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TMI Blog2020 (1) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... ff by way of gift or free samples. Now the moot question before us is to decide whether the furniture / fittings such as tables, chairs etc. and electrical goods supplied by the applicant are to be treated as gift or not. The term Gift' has not been defined under the CGST Act, 2017, however in common parlance gift is provided to someone occasionally, without consideration and which is voluntary in nature - a clear distinction needs to be drawn between goods given as 'gift' and those provided / supplied as a part of CSR activities. While the former is voluntary and occasional, the later is obligatory and regular in nature. CSR expenses incurred by the applicant have been mandated under the Companies Act, 2013. It is the applicant's obligation to incur such expenses in order to be in compliant with the law. Since CSR expenses are not incurred voluntarily, accordingly, they do not qualify as 'gifts' and therefore its credit is not restricted under Section 17(5) of the CGST Act, 2017. Goods and services used for construction of school building which is not capitalized - restriction u/s (5) (c) / 17 (5) (d) of CGST Act, 2017 - HELD THAT:- Section 17 (5) (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation to CSR activities which have been obligated under a law are restricted under Section 17 (5) of CGST Act, 2017? If yes, a. Whether free supply of goods as a part of CSR activities is restricted under Section 17 (5) (h) of CGST Act, 2017? b. Whether goods and services used for construction of school building which is not capitalized in the books of accounts is restricted under Section 17 (5) (c) / 17 (5) (d) of CGST Act, 2017? 4). The applicant further submitted that : i. In the course of business includes all activities which are incidental / ancillary to the business which are incurred during the course of business. Any activity which needs to be incurred as a part of some process in a business is to be treated as in the course of business . A Company is compulsorily required to undertake CSR activities in order to run its business. As a result, they become an essential part of the business process as a whole and thus are treated to be incurred in the course of business ii. Considering the wide definition of the term 'business', there is no requirement to establish a direct one to one linkage in order to avail ITC. Even incidental / ancil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the UPGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the 'CGST Act' 2017. 8). We have gone through the submissions made by the applicant and have examined the explanation submitted by them. At the outset, we find that the issue raised in the application is squarely covered under Section 97(2)(d) of the CGST Act 2017 being a matter related to admissibility of input tax credit of tax paid or deemed to have been paid. We therefore, admit the application for consideration on merits. 9). We have gone through the submissions made by the applicant and have examined the explanation submitted by them. Section 16(1) of the CGST Act, 2017 defines the eligibility for taking input tax credit, which is as sunder:- 16 (1) - Every registered person shall, subject to such conditions and rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy . Further Sub Section (7) of the Section 135 of the Companies Act, 2013, specifies that If a company contravenes the provisions of sub-section (5) or sub-section (6), the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of such company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to jive lakh rupees, or with both . Accordingly we observe that any Company, who meets the criteria for CSR, is mandatorily required to incur in CSR activities to be in compliant with the Companies Act, 2013 and non-compliance of these provisions may lead to business disruptions. 11). Now coming to the question whether CSR activity is to be considered used or intended to be used in the course or furtheranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. and electrical goods to be used in the school under the CSR activity, free of cost. In this regard, we observe that Section 17 of the CGST Act, 2017 talks about apportionment of credit and blocked credits. Further, as per Section 17(5)(h) of the CGST Act, 2017, input tax credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. The aforesaid section restricted credit of the goods which were written off or disposed off by way of gift or free samples. Now the moot question before us is to decide whether the furniture / fittings such as tables, chairs etc. and electrical goods supplied by the applicant are to be treated as gift or not. The term Gift' has not been defined under the CGST Act, 2017, however in common parlance gift is provided to someone occasionally, without consideration and which is voluntary in nature. Further, the applicant has also relied upon the Judgment of Hon'ble Supreme Court of India, in the case of Ku. Sonia Bhatia v. State of UP, wherein Hon'ble Court has cited the definition of 'gift' from Corpus Juris Secundum, Volume 38 in the following words: A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, to the said immovable property; 15). In this regard we observe that the Authority for Advance Ruling-Rajasthan, in the case of M/s. Rambagh Palace Hotels Pvt Ltd , has observed that, In view of above facts, we find that, input tax credit in general is not available for construction, reconstruction, renovation, addition, alteration or repair of an immovable property even when such goods or services or both are used in course or furtherance of business. However, the limitation in such a scenario is extent of capitalization. Observing this the Authority, on the question whether GST paid on building material meant for repair of building and labour supply for carrying out repair of building shall be available for ITC, has ruled that ITC will not be available to the extent of capitalization of building material /GST on labour supply. From the above discussion we are of the opinion that the Section 17 (5) (c) (d) of the CGST Act, 2017 has specifically restricted the ITC on construction / work contract service to the extent of capitalisation. Accordingly, we observe that the ITC of goods and services used for construction of school building will not be available to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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