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03 Sep 2024 
120 Replies 
30213 Views 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
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0 Sh.Sadanand Bulbule Ji,
Yes, Sir. Agreed but at the same time we have to keep the essence of original thoughts intact. It must not be eclipsed by any decision of any court or any person.
0 Dear Sethi Sirji
One should not repeat the same “ mantra” till cows come back.
0 Sh. Sadanand Bulbule Ji,
Sir, I agree. You are absolutely right.
0 Dear Sri Amit Agarwal Ji,
Sir,
In response to the Sl. No. 58, I am submitting the information available for me.
The orders under the Karnataka VAT Act were uploaded to the departmental website “e-filing system”. It does not bear TMI Citation. I tried to collect the information but the order copy was unavailable since it is password-protected and presently inoperative.
However, I will explain the précised facts briefly.
Ferns Icon:- The Firm is engaged in leasing movable and immovable properties.
There was a purchase of the lift for installation for the building owned by “M/s Ferns Builders & developers’ which was let on lease rent.
The purchase details are as follows.
| Inv. No. | Date | Description of goods | Rate of tax | Input tax | Invoice value |
| KA01INMAJ161000482 | 20-10-2016 | Modernisation Johnson Ele. Lift to Sy. No. 28 Ferns Icon | 14.50% | 63509 | 590386 |
| KA01INMAJ161200611 | 06-12-2016 | Passenger Lift-Electric Enduronic Lift | 14.50% | 63467 | 59000 |
During the VAT period, the firm though purchases were declared in the return has not claimed the ITC since it was not eligible.
When the GST was introduced the firm availed the ITC through transitional credit on the contention that Sec. 10 of the CGST Act-2017 for taking CENVAT credit in respect of Capital goods not carried forward in a return as per the provisions of Sec. 140(2) of the said Act also quoted the provisions that “ the registered person shall not be allowed to take credit unless the said credit was admissible in a CENVAT credit under the existing Law and is also admissible as input tax credit under this Act.”
The department rejected the claim on the grounds that the firm was a service provider only and the copy of the return produced Form ST-3 was related to services only.
The goods purchased were electrical goods such as panels, cable, motor and lift. There were also purchases of consumable goods like bleaching powder, garbage cover, broom, sponge etc. The electrical goods are not eligible for input tax as per Schedule V of the KVAT Act and the consumables are not for further sales but for own use. Therefore he is not eligible for transitional credit under GST not being eligible to carry over input tax credit/CENVAT credit under the existing Law.
There were also references made to Sec. 17(5)(d) in rejecting the lift.
From the above instance, the ITC was not allowed on the lift during the VAT period.
With regards
0 Dear Shri KALLESHAMURTHY MURTHY Ji,
Thanks for your effort in digging out contents of said order.
In continuation of what I said in my posts at Sr. No. 53, 54 & 58 above, I have noted following line from your post at Sr. No. 64 (i.e. reason for denial of credit under VAT regime) read with Section 140 (2) of the CGST Act, 2017 (i.e. reason to deny such 'VAT credit' under GST Regime during transition):
"The department rejected the claim on the grounds that the firm was a service provider only and the copy of the return produced Form ST-3 was related to services only."
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 The Supreme Court has pronounced the landmark Safari Retreats judgment on Oct 3, 2024 on denial of ITC on Construction of Immovable Property. Whilst upholding the constitutional validity of Sec.17(5)(d), Hon'ble Supreme Court clarified that the renting of a building could qualify as a “plant” exception under Section 17(5)(d) of the CGST Act is significant for businesses involved in leasing immovable property. By accepting the assessee's claim to ITC on GST paid for building construction, the court has provided relief in scenarios where the constructed property is essential to the taxable activity, such as renting.
In summary, while the court rejected the constitutional challenge, it provided relief to taxpayers by holding that ITC is allowed for construction activities that qualify as “plant or machinery,” based on the facts of each case. Tax authorities will need to determine eligibility on a case-by-case basis.
0 Para 66 & 67 of above-said ruling dated 03.10.2024 by the Apex Court states as follows:
"66. In the light of what we have held above, by setting aside the impugned judgment in Civil Appeal Nos. 2948 and 2949 of 2023 - 2024 (10) TMI 286 - SUPREME COURT, the writ petitions are remanded to the High Court of Orissa for limited purposes of deciding whether, in the facts of the case, the shopping mall is a “plant” in terms of clause (d) of Section 17(5). Appeals are partly allowed in above terms.
