TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 1181
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....of Section 16(1) of the CGST Act, 2017 r/w UPGST Act, 2017?. 3. As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant. 3.1 Shriram Pistons and Rings Limited (hereinafter referred to as 'Applicant') is engaged in manufacture and supply of automobile parts (two wheelers and four wheelers) viz. Engine Parts such as Pistons, Piston rings, Engine Valves etc. and related products from its manufacturing unit (factory) located at A-4 to A-7, B-8/1 & 2, B 9 & 10, Industrial Area III, Meerut Road, Ghaziabad- 201 003 (U.P.). 3.2 The Applicant is a company incorporated under the Companies Act, 1956 and is engaged in developing, manufacturing and marketing of its finished products. The Applicant with GSTIN 09AAACS0229G1ZN is registered with the Goods and Services Tax Department in the state of Uttar Pradesh and falls within the jurisdiction of Central Goods and Services Tax Commissionerate, Ghaziabad. 3.3 With an initiative to provide financial assistance to improve the lives of under-served and unprivileged sections of the society, the Minist....
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.... on the company's website, if any, in such manner as may be prescribed; and (b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company. (5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years [or where the company has not complete the period of three financial years since its incorporate, during such immediately preceding financial years], in pursuance of its Corporate Social Responsibility Policy: Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities: Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of Section 134, specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund ....
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....porate Social Responsibility as per Section 135 (1) of the Companies Act and also constitute a CSR Committee. 3.6 The CSR Committee, in accordance with Section 135 (3) (a) of the Companies Act (reproduced above), formulates/frames a Corporate Social Responsibility Policy ('CSR Policy'), indicating the activities like the ones mentioned in Schedule VII of the Companies Act, 2013 which the Applicant may undertake for discharging its CSR obligations. The Policy also postulates/ budgets out the expenses to be incurred by the Applicant on the activities/areas and monitors its progress thereof, from time to time, in terms of Section 135 (3) (b) and (c) of the Companies Act. Upon approval from the Board of Directors to the recommendations mentioned in the CSR Policy placed by CSR Committee, the same is uploaded on the Applicant's website in compliance to Section 135(4)(b) of the Companies Act. 3.7 The Applicant, in compliance to the statutory requirement of Companies Act and that it could carry out its business operation without any hindrance, incurs expenses on various activities in relation to CSR obligations as any contravention thereof would entail serious penal consequences on the ....
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....mply with the statutory requirement of CSR under the Companies Act, qualify as being incurred in the course of business and thus eligible for ITC under Section 16 of the CGST Act. The submissions in support of the aforesaid interpretation have been enunciated in the ensuing paragraphs: 4.2 GST charged on the supplies received by the Applicant for discharging its CSR obligations is in the course or furtherance of his business and thus eligible for Input Tax Credit under Section 16(1) of the CGST Act. 4.3 The present issue raised by the Applicant is whether the expenses incurred by it on receipt of various supplies for complying with CSR activities under Companies Act, is in furtherance of business and eligible for ITC in terms of Section 16(1) of the CGST Act. 4.4 According to Section 16(1) of the CGST Act, a registered person shall be entitled to take credit of input tax paid on any supply of goods or services or both that are used or intended to be used in the course or furtherance of business. The relevant portion of Section 16, is reproduced below, for ready reference: - Eligibility and conditions for taking input tax credit. 16. (1) Every registered person shall, subject....
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....ncludes' is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include" [Emphasis Supplied] 4.8 Further, the Hon'ble Supreme Court in Mazagon dock Ltd vs CIT and Excess Profit, 1958 (5) TMI 2- SUPREME COURT had an occasion to examine the scope of word "business" and held as follows: "14. The word "business" is, as has often been said, one of the wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense 15. "The word 'business' connotes", it was observed by this court in Narain Swadeshi Weaving Mills Vs Commissioner of Excess Profits Tax, 1955 1 SCR 952 = 1954 (10) TMI 11 - SUPREME COURT "some real, substantial and systematic or organised course of activity or conduct with a set purpose. " The term business" therefore, particularly in fiscal statutes is of wide import." 4.9 As per clause (b) of sub-Section 17, the term 'busines....
