availability of cenvat credit on setting up building

[Rishi Raj]

Background

A parent company has built a building which could be used as corporate office for all the subsidiaries/ group companies (separate legal entities). Now the parent company is going to charge a lease rental from all the group companies which has various components like lease rental, electricity, parking etc.

The total occupation by group companies is 75% of the total areas whereas the parent company occupies rest 25%.  

 ( The fact is no more credit will be available from 1st April 2011, query is raised to resolve some old cases)

Queries

 

1. Can cenvat credit can be taken on various input services used in relation to setting up / building the corporate office ( expenses like architect fees, project consultant fees, building insurance etc)
2. Can parent company take 100 % cenvat credit on input service or only to the extent building is actually let out i.e 75%  and why?  (Precisely Rule 6(2) could be applicable or Rule 6(3)(ii) of Cen Credit Rule? )
3. The space is occupied by the parent company (25%) will fall under the definition of ‘’exempted service’’ under Rule 2(e) of CCR.
4. The parent company is liable to pay service tax on only lease rental or all amount charged like lease rental, electricity expenses etc?
5. Any ruling available in the similar case?

AI Summary

Can a Parent Company Claim 100% CENVAT Credit for Building Construction or Only 75% for Subsidiary Use? A parent company constructed a building to serve as a corporate office for itself and its subsidiaries, charging lease rentals that include various expenses. The subsidiaries occupy 75% of the building, while the parent company occupies 25%. The discussion revolves around whether the parent company can claim CENVAT credit on input services related to building construction, and if so, whether it can claim 100% credit or only 75%. Additional queries include whether the parent company's occupancy constitutes an 'exempted service' and the extent of service tax liability. Respondents requested more details to provide a comprehensive answer.