ITC on lift, Air conditioners, shed, electrical wiring and fitting, factory maintenance, fumigation, insurance, structural support.
ITC on Lift
Lift in a factory building can be dismantled and moved to another place when required but generally it is not done so. Because it is installed and fitted into the building structure and as such it becomes an integral part of the building. In books of accounts it is capitalised as a Building. ITC is not allowed on lift being immovable property.
Air Conditioners
Air Conditioners (AC) installed in an office is different from an HVAC – Heating Ventilation and Air Conditioning. AC removes the heat from air and keeps the room cool. Whereas HVAC controls the temperature of the building as well. HVAC is installed centrally. The air is cooled at the central unit then with the force of the blower the cool air is passed on to various rooms in a building through insulated pipes. As such the installation is so embedded and connected from central unit to other rooms through concealed pipes in the civil structure that it becomes a part of the immovable property. It is practically not possible to dismantle every such connection and move to another place and reinstall it. Hence it becomes a part of immovable property. ITC on HVAC is not eligible.
In my view, the installation of HVAC is such that it is not moved generally but it does not take the character of a civil structure. As in civil structure it is impossible to move a building from one place to another. The cement, steel , mortar cannot be moved. Such is not the case with HVAC. It can be moved though with great effort. So, ITC should be allowed. If not full a certain percentage of ITC should be allowed.
The same logic should apply to the lift as well, in my view.
Shed
The shed is constructed temporarily with bamboo or iron rod in the factory at loading and unloading premises or dispatch area or any area in the factory premises during monsoon season or in summer or all the time. The ITC on the shed depends upon whether it is permanently or temporarily constructed. If it is removable and could be moved and installed at some other place then the ITC is eligible. If the same is permanently embedded to the earth that becomes a part of immovable property then ITC is not allowed.
Electrical wiring and fitting
A distinction is drawn between the electrical wiring and fittings – for plant and machinery and for other than plant and machinery. The electrical wiring connected to plant and machinery is eligible for ITC. The other wiring for shop floor, admins office, etc. which are capitalised along with the building or civil structure , the ITC is not eligible.
Electric wiring, repair, maintenance etc. which are of routine expense and not capitalised, the ITC is eligible.
Maintenance
Admin building is maintained by painting it at regular interval. The painting cost is considered as revenue expenditure in books of account. Hence, ITC is eligible. If the painting is part of construction of immovable property and capitalised . ITC is not eligible.
Fumigation
Fumigation is essential to control pest in a factory and warehouse. Therefore, Input tax credit on fumigation is an eligible ITC.
Insurance
Insurance is necessary for stock viz raw material, finished goods to protect from their loss or damage due to fire accident or theft etc. Thus, insurance becomes essential for protection of financial loss. ITC is eligible on insurance.
Structural Support
Plant and machinery require civil structure to stand erect and perform its function. This civil structure though immovable property becomes a part of plant and machinery. Without the civil support structure the machine cannot perform its function well. It may shake , jump and may fall. Hence, they qualify as part of plant and machinery to become eligible for ITC claim.
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