Skip to main content
Madras HC Sets Aside ITC Denial on Leasing Construction
Back to Court News
Madras High Courttaxproperty

Madras HC Sets Aside ITC Denial on Leasing Construction

October 7, 2026

Madras High Court remands GST ITC denial on construction meant for leasing, directing re-adjudication in light of Safari Retreats’ precedent on commercial use.

ITC on Construction for Leasing Reconsidered by Madras HC

The Madras High Court set aside an order rejecting input tax credit (ITC) on construction costs for a property intended for leasing, directing the assessing authority to reconsider the claim in view of the Supreme Court’s decision in Safari Retreats Pvt. Ltd. v. State of Karnataka.

The Court held that construction of immovable property for renting qualifies as an 'outward supply' under GST, and thus ITC on related inputs and services is admissible. The revenue department had denied credit on the grounds that construction was not for 'further supply', but the Court rejected this narrow interpretation.

If renting of immovable property is a taxable activity, then expenses leading to creation of such asset are inextricably linked to the business and eligible for ITC.

The case has been remanded for re-evaluation, with directions to recalculate and refund any recovered amount with interest. This ruling benefits real estate developers and REITs relying on rental income models.

Citations

  • Safari Retreats Pvt. Ltd. v. State of Karnataka
Practice Areas:taxproperty

Related Articles

View All →
Tax Classification Based on Form at Sale: Supreme CourtFeatured
Supreme Court of Indiataxcorporate

Tax Classification Based on Form at Sale: Supreme Court

The Supreme Court held that tax classification of goods must be determined by their physical form at the time of sale, not by the end-use or intended application by consumers.

Oct 14, 2026Read more →
SC: GST Fraud Under Section 74 Not Presumed From DiscrepanciesFeatured
Supreme Court of Indiatax

SC: GST Fraud Under Section 74 Not Presumed From Discrepancies

The Supreme Court held that fraud under GST Section 74 cannot be presumed solely from tax discrepancies or ITC mismatches, requiring independent proof of intent to evade tax.

Oct 14, 2026Read more →
Tax Classification Based on Form at Time of Sale, Not End Use: SCFeatured
Supreme Court of Indiataxcorporate

Tax Classification Based on Form at Time of Sale, Not End Use: SC

The Supreme Court held that tax classification of goods must be determined by their physical form at the time of sale, not by the buyer's ultimate use, clarifying long-standing confusion in tax jurisprudence.

Oct 12, 2026Read more →