Mridula (CHARTERED ACCOUNTANT) (65 Points)
22 June 2012Suppose Mr.A has bought a commercial space and he has given it on lease to Mr.B.
Mr.A receives a bill in his name on account of maintenance charges which is inclusive of service tax.
in this case can the payment on account of the bill be made directly by Mr.B?
And, if yes, who will be given CENVAT credit enitlement in this case - Mr. A or Mr.B??
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 22 June 2012
If it's a Finance lease, then definitely Mr B would be paying the maint chgs & he would get the Cenvat Credit.
Mridula
(CHARTERED ACCOUNTANT)
(65 Points)
Replied 22 June 2012
And What if it is an operating lease??
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 22 June 2012
Don't think so the lessee would be entitled, as all the risks & rewards are with the lessor unlike an finance lease.
Mridula
(CHARTERED ACCOUNTANT)
(65 Points)
Replied 22 June 2012
it is an operating lease and the lease deed contains this provision - " However,any tax in force at present including but not limited to service tax or that may be levied in future by any local, state or central government/authority which is applicable to the Lessee or in a nature applicable to the Lessee shall be paid by the Lessee."
Prateek Agarwal
(Sr. Executive - Finance & Accounts)
(1732 Points)
Replied 22 June 2012
The property is owned by the lessor, Mr. A. He would be eligible for credit. Not the lessee.
In the deed, it is mentioned that the payment has to be made by the lessee but the credit of the same will be available with Mr A only.
Mridula
(CHARTERED ACCOUNTANT)
(65 Points)
Replied 22 June 2012
can the credit be passsed on by Mr.A to Mr.B?
Prateek Agarwal
(Sr. Executive - Finance & Accounts)
(1732 Points)
Replied 22 June 2012
I dont think so. You cannot pass on cenvat credit without being an Input Service Distributor.
CAclubindia
