Sec 2(19) – Capital Goods

An attempt has been made to align the meaning of capital goods to the generally accepted standards of accounting. Goods will be regarded as capital goods if the following conditions are satisfied:
(a)    The value of such goods is capitalised in the books of account of the person claiming input tax credit;
(b)    Such goods are used or intended to be used in the course or furtherance of business.
The following aspects need to be noted:
(a)    Assuming that the value of capital goods was not capitalised in the books of account, the person purchasing the capital goods would still be eligible to claim input tax credit on such capital goods since the definition of ‘input tax’ applies to goods as a whole (including capital goods).
(b)    Capital goods lying at the job-workers premises would also be considered as ‘capital goods’ in the hands of the purchaser as long as the said capital goods are capitalized in his books of account.