Transitional credit— The appellant is aggrieved by the Advance Ruling pronounced by the Odisha Authority for Advance Ruling. In its appeal petition, it has requested to set aside / modify the impugned Advance Ruling and allow input tax credit on inputs and input services used by them for maintenance of their township, security services and horticulture meant for township.

Held that—The ruling of the AAR that inward supplies received by the Appellant-I by way of management, repair, renovation, alteration or maintenance service or goods received for furnishing the residential colony shall not qualify for input tax credit is found to be correct. Expenditure incurred by the Appellant-I towards construction, reconstruction, renovation, additions or alterations or repairs to the residential colony is not eligible for input tax benefit if the said expenditure has been capitalized.

the benefit of input tax credit still cannot be allowed, as any activity for the comfort, convenience and welfare of its employees cannot be treated as having been done in course of furtherance of business.

However, the ruling of the AAR that the Appellant-1 is entitled to input tax credit of the tax paid on inward supply of input and input services for maintenance of guest house, transit house and trainee hotel is found to be not correct. As discussed in the previous paragraph, the provision of residential accommodation through transit house / trainee hostel is also a perquisite in favour of the employees and hence tax paid on inward supplies of goods and services for the transit house/trainee hostel cannot be allowed the benefit of input tax credit.

Hence, we are of the view that tax paid on inward supplies of goods and services in connection with the guest house cannot be allowed the benefit of input tax credit .

The ruling of the AAR that services availed in relation to plantation and gardening within the plant area including mining area and the premises of other business establishments will qualify for input tax credit is found to be correct.

From the above, it is established that to claim input tax credit, an input service must be integrally connected with the business of manufacturing the final product Cost of an input service forming part of the cost of final product alone cannot be a condition to allow the benefit of input tax credit.—National Aluminium Company Limited, In Re…. [2019] 8 TAXLOK.COM 075 (AAAR-ODISHA)