ITC on Factory building

[Venkatesh Dhongadi]

Respected experts,

My query is in relation to ITC u/s 17(5). One of my client is giving contract to build a factory. He is letting out this factory on monthly rent basis. I have 2 queries -

1) whether the contractor can claim ITC on inputs he purchased to build the factory? (Later the contractor will bill for the building construction).

2) Whether contractee i.e, my client will be eligible to claim ITC on what contractor has billed as he is going to let out the factory building on monthly rent basis?

AI Summary

Input tax credit eligibility for construction depends on the functionality test determining whether a building is a plant.
Entitlement to input tax credit for construction of a factory for letting depends on whether the construction qualifies as a works contract for the contractor and whether the resulting building qualifies as a plant or machinery for the owner under the functionality test; the latter is a fact sensitive inquiry focused on whether the building is essential to the supplier's business of renting or leasing and performs the functional role of a plant, and adjudicating authorities retain discretion in assessing entitlement.