TaxTMI 
TaxTMI 
2025 (10) TMI 241
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....hort - 'the appellant') against the Advance Ruling No. GUJ/GAAR/R/2025/11, dated 25.03.2025. 3. Briefly, the appellant, a Public Ltd. Company and a SPSU [State Public Sector Undertakings] is engaged in the manufacturing of fertilizers and chemicals & is registered with the department. They initiated a share buyback ['buyback' signifies repurchasing its own shares from existing shareholders as stipulated under the Companies Act, 2013 & SEBI Regulation 2018.] program in December, 2023 in terms of GoG [Government of Gujarat] Government Resolution, dated 24.04.2023. 4. The appellant stated that various expenses are incurred for share buyback which are essential & that they were of the opinion that they are eligible to avail the ITC in respect of the expenses so incurred, in view of the following, viz. (a) any activity carried on with a purpose to achieve business objective, principles, continuity & stability is in course or furtherance of business; (b) that while buyback process does not directly result in immediate outward supply it is essential step towards optimizing financial health; that they would like to rely on the case of Coca-Cola India 2002 (22) STT 1....
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.... the GAAAR [Gujarat Appellate Authority for Advance Ruling], against the impugned ruling dated 25.03.2025, raising the following averments, viz (a) In terms of section 2(17)(b), ibid, the definition of 'business', covers the activity of buy back of shares; (b) that professional fees, legal expenses, consultancy charges, & other incidental costs incurred in relation to the buy-back of shares are directly connected to & undertaken in the furtherance of business and are therefore eligible for ITC u/s 16(1); (c) while buyback process does not directly result in immediate outward supply it is an essential step towards optimizing financial health & ultimately increase its ability to make taxable supplies; (d) that the term 'transaction in securities' is very wide & should be read in conjunction with value of exempt supply & not independently; (e) that in case of buy back of shares per se there is no supply in conventional sense; that the shares bought back are not in the nature of assets for the company & have to be cancelled after buyback within a prescribed time frame; (f) that in terms of the FAQ issued by the ICAI [The Institute o....
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....nd in the manner specified in Section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person." 15. In view of the above sub-section, the appellant's contention is that any input tax charged on any supply of goods or services or both to them, which are used or intended to be used in the course or furtherance of their business is available to them. Since, the buy-back of shares, according to the appellant, is for the furtherance of his business, they would be eligible of the expenses, charges and incidental costs incurred in relation to the buy-back of shares. 16. We do not, however, subscribe to this view that any tax paid on the cost incurred for the furtherance of the business is eligible for credit. It is trite law that for entitlement of input tax credit, the goods or services or both should be intended to be used for the business or in its furtherance thereof. However, this does not mean that the tax paid on every activity used in the furtherance of business is....
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....should be allowed. We are firmly of the view that the argument that the activities are in the course of furtherance of business is wholly irrelevant to decide the availability of ITC if the activities are in relation to transaction in securities. Hence, we don't find it worthwhile to go into the issue of whether or not the activities, relevant in this case, are in the course of furtherance of business. 18. In view of the foregoing, we concur with the ruling of the GAAR holding that the appellant is not eligible to avail ITC involved in the expenditure incurred for buy back of its shares. Reversal of ITC on common inputs 19. Now, as far as reversal of the ITC attributable to the common expenses is concerned, as discussed supra, 'securities' are excluded from the definition of goods & services. Therefore, they stand excluded even from the ambit of exempt supply [u/s 2(47)] and non-taxable supply [u/s 2(78)]. However, section 17(3) of the CGST Act, 2017, states as under: (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions i....
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....ly that would certainly help in the business of the company and may also help in profit-making, it still retains the character of a capital expenditure since the expenditure was directly related to the expansion of the capital base of the company." (b) Brooke Bond India Ltd [1997 (91) Taxman 26/225 ITR 798 (SC)]. The question involved in this case before the Hon'ble Supreme Court was whether the ITAT was right in sustaining the disallowance of Rs. 13,99,305/- being expenses incurred in connection with the issue of fresh lot of shares in 1967. The Supreme Court relying on the aforementioned case of Punjab State Industrial Development Corporation Ltd held that it is a capital expenditure. (c) M/s. Kernex Microsystems (India) Ltd [2016 (42) STR (Tri-Bang)]. The issue involved in this case was denial of CENVAT credit for the input services viz. advertisement, DVD film production, campaigning in electronic and print media etc. which were used for collecting capital through IPO by the appellant. The IPO was to collect the capital for expansion & creation of manufacturing facilities. The Hon'ble Tribunal held that the definition of input services under ....