The prohibition on claiming input tax credit per Section 16(3) of the CGST Act relates specifically to the tax component for which depreciation is claimed and does not extend to unavailed input tax credits under Section 17(4).

JUDGMENT :

ZIYAD RAHMAN A.A., J.

In all these cases, the banking companies registered under the Companies Act, have approached this Court seeking various reliefs. The reliefs in W.P.(C) No.29087/2025 and W.P. (C) No.24348/2025, consist of the challenge against the show cause notices issued to the respective petitioners under Section 74 of the CGST Act. In W.P.(C) No.23546/2024, the challenge is raised against the Order-in-Original passed under Section 73 of the CGST Act. In all these cases, a common issue that arises, relates to the entitlement of the input tax credit, in respect of a portion of the tax component on which the petitioners have claimed depreciation under the provisions of the Income Tax Act.

2. The issue involved herein has to be decided, based on the interpretation to be given to Section 16 (3), Section 17 (2) and (4) of the CGST Act that relate to the claim of input tax credit and the restrictions in granting such reliefs.

3. In W.P.(C) No.29087/2025, which is taken as the leading case, the proceedings were initiated by issuing Ext.P1 show cause notice, based on the information received by the officers of Directorate General of Goods and Service Tax Intelligence, Kochi Zonal Unit that, most of the banking companies are availing Input Tax Credit on the capital goods, in contravention of Section 16 (3) and 17(4) of the CGST Act, 2017. Based on the said information, an investigation was initiated against the petitioner in the said writ petition which has branches all over India, for verification of the possible availing of the ineligible input tax credit.

4. During the process of such investigation, it was revealed that, the petitioner therein, for the purpose of availing the input tax credit, opted for Section 17 (4) of the CGST Act, and availed 50% of the eligible input tax credit, and the remaining 50% of the same, was lapsed as per the said provision. As far as the 50% of the input tax credit lapsed as above is concerned, the same is capitalised to the respective assets and depreciation is claimed on the gross-block assets under the Income Tax Act, 1961. Thus, according to the Department of GST, since the petitioner claimed depreciation on the tax component, after availing the option of (4), the petitioner became ineligible to get the input tax credit for the entire tax component, in the light of the stipulations in Section 16 (3) of the CGST Act. In the other writ petitions also, proceedings were initiated mainly on the said reason. In WP(C)23546/2024, the Order-in-Original passed, contains certain other irregularities, apart from the allegations referred to above.

5. Thus, as far as the challenge raised in these cases are concerned, the same is confined to the question of alleged wrongful availment of input tax credit in respect of the tax component, to which, the petitioners have claimed depreciation under the provisions of the Income Tax Act.

6. The respondents have filed a counter affidavit in W.P(C) No.29087/2025 and the same is adopted in other cases as well. In the said counter affidavit, the respondents have explained the circumstances and the reasons under/for which, the input tax credit availed by the petitioners becomes ineligible by virtue of Section 16 (3).

7. I have heard Sri.G.Shivadas, learned Senior Counsel appearing for the petitioner, assisted by Sri.Shaji Thomas, Sri.Abraham Joseph Markos, learned counsel appearing for the petitioner, and Sri.P.T.Dinesh, learned Senior Standing Counsel for the respondents.

8. Before going into the disputed questions in this case, it is profitable to refer to the relevant statutory provisions, which are, Sections 16 (3), 17(2) and 17(4) of the CGST Act. Those provisions read as follows:

16.(1)***

(2) ***

(3) Where the registered perso