ITC on Professional and Legal Expenses for Share Buyback are Disallowed | AAAR

Case Details: Gujarat Narmada Valley Fertilizers & Chemicals Ltd., In re [2025] 179 taxmann.com 539 (AAAR-GUJARAT)

Judiciary and Counsel Details

• Rajeev Topno & Sunil Kumar Mall, Member
• Rutvij Modi & Jenee Bhavsar, CAs for the Appellant.

Facts of the Case

The appellant, a public sector company engaged in the manufacture of fertilisers and chemicals, undertook a buyback of its own shares pursuant to a State Government resolution and incurred professional, legal, consultancy, and incidental expenses for the transaction. It sought input tax credit (ITC) on the GST paid for such expenses, contending that these were incurred in the course or furtherance of business. The claim was rejected, holding that since the buyback involved shares, which are securities excluded from the ambit of goods and services. ITC was not admissible. The appellant filed an appeal before the Appellate Authority for Advance Ruling (AAAR).

AAAR Held

The AAAR held that shares constitute securities and are neither goods nor services under GST law. Accordingly, expenses directly related to transactions in securities were treated as exempt, making ITC on such costs ineligible under Sections 16 and 17 of the CGST Act and the Gujarat GST Act. It was observed that ITC entitlement is limited to inputs used for taxable supplies and does not extend to all business-related activities, including those pertaining to securities transactions. It further noted that the ‘blocked credit’ provisions reinforced this restriction. Consequently, the AAAR concluded that ITC on professional, legal, and consultancy expenses incurred for share buyback was inadmissible.

List of Cases Reviewed

• Gujarat Narmada Valley Ferilizers & Chemicals Ltd., In re [2025] 173 taxmann.com 864 (AAR – GUJARAT) (para 18) affirmed
• Punjab State Industrial Development Corpn. Ltd. v. CIT [1997] 93 Taxman 5/225 ITR 792 (SC)
• Brooke Bond India Ltd. v. CIT [1997] 225 ITR 798/91 Taxman 26 (SC) (para 21) distinguished

List of Cases Referred to

• Gujarat Narmada Valley Ferilizers & Chemicals Ltd. In re [2025] 173 taxmann.com 864 (AAR – GUJARAT) (para 2)
• Coca Cola India (P.) Ltd. v. CCE [2009] 22 STT 130/15 STR 657 (Bombay) (para 4)
• TVS Motor Co. Ltd. v. State of Tamil Nadu [2018] 98 taxmann.com 343/70 GST 501/18 GSTL 769 (SC) (para 16)
• Punjab State Industrial Development Corpn. Ltd. v. CIT [1997] 93 Taxman 5 /[225 ITR 792 (SC) (para 21)
• Brooke Bond India Ltd. v. CIT [1997] 225 ITR 798/91 Taxman 26 (SC) (para 21)
• Kernex Microsystems (India) Ltd. v. CCE 2016 (42) S.T.R. 533 (Tri.-Bang) (para 21).