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....d crores as well as the net profit is more than rupees five crores, during the preceding financial year, it is therefore mandatory for the Applicant to incur expenses attributable to CSR activities in compliance with the Companies Act and any default/ non-compliance would entail serious penal consequences upon the Applicant and also lead to disruption as well as hindrances in the smooth functioning of its business. 4.13 Accordingly, for complying with the statutory requirement of CSR obligation, the Applicant is incurring expenses for educational services, wherein they are providing funds for running of a school for the underprivileged. They are also incurring expenses on running of dispensary and supply of medicine to patients who may not be able to afford the necessary medical care. Expenses are also being incurred to achieve one of the goals of Swacch Bharat Abhiyaan for providing hygiene and sanitation by making proper toilet facilities available for all and its maintenance/repair thereof etc. 4.14 Therefore, the expenses attributable to CSR activities are being undertaken by the Applicant in order to ensure smooth functioning and maintain continuity in its manufacturing busi....
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.... or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director." And as per sub-section (5) of the Section 135 of the Companies Act, 2013, "The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy". Further sub-section (7) of the Section 135 of the Companies Act, 2013, specifies that "If a company contravenes the provisions of sub-section (5) or sub-section (6), the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of such company who is in default shall be punishable with imprisonment for a term which may exten....
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....e that the applicant is compulsorily required to undertake CSR activities in order to run its business and accordingly, it becomes an essential part of his business process as a whole. Therefore the said CSR activities are to be treated as incurred "in the course of business". 13. As regard to the question whether free supply of goods as a part of CSR activities is restricted under Section 17(5)(h) of CGST Act, 2017, we observe that the applicant supplies of furniture/fittings such as tables, chairs etc. and electrical goods to be used in the school under the CSR activity, free of cost. In this regard, we observe that Section 17 of the CGST Act, 2017 talks about apportionment of credit and blocked credits. Further, as per Section 17(5)(h) of the CGST Act, 2017, input tax credit shall not be available in respect of "goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples." The aforesaid section restricted credit of the goods which were written off or disposed of by way of gift or free samples. Now the moot question before us is to decide whether the furniture/fittings such as tables, chairs etc. and electrical goods supplied by the applicant are to....
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....mments/views/verification report on the matter and reminder dated 27.10.2022 was sent. The Deputy Commissioner, CGST & Central Excise Division-III, Ghaziabad vide his letter C. No. 20-CGST/R-11/D-III/Misc/131/2021/965 dated 11.11.2022 offered desired comments/view/verification report on the question raised in the Advance Ruling Application is as under:- As it is clear that these are merely compliance of Corporate social responsibility under Companies Act, 2013 being an obligation under a law it can't be considered as furtherance of business and the same is not eligible for input tax credit. No such proceeding on the question raised in application is pending or decided in this office as on date. 7. The applicant was granted a personal hearing on 15.11.2022 which was attended by Shri Sanjay Kumar And Shri Atul Gupta, the authorized representative of the applicant during which they reiterated the submissions made in the application of advance ruling. DISCUSSION AND FINDING 8. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such d....
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....vices related to COV1D-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that- (a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act. (b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board's Report sports (ii) any activity undertaken by the company outside India except for training of Indian personnel representing any State or Union territory at national level or India at international level; (iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act. (iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019) (v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services (vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India; 12.1 We find that as per Rule 4(1) above (for the period prior to 23-1-2021), the CSR activities undertaken by t....
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....t. 13. Section 16(1) of the CGST Act, stipulates that a registered person is entitled to take credit of input tax charged on any supply of goods or services or both, which are used or intended to be used in the course or furtherance of his business. Thereby, we hold that the Section 16 (1) of the CGST Act bars CSR activities from input/input service. 14. In pursuance to Companies CSR Rules framed by the Central Government and in pursuance to wordings of Section 16(1) CGST Act, we disagree with both the applicant's and revenue's stand for admissibility of ITC on CSR activities. In fact, we note that the applicant submitted that CSR activities being undertaken by the applicant can become eligible for ITC if only it is established that such activities are in the course and furtherance of business. As per law, Section 16(1) CGST Act bars CSR activities from ITC. We therefore find no merit to discuss the item wise CSR activities of the applicant. 15. The applicant cited case laws: (1) CESTAT order in the case of Essel Propack Vs. Commissioner of CGST, Bhiwandi and (2) Hon'ble Karnataka High Court's decision in the matter of C.Ex, Bangalore vs. Millipore India Pvt.Ltd. Both the....