67. While deciding these cases, we cannot make any final adjudication on the question of whether the construction of immovable property carried out by the petitioners in Writ Petitions amounts to plant, and each case will have to be decided on its merit by applying the functionality test in terms of this judgment. The issue must be decided in appropriate proceedings in which adjudication can be made on facts. The petitioners are free to adopt appropriate proceedings or raise the issue in appropriate proceedings."
By reading the entire ruling, I believe that it gives lots of 'additional' grounds of defense for taking ITC against 'Lifts installed in commercial building given for rent' (For example: Non-applicability of 'explanation' itself which is given after Section 17(6) while trying to deny ITC u/s 17(5)(d) by proving the lift in itself is 'immovable' 'plant or machinery' with help of supporting facts & circumstances).
Moreover, it opens up a real possibility of taking ITC against construction of 'Building' itself by applying the functionality test and same will be depend on facts & circumstances in each case.
Once thing, which is clear at-least for me, is that various AAR / AAAR ruling quoted in various posts above (in support of denial of ITC against lifts) deserves to be completely ignored while taking all these call.
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 Another thing which is also clear (at-least to me) is that various Apex Court rulings, which are quoted earlier in various posts above - do NOT have any bearing on subject of issue under discussion here what-so-ever. It simply does not matter that 'Lifts are part of building or permanent fixture of building etc.' while taking subject call under discussion here.
Apex Court has now clearly held that one can possibility of taking ITC against 'Construction of Building' itself by applying the functionality test and same will be depend on facts & circumstances in each case
If anything, various court rulings from erstwhile regime read with this latest latest Apex Court ruling can be applied to demonstrate that such lilts are indeed 'Plant' in the context under discussion here.
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 Apex Court has not only overruled Safari Retreats Private Limited - 2019 (5) TMI 1278 - ORISSA HIGH COURT (which had read down those provisions) but went for beyond that by explaining difference between 'Plant & Machinery' and 'Plant or Machinery' while applying clause (c) & (d) of Section 17(5).
In this ruling, there are so many judgements quoted, relied upon & explained by Apex Court in the context of dispute before it which in-turn gives fairly broad range of legal arguments to justify ITC against lifts for situation under discussion here.
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 Just an update on my three posts above:
Para 65 of the this Apex Court ruling is also very worth noting:
"65. Some of our conclusions can be summarised as under:
a. The challenge to the constitutional validity of clauses (c) and (d) of Section 17(5) and Section 16(4) of the CGST Act is not established;
b. 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;
c. The question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression “plant or machinery” used in Section 17(5)(d) is a factual question which has to be determined keeping in mind the business of the registered person and the role that building plays in the said business. If the construction of a building was essential for carrying out the activity of supplying services, such as renting or giving on lease or other transactions in respect of the building or a part thereof, which are covered by clauses (2) and (5) of Schedule II of the CGST Act, the building could be held to be a plant. Then, it is taken out of the exception carved out by clause (d) of Section 17(5) to sub-section (1) of Section 16. Functionality test will have to be applied to decide whether a building is a plant. Therefore, by using the functionality test, in each case, on facts, in the light of what we have held earlier, it will have to be decided whether the construction of an immovable property is a “plant” for the purposes of clause (d) of Section 17(5)."
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 W.r.t. my views shared earlier (i.e. ITC is available against 'a centralised airconditioning plant' installed in the building, on similar reasoning applied for 'ITC against lift' as per query raised), I want to draw your attention to COMMISSIONER OF INCOME-TAX, AP VERSUS TAJ MAHAL HOTEL (1971 (8) TMI 2 - SUPREME COURT) where Apex Court observed the followings:
"Now it is well-settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of every day use. Popular sense means that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it ...........
............................
The heating installation, of a building may be passive in the sense that it involves no moving machinery, but few would deny it the name of 'plant'. The same thing could, no doubt, be said of many air conditioning and water softening installations."
