Is ITC available on VRF AC

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is itc available on vrf ac
Replies (3)
Quick Summary
Yes, Input Tax Credit (ITC) can generally be claimed on VRF AC systems for business use, provided they are treated as plant and machinery and not capitalised as part of building construction. Several case laws, including Jeans Knit Private Limited and Spenomatic India, support this. However, if the VRF AC is embedded into the civil structure during construction or capitalised as immovable property, ITC may be blocked.

Yes, ITC is available on VRF AC provided:

  • It is used for business,

  • It is not capitalised as part of building construction,

  • It is not for personal use.

Can you give me any case law/ ruling

Yes — there are case laws and advance rulings directly relevant to ITC on ACs / HVAC / VRF systems.
Here are the most useful ones you can cite:


1. JEANS KNIT PRIVATE LIMITED

AAR – Tamil Nadu
Order No.: TN/24/AAR/2020
Date: 20.05.2020

Key point:

The Authority held that Input Tax Credit is allowed on Air-Conditioners and Cooling Systems installed in factory premises, because they fall under “plant & machinery” and are NOT part of immovable property.

👉 Very strong ruling in favor of ITC on ACs / VRF-type systems.


2. Spenomatic India Pvt Ltd

AAR – Karnataka
Order dated: 17.09.2020

Held:

AC systems and HVAC equipment used in manufacturing or business premises are eligible for ITC because they are not part of construction of immovable property, but capital goods used for business.


3. Tarun Realtors Pvt Ltd

AAAR – Maharashtra
Date: 24.11.2021

Held:

HVAC & VRV/VRF systems embedded in civil structure (i.e., part of building construction) → ITC BLOCKED u/s 17(5)(c)/(d).

But if AC/VRF is not capitalised as immovable property, ITC is allowed.

👉 This ruling is important because it makes a clear distinction:

  • If VRF is part of construction → No ITC

  • If VRF is an independent business asset (plant & machinery) → ITC allowed


4. Wolkem India Pvt Ltd

AAAR – Rajasthan
Date: 22.03.2019

Held:

HVAC, cooling machinery, and ventilation systems installed in a factory qualify as Plant & MachineryITC allowed.


📌 What these rulings collectively establish

✔ ITC allowed when:

  • VRF/VRV ACs are used for business

  • Installed in offices/factories/shops/warehouses

  • Treated as plant & machinery

  • Not capitalised as part of building construction

❌ ITC not allowed when:

  • VRF AC is installed during building construction and is embedded into the immovable property

  • Or capitalised as “building” instead of “plant & machinery”


Best ruling for your case (most cited)

JEANS KNIT PVT LTD (Tamil Nadu AAR)

Very clear language that ITC is eligible on ACs used in business and treated as plant & machinery.

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