Input tax credit— Section 17(5) of CGST Act— In the instant case, the appellant is a registered person under GST for the purpose of providing various taxable and exempt outward supplies of leasing of Industrial and Non-Industrial Plots as well as financing activities of providing term loan to various projects.

From the facts of the case, it would appear that the appellant is providing taxable and exempt outward supplies of leasing of Industrial and Non-Industrial Plots as well as financing activities of providing term loan to various projects.

The Appellant filed an Application for Advance Ruling on the following questions:

(i) Whether the Applicant can claim the ITC on the Input services of construction or works contract procured for the development of an Industrial area or the special maintenance expenses of the area?

(ii) If the answer of question No. 1 is in affirmative then what would be the mechanism for apportionment of ITC between exempt and taxable supplies as in an industrial area, long term leasing of 'industrial plot' of land is exempt under N.No. 12/2017-Central Tax (Rate) but leasing of 'non-industrial plot' of land/commercial plot of land is a taxable supply?

The Rajasthan Authority of Advance Ruling has held that the term 'extent to which capitalized', only suggests that the extent of such expenses are expected to be capitalized or else will be treated as capitalized to such immovable property. 

Hence, such expenses, which enhance the value of the property permanently and as per accounting convention, the expenditure are capital in nature, have to be capitalized and cannot be treated as revenue expenditure. Therefore, as per Section 17 (5) (c) &(d) of the CGST/RGST Act, 2017, No ITC is available to the applicant'.

Aggrieved by the Ruling, the appellant filed this appeal mainly on ground that the appellant has not capitalized the expenditure in fixed assets and prayed that benefit of ITC both on the development expenses and special maintenance expenses should be allowed to them and consequently the decision of AAR is liable to be set aside.

Since the appeal against the High Court order supra is pending before the Hon'ble Supreme Court and thus has not yet attained the finality, this authority refrain from commenting on the eligibility of the ITC

Held that— the appeal filed by the appellant is liable to be rejected for want of any merit, and hence rejected.