TaxTMI 
TaxTMI 
2022 (8) TMI 920
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.... 33AAACE9013G2Z1. The applicant has sought Advance Ruling on the following questions: 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? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/ - each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that the Chennai Port Trust has allotted covered space to an extent of 267 sq.m at Ground floor - North wing of Jawahar building on Upfront Premium for Long Term Lease Basis to the applicant till 31.08.2045 from the date of handing over of the premises by Chennai Port Trust. The space is intended to be used by the applicant as an extended corporate office. The prevailing rate as per Schedule of Rates for the above building premises at Rajaji Salai is Rs. 740/ -(for January 2021) per Sq.m per month or part thereof which is arrived after effecting the compoundable annual escalation of 5% on every year basis. The Details of the allotment and Upfront premium calculation are as below:....
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....ent for the lease transaction: Indian Accounting Standard 116 applies to leases of Property, Plant and Equipment and other assets. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange of consideration. Indian Accounting Standard 116 "Leases" requires a lessee to recognize a right-of-Use (ROU) asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. KPL shall recognize the ROU Asset and the lease liability as follows: * Right of Use Asset: 1. As per the initial measurement criteria, ROU Asset that has to be capitalized amounts to Rs.5,39,21,553/- including initial direct cost, if any, incurred by KPL. 2. Subsequently, the carrying amount of the ROU Asset shall be measured by applying cost model complying with the depreciation requirements as per Ind AS 16 "Property, Plant and Equipment" by depreciating the asset over its useful life of 25 years being the period of lease Term. * Lease Liability: 1. The lease liability shall initially be measured at the present value of lease payments which is being discounted....
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....herein input tax credit in r/o goods/services shall not be available. At this juncture, it is relevant to refer to clause (d) Sec. 17 (5) (d) which is reproduced hereunder: "(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." In the instant case, the applicant has paid tax of Rs.97,05,880/- for the upfront premium for long term lease to Chennai Port Trust for covered space which is to be utilized for the accommodation of Record / Documentation Room. In view of the above Section 17 (5) (d) read with Section 16 (1) of the TNGST Act, 2017, the said GST paid is an one time payment wherein there is no inference for the furtherance of business. Tvl. Kamaraj Port Limited is found to be the ultimate user and hence the input tax credit availed on upfront premium for long term lease is ineligible under Section 17 (5) (d) read with Section 16 (1) of the TNGST Act ,2017. 5. The Central Jurisdictional Authority Chennai North Commissionerate has not offered any remarks on the questions raised by t....
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....ust at Ground floor, North wing of Jawahar building vide Allotment Order No. LBS1/992/2020/E dated 27.04.2021 of Chennai Port Trust, for the purposes of accommodation of Record/Documentation Room till 31.08.2045 from the date of actual handing over of the premises by Chennai Port Trust 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 payment to Chennai Port Trust was made on 12.08.2021 against the invoice number R/07/202104/10 Dt.30.07.2021. 7.2 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 7.3 The Applicant has contended that the contract is a simple lease contract of building and does not construe....
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....received the goods or services, paid the tax charged on such supply and has furnished the returns. Section 16 (3) provides that if depreciation is claimed the ITC on the said tax component is not available. In the instant case the applicant has been allotted space by Chennai Port Trust vide Allotment Order No. LBS1/992/2020/E dated 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 from the tax invoice furnished by the applicant that the license fee paid amounts to Rs.5,39,21,553/- which is the taxable value and GST is levied only on the taxable value. Thus on reading of the above statue and applying to the case at hand 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. 8.2 The State Jurisdictional authority has stated that input tax c....