• Notification Date: 23-02-2022
• Notification No: N/A

AAR Strikes-off ITC on Expenses for Construction of Commercial Complex

According to the new ruling of the Uttar Pradesh Authority of Advance Ruling (AAR), there is no Input Tax Credit (ITC) available on the expenses bared for the construction of a commercial complex. ITC benefits would not be available for renovation, fabrication, or making interior decorations or furnishing of the building. The landlord would receive no ITC benefits for developing their building for the purpose of letting it out for rent to tenants.

The applicant has filed an application to the Authority of Advance Ruling seeking his eligibility to avail of the Input Tax Credits (ITC) regarding the expenditure made on ‘Civil and Interior Works’ in his building on several floors. He added that he has borne the expenses for the purpose of renovation in his building for letting it out to tenants. He said that he has made the expenditure for extending his business. He has sought his eligibility on availing ITC for the expenses spent for the construction of a commercial complex. The building located at plot no. 18 BLOCK C, SECTOR-153, NOIDA, Gautam Buddha Nagar, Uttar Pradesh, 201301, belongs to the applicant that he wants to rent out to tenants.

The final judgment has been passed by the High Court of Orissa in the ease of M/s. Safari Retreats Pvt. Ltd. the applicant has trusted the decision of the Orissa High Court and another V/s Chief Commissioner of Central Goods and Service Tax, Bhubaneswar and others in WP (C) No. 20463 of 2018. In the mentioned case, the party constructed malls that were further leased on lease. In this case, the Court had ruled that the party is eligible to avail of the ITC credits. The Honorable Court held Section 17(5) (d) not to be ultra vires. The department has filed an application, {SLP(C) No. 26696/2019}. It has applied against the judgment passed by the Orissa High Court to the Honorable Supreme Court. The case is still pending to reach its decision. In the case of Union of India versus West Coast Paper Mills Ltd. in [2004 (164) ELT375 (SC) ], the Honorable Supreme Court has passed the judgment that if once a special leave to appeal is granted and admitted, the correctness or otherwise of the judgment of the Tribunal is open. The Court has the right to question both the facts and law in such an appeal. The correctness and fairness of the judgment in such a case are always jeopardized.

According to the Coram of Vivek Arya and Abhishek Chauhan, clause (c) and (d) of Section 17(5) does not entitle an individual to avail of the ITC benefits on the expenses borne on the constructions of immovable property. Hence, the applicant is not eligible to avail of the ITC benefits.