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 For query raised by the querist (i.e. ITC against lifts), using recent Apex Court ruling in case of M/S SAFARI RETREATS PRIVATE LTD. & ORS (2024 (10) TMI 286 - SUPREME COURT) read with observations from case of TAJ MAHAL HOTEL (1971 (8) TMI 2 - SUPREME COURT) quoted by me in earlier post, I would refine my earlier views & reasoning as follows:
Lifts / elevators are ‘separately identifiable immovable property' even within ‘overall building’ in common parlance (For example: Brake-down / Collapse of lift in a accident’ is NOT equated with ‘Break-down / Collapse of Building’ in common parlance, Lifts needs separate 'maintenance contract' with specific differentiated requirements and same does not get covered in 'house-keeping or maintenance contract' for building etc.).
And, hence, such 'separately identifiable immovable property' (i.e. Lifts / elevators) fits perfectly into "Plant' (being construed in its popular sense if it is a word of every day use. Popular sense means that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it).
In other words, calling them 'Lift / Elevator' itself means that it is 'plant or machinery' & not 'building' in popular sense while applying either clause (c) or (d) of Section 17(5).
Hence, IMHO, subject ITC under discussion is indeed available.
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 W.r.t. my views shared earlier (i.e. capitalisation of 'lift' either under 'Building' or 'Plant & Machinery' in tax-payer's books of accounts does not matter for issue under discussion here), following observations by Apex Court from case of TAJ MAHAL HOTEL (1971 (8) TMI 2 - SUPREME COURT) are worth noting:
" ............The Tribunal rejected the appeal holding that the definition of "plant" must necessarily be the same, whether it was for claiming depreciation under section 10(2)(vi) or for development rebate under section 10(2)(vib) .............
..................................
The High Court was right in not accepting the reasoning of the Tribunal based on the rates relating to depreciation under section 10(2)(vi) and the assessee having claimed that the sanitary and pipe-line fittings fell within the, meaning of "furniture and fittings" in rule 8(2) of the Rules. It has been rightly observed that the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what wag conferred by the Act or whittle down its effect. If the assessee had claimed higher depreciation allowance that would not detract from the meaning of the word "plant" in clause (vib) of section 10(2)."
Thus, Supreme Court has ruled that two different classification i.e. "furniture and fittings & "plant" for very same asset (i.e. sanitary and pipe-line fittings) while allowing same tax-payer 'two different benefits' under very same Income Tax Act. Here, the tax-payer is giving differential treatment in two different acts (i.e. income tax & GST).
And hence, there is no legal bar in applying differential classification for very same asset (i.e. Lifts) while taking legally available benefits in two different act.
These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.
0 The Hon'ble Supreme Court delivered the judgment in the Civil Appeal No. 2948 of 2023 in the case of M/s Safari Retreats Private Ltd. - 2024 (10) TMI 286 - SUPREME COURT, who was engaged in constructing a shopping mall to lease out to different tenants, focusing on the constitutional validity of Sec. 17(5)(c) & (d) of the CGST Act which restricts the availment of ITC. The court has observed that sub-section (c) used the phrase "Plant & Machinery" whereas Sub-Sec. (d) used the phrase "plant or machinery". These phrases have different meanings and reject the plea of the Company to read "or" as "and".
The court rationally held that a building or immovable property could be classified as a plant if it is integral to business operations, such as in cases where a mall or warehouse is essential for supplying services (renting) subjected to determine it by applying the functionality test.
The court referred to the common understanding of a plant—whether it is movable or fixed to the earth. Items like equipment, machinery, or structural supports that are fixed but integral to the nature of business qualify as plant this may include lift also.
It has been remanded back to the Odissa High Court to determine the issue accordingly.
Though this has appeared to be given relief to the availment of ITC, it is subject to the determination of the Hon'ble HC Odissa.
Hence the Hon'ble Supreme Court has not conclusively given Judgement entirety to avail the ITC on construction materials used in the Building until it is decided whether it is a plant and the lift attached to the building is treated as a plant as part of the building or still, it holds as not having an identity on collapse or demolish of the building.
This is as understanding of the Judgement by me.
0 Sh.Murthy Ji,
Sir, The best analysis by you. Indirectly Hon'ble Supreme Court has upheld the constitutional validity of Section 155 of CGST Act. The ball is in the High Court again and the person taking ITC has to conform to the parameters laid down by Hon'ble Supreme Court.
0 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.
0 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.
0 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.
0 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.
0 Dear Sirs,
Well said by Sri Sadanand Bulbule Sir, in simple words but intuitively.
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