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2020 (1) TMI 64 - APPELLATE AUTHORITY FOR ADVANCE RULING, TAMILNADUInput tax credit - lease of Cranes, to distinct person for sub-lease to the ultimate customer - settlement of dues / account between the customers and HO directly - supplies received from M/s. Sanghvi Movers Ltd., Maharashtra, the applicant M/s. Sanghvi Movers Ltd., Tamil Nadu - restrictions as per second proviso Section 16(2) of CGST Act and Rule 37 of CGST Rules read with Section 20(iv) of IGST Act, subject to fulfillment of all other conditions under section 16 of CGST Act, read with Section 20(iv) of IGST Act - challenge to AAR decision. Whether GST paid by the SML Maharashtra on the lease of Cranes, to their distinct person, the appellant, for sub-lease to the ultimate customer is eligible as credit in the hands of the appellant? HELD THAT:- The implementation of GST and the Act providing the supply between the distinct persons of the same PAN but in different states as a Supply under Section 7 read with Schedule I of the CGST/TNGST Act 2017, the appellant has entered into an MOU with the Head Office of the appellant drawing the modus for the transactions between them and compliance of GST provisions. The HO of the appellant is the title holder of all the cranes, which they lease to the appellant, for further sub-lease by the distinct person. Whether the appellant is eligible for the ITC of the entire tax paid by SML HO in the stated transactions? HELD THAT:- This is a case which is covered by Schedule I of the CGST Act. The transaction is between distinct persons. The appellant in the tax invoice raised on their customers mentions that the payment to be made either by Cheque/DD in the name of ‘SANGHVI MOVERS LIMITED’ or directly to the account of SML HO at Pune. The appellant has represented that the receipts and payables are accounted at the entity level only. The HO being distinct person in the eyes of law and the transaction is in the course of furtherance of business, the supply is taxable supply for which SML HO has adopted a value agreed under the ‘Pricing’ clause of the MOU and paid the tax on the value declared in the Invoice. The proviso to Rule 37, provides for deemed payment of value in such transactions. Even considering that the proviso to Rule 37 does not have application in the case at hand as there is a value stated in the Tax Invoice as held by the Lower Authority, we find no reason to restrict the Input Tax Credit of the tax paid by the SML HO, in the hands of the appellant as it has been substantially brought out that the ‘consideration’ stands paid to the SML HO either by the customer of the Appellant or by setting off against the payables of the appellant to SML HO, in respect of lease/ hire of Cranes, etc which is as per the established accounting principles. Therefore there are no reason to restrict the eligibility of ITC credit under Section 16 (2) of the Act, in the case at hand. Thus, the appellant is eligible to avail full Input tax credit of tax paid by SML HO on the lease/ hire of cranes to them for furtherance of business, subject to other conditions of eligibility to such credit as per Section 16 of CGST/TNGST Act 2017.
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