CBIC Circular Clarifying ITC Availability On Demo Vehicles Prevails Over AAAR’s Order: Bombay High Court

Date:

The Goa bench of Bombay High Court has held that the Central Board of Indirect Taxes and Customs (CBIC) Circular clarifying Input Tax Credit (ITC) availability on demo vehicles prevails over order passed by the Appellate Authority of Advance Ruling (AAAR).

The bench of Justice M. S. Karnik and Justice Valmiki Menezes has observed that post issuance of the order by AAAR; the CBIC has issued circular dated 10.09.2024 clarifying that ITC would be available in respect of demo vehicles. The circular would prevail over the order of the AAAR. 

Background

The petitioner/assessee is an authorised dealer for sale of Maruti motor vehicles. It purchases and sells motor vehicles. It places a “demo vehicle” at the showroom for demonstration to customers. It availed input tax credit on demo vehicles. The demo car will be sold after some time. 

It applied to Authority for Advance ruling. The AAR ruled that ITC on demo vehicles is not available as the ITC is not used on “such” vehicles which are sold and the value of demo vehicles is capitalised in the books. Appeal was rejected by the Appellate Authority for Advance ruling. 

Demo Vehicles

Conclusion

The court held that the petitioner would be entitled for benefit of the input tax credit on demo vehicles in terms of the said circular dated 10.09.2024.

Case Details

Case Title: Sai Service Private Limited Versus Union Of India

Case No.: Writ Petition No.622 Of 2024

Date: 24/10/2024

Counsel For Petitioner: Bharat Raichandani, Vibhav Amonkar

Counsel For Respondent: Asha Desai

Click Here To Read Order

Mariya Paliwala
Mariya Paliwalahttps://jurishour.in/
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.

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