SC rejects review plea in Safari Retreats case, upholds ITC for leasing
The Supreme Court on Tuesday dismissed the Finance Ministry’s review petition seeking to overturn its landmark ruling in the Safari Retreats case, which had allowed commercial real estate firms to claim input tax credit (ITC) on construction costs for properties meant to be rented out.
A two-judge bench comprising Justices Abhay S Oka and Sanjay Karol passed the order on May 20, noting that there was “no error apparent on the record” in its earlier judgment delivered on October 3, 2024. “In the interest of justice, the defects raised by the Registry are waived. Delay condoned,” the court stated. “Review Petition is dismissed.”
In the Union Budget 2025, presented on February 1, the Finance Ministry had introduced a retrospective amendment to the Central Goods and Services Tax (CGST) Act through the Finance Bill. The amendment replaced the phrase “plant or machinery” with “plant and machinery” under Section 17(5)(d), effective from July 1, 2017. This legislative change sought to restrict ITC claims on construction costs for leased properties, thereby nullifying the effect of the Safari Retreats ruling through statutory amendment.
Abhishek A Rastogi, founder of Rastogi Chambers, who represented multiple taxpayers before the Supreme Court in similar matters, called the court’s decision a strong endorsement of taxpayer rights. “The dismissal of the review petition filed by the revenue in the Safari Retreats case is a significant affirmation of the legal position that input tax credit cannot be denied merely on the ground of its use in the construction of immovable property, particularly when such construction is intended for further business use such as leasing,” he said.
