Page 43 - GSTL_23rd July 2020_Vol 38_Part 4

2020 ] ITC ON DETACHABLE WOODEN FLOORING AND STACKABLE GLASS PARTITION J101
chinery) on his own account including when such goods or ser-
vices or both are used in the course or furtherance of business.
Explanation. - For the purposes of clauses (c) and (d), the expression
“construction” includes reconstruction, renovation, additions or al-
terations or repairs, to the extent of capitalization, to the said immov-
able property
(7) When the text of Section 17(5)(d) is read together with its explana-
tion, it is found that for triggering the restriction under this clause,
certain criteria have to be satisfied viz :
(a) The goods or services should be used for construction of im-
movable property.
(b) The construction can be in the form of re-construction, reno-
vation, additions or alterations or repairs to the immovable
property.
(c) The construction should be on his own account.
(d) The goods or services received are capitalised in the books of
account.
Only when all the above criteria are satisfied can it be said that the
credit is restricted and the goods and services are ineligible for in-
put tax credit.
(8) The term ‘immovable property’ has not been defined in the GST law
but rather it is defined in Section 3(26) of the General Clauses Act,
1897 as including land, benefits arising out of land, and things attached
to the earth, or permanently fastened to anything attached to the earth.
“Attached to earth” is defined in Section 3 of the Transfer of Proper-
ty Act as meaning (a) rooted in the earth, as in the case of trees and
shrubs; (b) imbedded in the earth, as in the case of walls or build-
ings; or (c) attached to what is so imbedded for the permanent bene-
ficial enjoyment of that to which it is attached. In case of fixtures
like the glass partitions, the rule is permanent attachment, that is,
such attachment, whereby, removing the item in question will re-
quire demolition. To ascertain whether the item is permanently at-
tached to earth, many Courts have consistently used two-fold tests -
(i) the extent of annexation and (ii) the object of annexation. The ex-
tent of annexation means annexing the fixture or object by which it
ceases to be detachable. It would need to be demolished if one were
to remove it. The object of annexation test lays down that where a
movable property gets annexed with an immovable property, if the
intent of annexation is of permanent beneficial enjoyment of the
immovable property, then the fixture becomes an immovable prop-
erty. If the intent of annexation is the beneficial enjoyment of the
movable property, then the property still remains movable. Apply-
ing the above tests to this case, the AAAR found that the glass parti-
tions are not permanent and are not embedded to the earth. They
can be dismantled and moved according to the requirements of the
clients of the appellant. Although they are fixed to the earth with
nuts and bolts, they can be dismantled without demolishing the civ-
il structure. Therefore, the detachable sliding and stackable glass
partitions do not qualify as immovable property.
[Continued on page J105]
GST LAW TIMES  23rd July 2020  43