Eligibility of ITC in case of services received for destroying goods on instructions of customs officers
Taxpayer is in service of container handing (CFS). They destroy goods which are not claimed by their buyer on instruction of customs which are there in CFS. For destruction Taxpayer hires third party for destruction and claim ITC of such services by third party. Now, question is whether ITC claimed by taxpayer is correct? can it be considered as in course or furtherness of business?
Any activity which is quite essential for the purpose of running a business or which has been performed with the sole objective of furthering the trade or business interest of the taxpayer is an activity performed "in the course or furtherance of business"
As per Section 2(17) “business” includes––
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
The definition is thus an inclusive one and is wide enough to cover within its scope a broad range of activities. The word "includes" is used to enlarge the meaning of the words or phrases occurring in the body of the statute.
Now, since the goods are destroyed under obligation means that they are essential for the purpose of running the business. These expenses are essential part of the business process as a whole.
Also, Section 17(5)h will not be applicable in this case as it blocks ITC only in case of goods and not in case of services.
Hence, it seems that the expenses are in fact for the furtherance of business and ITC is eligible for such services provided all other provisions are followed.
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