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2019 (5) TMI 964 - AAAR - GSTInput Tax Credit - lease rent during pre-operative period for the leasehold land on which the resort is being constructed to be used for furtherance of business - the said rent is capitalized and treated as capital expenditure - Challenge to AAR decision. HELD THAT:- WBHIDCL holds the ownership title of the land only and holding no proprietary interest in the immovable property constructed or being constructed on it. The Appellant is not providing any construction service to the WBHIDCL and also will not be operating the hotel on behalf of the latter. Further the Eco Resort comes not only with hotel building but also with swimming pool, cafeteria, outdoor barbeque, landscape gardens. The construction of Resort is not limited to the hotel building only as a significant amount of construction is involved for creating swimming pools and landscaping. Every registered person is entitled to take credit on any supply of goods or services or both which are used or intended to be used in the course of furtherance of business in terms of sub-section (1) of section 16 of the GST Act, subject to the restrictions stipulated in Section 17 of the GST Act. The WBAAR never held lease rental to be capital good so discussion on sub-section (3) of section 16 of the GST Act is irrelevant. The Appellant's argument on the absence of any nexus, direct or indirect between lease rental and construction of the Project is incorrect. The Lease Rent paid during pre-operative period for the lease hold land, on which the construction activity had been taken for furtherance of business, has direct nexus between the Lease Rent and construction of resort. Had the appellant not paid the Lease Rent during pre-operative period they would not be able to take any construction activity thereon. Further, the asset will be capitalized in the books of accounts of the Appellant. So it is clear that the Appellant is building the Eco Resort on its own account for furtherance of business, and credit of Tax paid on input goods/service is debarred in terms of Section 17(5) (d) of GST Act. So the moot question is whether input tax credit on lease rental paid is available in the pre-operative period. It transpires from the above discussion that the Appellant is constructing the Eco Resort on his own account in course of furtherance of its business of providing hospitality service, for which one of the input service availed is lease rental service. The ambit of the blocked credit as per clause (d) of sub-section (5) of section 17 is broad as it includes such goods or services or both when used in the course of furtherance of business. So clause (d) of sub-section (5) of section 17 restricts the Appellant availing input tax credit on lease rental paid. The AAR decision upheld - appeal dismissed.
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