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TMI Blog2021 (9) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... h are used or intended to be used in the course or furtherance of his business. Thus, Section 16(1) of the CGST Act bars CSR activities from input/input service. In pursuance to Companies CSR Rules framed by the Central Government and in pursuance to wordings of Section 16(1) CGST Act, we disagree with both the applicant s and revenue s stand for admissibility of ITC on CSR activities. In fact, it is noted that the applicant submitted that CSR activities being undertaken by the applicant can become eligible for ITC if only it is established that such activities are in the course and furtherance of business. As per law, Section 16(1) CGST Act bars CSR activities from ITC. There are thus no merit to discuss the item wise CSR activities of the applicant. CSR activities, as per Companies (CSR Policy) Rules, 2014 are those activities excluded from normal course of business of the applicant and therefore not eligible for ITC, as per Section 16(1) of the CGST Act. - GUJ/GAAR/R/44/2021 - - - Dated:- 11-8-2021 - SANJAY SAXENA AND ARUN RICHARD MEMBER Present for the applicant : Shri Gorki Tiwari, Sr. Manager and Shri Ramakrishna Hari, GM, Finance BRIEF FACTS: Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (iv) The above definition envisages that even an activity or a transaction which is done in connection with the main business operations of the Company shall be covered under the definition of business under the GST law. In the present case, the expenses incurred on the CSR activities by the Applicant are a mandatory requirement as per the Companies Act and any disclosure regarding non-compliance of the said requirement will lead to tarnishing the image of the company, lower brand value, lower market standing and lower credit rating. (v) In view of the above, it is submitted that use of the expression in connection with or incidental in the aforesaid definition of business purports to expand the scope of the definition so as to include such activities which though might not have a direct bearing on the profits of the Company, but, if not done, might result in the business suffering from coercive process and unlawful expropriation which will ultimately hamper it s profit making ability. The said principle was upheld by the Calcut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii) In view of the above submissions on merits and judicial pronouncements, it is submitted that CSR expenses, being mandatory in nature, are incurred in the course and furtherance of business by the applicant and therefore the ITC pertaining to the said expenses must be allowed as eligible ITC under Section 16 of the CGST Act. 4. The applicant further submits that once it is established that incurring the CSR expenditure is in the course and furtherance of business, the ITC of the categories of inputs and input services being procured by the applicant to undertake CSR activities is eligible ITC and does not suffer from any infirmities as envisaged under Section 17(5) of the CGST Act which is summarized below: S.No. Category of inputs/input services Expense items (illustrative) Applicant s submission 1 Books and Stationery Providing Notebooks/ course materials for schools (a)The ITC pertaining to books and stationery items is nowhere blocked under the provisions of Section 17(5). However, the supply of said goods without an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST law. The definition of plant and machinery items has been given as explanation to section 17(5) of the CGST Act, i.e. any apparatus, equipment or machinery fixed to earth by foundation or structural support. Therefore, in the present case, the plant and machinery items such as oxygen generator plant/water filters that are fixed to earth with the help of foundational or structural support are outside the scope of section 17(5) and the ITC pertaining to its installation and procurement shall be eligible. 4 Medical equipment and accessories Masks Sanitizers, Oxygen concentrator (a) The ITC pertaining to medical equipment and other related accessories items is nowhere blocked under the provisions of Section 17(5). However, the supply of said goods without any consideration being received might appear to be as gifts and hence the ITC may not be eligible under section 17(5)(h). However, it is to be noted that UP AAR in the matter of Dwarikesh Sugar Industries limited by relying on SC judgement passed in the matter of Ku. Sonia Bhatia v. State of UP, held that a clear distinction needs to be drawn between g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The applicant has submitted that it is eligible to avail the ITC of all the above categories of inputs and input services items which are being procured for the purpose of undertaking CSR activities. 6. The applicant vide letter dated 29-7-2021 submitted that all the input items such as furniture, stationery, plant and machinery items, oxygen concentrators/oxygen plant which are being procured and donated as part of the CSR activity cannot be treated as gift and hence Input Tax Credit(ITC) on such items cannot be denied under the provisions of section 17(5)(h); that since the expression gift has not been defined anywhere in the GST law, reference is drawn from the Hon ble SC judgement in the matter of Ku.Sonia Bhatia vs. State of UP Ors. [1981 SCR (3) 239] wherein it was held that a gift is an act of generosity and is voluntary in nature. The relevant text has been reproduced as under: A gift has aptly been described as a gratuity and an act of generosity and stress has been laid on the fact that if there is any consideration then the transaction ceases to be a gift 6.1 The applicant submitted that CBIC in a press note has also sought to define gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct )? b. Also, if the answer to the above question is in the affirmative, whether the categories of the following inputs and input services being procured by the applicant for the purpose of undertaking CSR activities will constitute as eligible ITC in terms of section 17(5) of the CGST Act: S.No. Category of inputs/input services Expense items (illustrative) 1 Books and stationery Providing Notebooks/course materials for schools 2 All kinds of civil works, whether or not including plant and machinery items Construction of cement bench at public places, public urinals, auditoriums etc. at educational institutions. 3 All plant and machinery items Procurement and installation of oxygen generating plant at hospitals, water filter plants, solar water heaters. 4 Medical equipment and accessories Masks, Sanitizers, Oxygen concentrator. 5 Furniture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CSR, itself, excluded activities undertaken in pursuance of normal course of business of the company, reproduced as follows, the Rule 2(d) of said Rules, defines CSR as follows: 2(d) Corporate Social Responsibility (CSR) means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:- (i) activities undertaken in pursuance of normal course of business of the company: Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that (a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act; (b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board's Repor ..... 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