Gujarat HC: ITC on GIDC Leasehold Transfers Not Blocked Under Section 17(5)(d)
The Gujarat High Court, in the case of Niket Bipinbhai Patel vs. Assistant Commissioner (A.E.) CGST, ruled that Input Tax Credit (ITC) cannot be denied for activities involving the transfer of leasehold rights when no construction is involved.
Key Highlights of the Judgment
- Nature of Business: The petitioner, an NRI, acquired leasehold rights for GIDC plots, performed sub-plotting, and transferred those rights to purchasers.
- ITC Eligibility: The Court held that ITC availed on GIDC invoices for charges like sub-divisional fees and transfer fees is not barred by Section 17(5)(d) of the CGST Act
- Legislative Intent: The Court clarified that the restriction under Section 17(5)(d) applies exclusively to construction-related expenditure for immovable property.
- Absence of Construction: Since the Revenue failed to prove the petitioner undertook any construction activity, the “blocked credit” provision did not apply.
- Section 74 Inapplicability: The Court found no evidence of fraud, willful misstatement, or suppression. It noted that the petitioner had paid the entire output tax liability in cash after reversing inadvertently used ITC via Form DRC-03.
Final Ruling
The High Court quashed the Show Cause Notice (SCN) for ₹98.11 lakhs and directed the Revenue to unblock the petitioner’s Electronic Credit Ledger within three weeks