9. Tax credit

1[(1) Subject to sub-section (2) of this section and such conditions, restrictions

and limitations as may be prescribed, a dealer who is registered or is required to be

registered under this Act shall be entitled to a tax credit in respect of the turnover of

purchases occurring during the tax period 2[where the purchase arises] in the course

of his activities as a dealer and the goods are to be used by him directly or indirectly

for the purpose of making –

(a) sales which are liable to tax under section 3 of this Act; or

(b) sales which are not liable to tax under section 7 of this Act.

Explanation.- Sales which are not liable to tax under section 7 of this Act

involve exports from Delhi whether to other States or Union territories or to foreign

countries.]

(2) No tax credit shall be allowed –

(a) in the case of the purchase of goods for goods purchased from a person

who is not a registered dealer;

(b) for the purchase of non-creditable goods;

(c) for the purchase of goods which are to be incorporated into the structure of

a building owned or occupied by the person;

Explanation.- This sub-section does not prevent a tax credit arising for

goods and building materials that are purchased either for the purpose of re-sale in an

unmodified form, or for the performance of a works contract on a building owned or

occupied by another;

(d) for goods purchased from a dealer who has elected to pay tax under

section 16 of this Act;

[(e) for goods purchased from a casual trader;]

[{(f)} to the dealers or class of dealers specified in the Fifth Schedule except

the entry no.1 of the said Schedule.]

3[(g) to the dealers or class of dealers unless the tax paid by the purchasing

dealer has actually been deposited by the selling dealer with the Government or has

been lawfully adjusted against output tax liability and correctly reflected in the return

filed for the respective tax period.]

(3) The amount of the tax credit to which a dealer is entitled in respect of the

purchase of goods shall be the amount of input tax arising in the tax period reduced

in the manner described in sub-sections 4[(4), (6) and (10)] of this section.

(4) Where a dealer has purchased goods and the goods are to be used partly for

the purpose of making the sales referred to in sub-section (1) of this section and partly

for other purposes, the amount of the tax credit shall be reduced proportionately.

(5) The method used by a dealer to determine the extent to which the goods are

used in the manner specified in sub-section (4) of this section, shall be fair and

reasonable in the circumstances:

PROVIDED that the Commissioner may -

(a) after giving reasons in writing, reject the method adopted by the

dealer and calculate the amount of tax credit; and

(b) prescribe methods for calculating the amount of tax credit or the

amount of any adjustment or reduction of a tax credit in certain instances.

Explanation.- A person may object in the manner referred to in

section 74 of this Act to a decision of the Commissioner to reject a method of

calculating a tax credit.

(6) [Notwithstanding anything contained to the contrary in sub-section (1), where -]

(a) a dealer has purchased goods (other than capital goods) for which a tax

credit arises under sub-section (1) of this section;

(b) the goods or goods manufactured out of such goods are to be exported

from Delhi by way of transfer to a –

(i) non-resident consignment agent; or

(ii) non-resident branch of the dealer; and

(c) the transfer will not be by way of a sale made in Delhi;

the amount of the tax credit shall be reduced by the prescribed percentage.

(7) For the removal of doubt, no tax credit shall be allowed for -

(a) the purchase of goods from an unregistered dealer;

(b) the purchase of goods which are used exclusively for the manufacture,

processing or packing of goods specified in the First Schedule.

1[(c) any purchase of consumables or of capital goods where the dealer is

exclusively engaged in doing job work or labour work and is not engaged in the

business of manufacturing of goods for sale by him and incidental to the business of

job work or labour work, obtains any waste or scrap goods which are sold by him.]

(8) The tax credit may be claimed by a dealer only if he holds a tax invoice at

the time the prescribed return for the tax period is furnished.

2[(9)(a) Notwithstanding anything contained to the contrary in sub-sections (1) and

(3) and subject to sub-section (2), tax credit in respect of capital goods shall be

allowed as follows: -

(i) 1/3rd of the input tax on such capital goods arising in the tax period, in

the same tax period;

(ii) 3[balance 2/3rd of such input tax, in equal proportions, in corresponding

tax periods, in two immediately successive financial years :]

PROVIDED that, where the dealer sells such capital goods, the dealer

shall be allowed as tax credit, the balance amount of the input tax, if any, in respect

of such capital goods as has not been earlier availed as tax credit, such tax credit

shall be allowed in the tax period in which such capital goods are sold and only after

adjusting the output tax payable by him:

4[PROVIDED FURTHER that where the dealer transfers such capital

goods from Delhi otherwise than by way of sale before the expiry of three years from the

date of purchase, he shall, after claiming the balance amount of input tax, if any, not

availed earlier in respect of such capital goods, reduce the input tax credit by the

prescribed percentage of the purchase price of such capital goods and make adjustments

in the input tax credit in the tax period in which these capital goods are so transferred:

PROVIDED ALSO that where a dealer has purchased capital goods and

the capital goods are to be used partly for the purpose of making sales referred to in

sub-section (1) of this section and partly for other purposes, the amount of tax credit

shall be reduced proportionately:]

PROVIDED ALSO that no tax credit in respect of capital goods shall be

allowed if such capital goods are used exclusively for the purpose of making sale of

exempted goods specified in the first schedule:

PROVIDED ALSO that no tax credit in respect of capital goods shall be

allowed on that part of the value of such capital goods which represents the amount

of input tax on such capital goods, which the dealer claims as depreciation under

section 32 of the Income Tax Act, 1961 (43 of 1961).

(b) If any capital goods in respect of which tax credit is allowed under clause

(a) of this sub-section is transferred to any other person otherwise than by way of

sale at the fair market value before the expiry of a period of five years from the date

of purchase, the tax credit claimed in respect of such purchase shall be 1[reversed] in

the tax period during which such transfer takes place.]

[(10) Notwithstanding anything contained to the contrary in sub-section (1),

where –

(a) a dealer has purchased goods (other than capital goods) for which a tax

credit arises under sub-section (1) of this section; and,

(b) the goods or goods manufactured out of such goods are to be exported

from Delhi by way of sale made under sub-section (1) of Section 8 of the Central

Sales Tax Act, 1956,

the amount of the tax credit shall be reduced by the prescribed percentage.]

[(11) Subject to sub-section (1), (2) and (3) of this section, the tax credit of goods

to be used for sale, as defined in sub-clause (vi) of clause (zc) of sub-section (1) of

Section 2 of the Act, shall be allowed as follows:

(a) 1/4th of the input tax on such goods arising in the tax period, in the same

tax period;

(b) balance 3/4th of such input tax, in equal proportions, in corresponding tax

periods, in three immediately successive financial years.]