation. Nobody likes litigation. We only lay the foundation for the querist and final decision is to be taken by the querist himself/herself. (Already mentioned in my earlier replies.)

The idiom, 'twisting the arms' used signifies that none should be a victim of any bitter experience with the department. Thus it is also sincere advice to all the visitors by you.

Sir, I could not understand the usage of the word, 'drug'. here. Naturally, here 'drug' does not mean the 'use of substance'. I know you have used it as a metaphor. How metaphor is applicable here and with what message ?

Pl. throw light for enrichment of my knowledge.

Endless thanks from my whole heart in advance.

K.L.SETHI