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The State of Karnataka vs. Taghar Vasudeva Ambrish

Not available · 2025 INSC 1505Decided 4 Dec 2025
Not available
Justice J.B. Pardiwala · Justice K.V. Viswanathan

Background

The respondent, a co-owner of a 42-room residential property in Bangalore, leased it to M/s DTwelve Spaces Private Limited, which in turn sub-let rooms as hostel accommodation to students and working professionals for stays of 3-12 months. The respondent sought a ruling that this rental income was exempt from GST under Entry 13 of Notification No. 9/2017 (exemption for renting residential dwellings "for use as residence"), but both the Authority and Appellate Authority for Advance Ruling in Karnataka rejected the claim, holding the arrangement was more like commercial hostel/lodging use. The Karnataka High Court reversed this and ruled in the respondent's favour, prompting the State of Karnataka to appeal to the Supreme Court. (This judgment jointly disposes of two connected appeals: Civil Appeal Nos. 7846 and 7847 of 2023, arising from the same High Court judgment; the case summarized here corresponds specifically to Civil Appeal No. 7846/2023, per diary number 29980/2022.)

Decision Breakdown

The Supreme Court held that the property qualified as a "residential dwelling" based on its municipal records and long-term residential use, rejecting the revenue's argument that a 42-room property with attached washrooms could not qualify. On the key legal question, the Court held that Entry 13's exemption does not require the immediate lessee (the aggregator company) itself to reside in the property. It is enough that the property is ultimately used as a residence, including through a sub-lease to students and working professionals, since reading in such a restriction would rewrite the exemption and defeat its purpose of keeping actual residential use free of GST. Applying purposive interpretation and noting that a 2022 amendment (restricting the exemption where the dwelling is rented to a "registered person") was not retrospective, the Court upheld the High Court's ruling and dismissed both connected appeals.

Lesson Learnt

A tax exemption written around the "use" of a property (such as renting a residential dwelling "for use as residence") looks at how the property is actually and ultimately used, not merely who technically signs the lease, and exemption notifications, once found applicable, are to be construed liberally in favour of the taxpayer rather than narrowed by adding conditions the text does not contain.

Official source (sci.gov.in)View Judgment (PDF)

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