Karnataka-based appellate authority has reversed the decision of the Authority for Advance Rulings (AAR) to allow claiming of input tax credit (ITC) for detachable sliding and stacking glass partitions.
The ruling is important as it would set a precedent as to what comes under immovable property where ITC is not allowed.
WeWork India Management had earlier approached AAR to seek its ruling over claiming of ITC for detachable sliding and stacking glass partitions.
The company provides shared workspace to freelancers, start-ups, small and large businesses. During the course of providing the service, it procured detachable sliding and stacking glass partitions, which were fitted in the building to provide co-working space to its members. The AAR disallowed ITC on these items.
Aggrieved by the decision, the applicant approached the Appellate Authority for Advance Rulings (AAAR).
The AAAR held that by applying the principle of extent of annexation (annexing the fixture or object by which it ceases to be detachable) and object of annexation (intent of annexation wherein a movable property is annexed to immovable property), it can be held that glass partitions are not permanent and can be dismantled without demolishing the civil structure.
There is no permanency in affixing such partitions as the same can be dismantled and re-fixed to signify a change in the dimensions of the work space. It only gives a false sense of permanency, the authority ruled.
As such, the detachable sliding and stackable glass partitions are movable property and addition or fixing of glass partitions does not amount to construction of immovable property. Accordingly, ITC on such goods should be eligible.
Harpreet Singh, partner, KPMG, said: “Availing of credit of items used in office furnishing has been a perennial issue, with diverse views emerging on what qualifies as movable and what as immovable.”
He said the ruling by discussing extent and object of annexation has set the right principles to determine permanency, which is sine qua non (essential condition) for proving movability and eligibility of credit.