Page 45 - GSTL_2nd April 2020_Vol 35_Part 1

2020 ] INPUT TAX CREDIT ON CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES J11
“4. As per Section 17 of GST Act, ‘where the goods or services or both are
used by the registered person partly for the purpose of any business and part-
ly for other purposes, the amount of credit shall be restricted to so much of
the input tax as is attributable to the purpose of his business’. As per Sec.
17(5)(h) input tax credit shall not be available in respect of goods lost, stolen,
destroyed, written off or disposed by way of gift or free samples. In this case
after availing input tax credit, the applicant disposed goods as free supply for
CSR activities. Hence, the applicant is liable to reverse the input tax credit al-
ready availed.”
Though Authority of Advanced Ruling is a departmental authority, and their rul-
ings are applicable only to the parties before it; such rulings have impact on cases
of other assessees. If orders are bad they shake the people’s faith in the judicial sys-
tem and harm the very foundation of Rule of Law.
It is to be noted that Input Tax Credit is available on all inputs received
and used in the business or in furtherance of business. The term “business” was
examined by Bombay High Court in case of Coca Cola India Private Limited v.
Commissioner [2009 (15) S.T.R. 657 (Bom.)], which held,
“25. The expression Business is an integrated/continuous activity and is not
confined/restricted to mere manufacture of the product. Therefore, activities
in relation to business can cover all the activities that are related to the func-
tioning of a business. The term business therefore, in our opinion cannot be
given a restricted definition to say that business of a manufacturer is to man-
ufacture final products only. In a case like the present, business of assessee
being an integrated activity comprising of manufacture of concentrate, enter-
ing into franchise agreement with bottlers permitting use of brand name by
bottlers promotion of brand name, etc. the expression will have to be seen in
that context.”
The Hon’ble Supreme Court affirmed the view taken by the Hon’ble Karnataka
High Court reported at [2001 (121) STC 738], which, inter alia, held as under :
“Business comprises of the regular and systematic activity with an object of
earning of profits. The machinery, plant, building and the land over which
they have erected or constructed are only the tools of such business. Assets
and liabilities including goodwill are the necessary ingredients to constitute a
business, besides the stocks and other movable and immovable items con-
nected with the said business.”
In Mazgaon Dock Ltd. v. Commissioner of Income-tax and Excess Profits Tax [AIR 1958
SC 861] the Hon’ble Supreme Court held as follows :
“14. The word “business” is, as has often been said, one of the wide import
and in fiscal statutes, it must be construed in a broad rather than a restricted
sense.”
Thus, the term “business” therefore, particularly in fiscal statutes is of wide import.
It cannot be restricted to mere supply of goods or services. Before any supply of
goods or services are made, numerous activities are conducted. Such activities are
integral to supply of goods or services, and such supplies cannot be efficiently or
profitably made if such activities are not done.
In Service Tax regime, such question arose before the CESTAT in case of
Essel Propack Limited v. Commissioner of CGST [2018 (362) E.L.T. 833 (Tri. - Mum-
bai)], wherein the Tribunal held,
“To pin-point the dispute, it is now to be looked into as to if CSR can be con-
sidered as input service and be included within the definition of “activities re-
lating to business” and if in so doing, a company’s image before corporate
world is enhanced so as to increase its credit rating as found from the hand-
GST LAW TIMES  2nd April 2020  109