Shivkrupa Synthetics Private Limited Vs DCIT (ITAT Mumbai)
Non-Refundable GST Credit Can Be Examined as Business Loss: Mumbai ITAT Restores ₹59.85-Lakh Claim
The assessee, engaged in textile-processing job work, suffered aggregate disallowances of ₹3.39 crore comprising labour charges of ₹76.76 lakh, bad debts of ₹1.21 crore, repairs and maintenance of ₹81.72 lakh, and unrefunded GST input-tax credit of ₹59.85 lakh.
The ITAT found that the labour-charge disallowance was based merely on a comparison between the percentage increase in labour expenses and staff salaries, without identifying any bogus or inflated payment. Similarly, 50% of repair charges had been disallowed on an ad hoc basis without properly examining the invoices and ledgers. Both issues were restored to the CIT(A) for verification.
The bad-debt claim relating to a customer under liquidation was also remanded for examining the debt’s origin, its earlier recognition as income, actual write-off, correspondence with the debtor and liquidation proceedings.
On the principal issue of unrefunded GST input-tax credit, the Tribunal held that its rejection or non-refund under GST law does not automatically make it inadmissible under the Income-tax Act. If the credit has become irrecoverable and has been written off, the claim must be examined according to its real nature and nexus with the business as a possible business loss or expenditure. Mere rejection by GST authorities is not conclusive.
