9911796707
TMI Blog2022 (8) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 27.04.2021 that is intended to be used by them as an extended corporate office for the accommodation of Record/Documentation Room till 31.08.2045 and in respect of the Right of use of the Asset the applicant has stated that ROU Asset that has to be capitalized, amounts to Rs.5,39,21,553/- including the initial direct cost, if any incurred by them - it is seen that input tax credit can be claimed on the upfront lease premium which is paid for the allotted covered space used as an extended corporate office as it is in the course of business. The upfront premium made is the lease rentals as per the allotment order/letter of Chennai Port Trusts and it is nothing but lease rentals paid for the services of Renting of Immovable property for business purpose - the upfront premium paid is not related to any construction activity of such covered space but against the rental value for the period of rent calculated for the period of lease and collected upfront. Thus, provisions of Section 17(5) (d) is not applicable to the instant case. The provisions of Section 17(5)(d) is not attracted to the activity of renting Immovable Property Services . Therefore, the credit of tax paid on the upfr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Jawahar building (Ground floor) till 31.08.2045 for Karnarajar Port Limited's Extension of corporate office, subject to the following conditions: i) The lease rent is fixed as Rs. 740/- per sq.m per month or part thereof and inform the KPL to pay the Provisional Upfront amount of Rs.6,84,28,627/- (Rupees Six Crores eighty-four lakhs twenty-eight thousand six hundred and twenty-seven only) (including SD & GST). The detailed breakup of lease rent on upfront mode is furnished below: i) 267 sq.m - Total Lease rent on Upfront mode calculated Upto 31.08.2045 Rs. 5,39,21,553.00 ii) GST @ 18% (for the upfront premium)(CGST 9% and SGST 9%) Rs. 97,05,880.00 iii) Security Deposit - 2 years annual lease rent (refundable) Rs. 48,01,194.00 Total Rs. 6,84,28,627.00 The above payment to Chennai Port Trust was made on 12.08.2021 against the invoice number R/07/202104/10 Dt.30.07.2021. 2.2 On interpretation of law, the applicant has stated that the contract is a simple lease contract of building and does not construe to any construction activity and hence the credit should not be blocked and should be available to them. 3.1 The applicant was addressed to seek their willing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Subsequently, the carrying amount of lease liability shall be increased by the interest component at 5.96% and reduced by the lease payments made every year. The said interest component shall be recognized in the Profit and Loss Statement of the company over the lease term. * Security Deposit Security Deposit of Rs.48,01,194/- (Two years annual lease rent) being refundable in nature shall be treated as a non-current Asset as per Indian Accounting Standard 1 "Presentation of Financial Statements". The applicant has furnished the Amortisation Schedule of Lease liability for the lease term period from 01.08.2021 to 31.08.2045 Further, in respect of the status of pending scrutiny proceedings the applicant has submitted that several discrepancies were observed by the Department during Scrutiny of assessment of the returns filed by them for the FY 2018-19, the discrepancies were notified to them vide GST ASMT-10 and the applicant has filed a written submission on 05.01.2022 vide GST ASMT-11 clarifying the differences observed by the GST Department, however, no order has been passed with regard to the scrutiny proceedings till date. The applicant has submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is construed that there is no proceedings pending on the questions raised by the applicant in the Advance Ruling Application. 6. We have carefully examined the statement of facts, supporting documents filed by the Applicant along with application, submissions made at the time of Virtual hearing and thereafter the comments of the State Jurisdictional Authority. It is seen that the Chennai Port Trust has allotted the covered space to an extent of 267 sq.m at Jawahar building (Ground floor) till 31.08.2045 for Kamarajar Port Limited's Extension of corporate office on lease and the lease rent is fixed as Rs.740/- per sq.m per month or part thereof and has informed the KPL to pay the Provisional Upfront amount of Rs. 6,84,28,627/-(Rupees Six Crores eighty-four lakhs twenty-eight thousand six hundred and twenty-seven only) (including Security Deposit & GST). The applicant is before us seeking ruling on the following question: Whether input tax credit can be claimed on upfront lease premium paid? If the answer is affirmative, in what manner the input tax credit can be availed? 6.1 During the virtual hearing it was observed that AC(LTU), the State Jurisdictional officer has repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked. 8.1 Before proceeding further, the statutory provisions related to Input Tax Credit are examined as under: Section 16. Eligibility and conditions for taking input tax credit.- (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation-For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CGST Act, 2017. The relevant provisions of the Section is extracted below: 17 (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation.-For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; From the above provisions it is seen that in respect of immovable property the Credit of tax paid on goods or services received on own account, for construction of immovable property is available only when such immovable property is a 'Plant and Machinery'. In the instant case the contract is a lease contract of the built-building for use as an extended corporate office for accommodation of record & as documentation room and it is f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
