Tax Monthly Digest: December 2025

SUPREME COURTCentral Excise Exemption For Cotton Fabrics Not Available If Any Interlinked Process Uses Power : Supreme CourtCause Title: COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, RAJKOT VERSUS NARSIBHAI KARAMSIBHAI GAJERA & ORS.The Supreme Court has held that manufacturers cannot claim central excise duty exemption for processed cotton fabrics if power is used at any stage of the manufacturing chain, even when the work is carried out through separate units. The Court restored a duty and penalty demand that had been set aside by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).To claim excise duty exemption for 'cotton fabrics' processed without the aid of power or steam, the manufacturing stages must be completely independent; if the final product cannot emerge without each interlinked process, including those involving power, the exemption cannot be availed.Supreme Court Seeks Centre's Response On Plea Seeking GST Concession For Car Purchase By Persons With DisabilitiesCase Title: KULDIPAK RAJESH PRASHAD Versus UNION OF INDIA AND ORS. Case no.: W.P.(C) No. 1140/2025The Supreme Court recently issued notice on a petition filed by a person suffering visual impairment seeking that the government revive its GST Concession scheme for the purchase of cars by persons with orthopaedic disability and extend it to all Persons with Disabilities, irrespective of the nature of their disability.A bench of Justices Vikram Nath and Sandeep Mehta passed the order, after hearing counsel for the petitioner, who argued that the Union has taken different stands before different High Courts, which has resulted in conflicting opinions on the government's now-discontinued scheme. The counsel also informed the Court that the scheme existed in one form or another since 1999 but came to be withdrawn in 2025.GST Exemption For Residential Lease Applies When Lessee Sub-Leases Building For Hostel/PG Use : Supreme CourtCase : The State of Karnataka v Taghar Vasudeva AmbrishIn a significant judgment that will have wide ramifications for hostel and paying guest (PG) accommodation sectors, the Supreme Court held that the exemption from Goods and Services Tax (GST) available for renting residential dwellings continues to apply even when the lessee sub-leases the premises to provide hostel or PG accommodation. The Court ruled that the exemption under Entry 13 of the GST Exemption Notification No.9/2017 dated 28.06.2017 does not require the lessee to personally use the property as a residence, so long as the ultimate use of the premises is residential in nature.A bench of Justice JB Pardiwala and KV Viswanathan delivered the ruling while deciding a dispute concerning a four-storeyed residential building with 42 rooms in Karnataka. The building's owner had leased it to M/s DTwelve Spaces Private Limited, a company operating as an aggregator providing long-term hostel accommodation to students and working women. The tax authorities took the view that GST at 18 percent was payable on the rental transaction because the lessee was a commercial entity and did not itself occupy the premises as a residence. Both the Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) upheld this interpretation. However, the Karnataka High Court set aside the rulings of AAAR and AAR, holding that the GST exemption will apply. Challenging the High Court's judgment ,the revenue appealed to the Supreme Court.Income Tax | Statutory Corporation Can Claim Deduction Under S 36(1)(viii) Only For Income Directly Derived From Long-Term Finance : Supreme CourtCause Title: NATIONAL COOPERATIVE DEVELOPMENT CORPORATION VERSUS ASSISTANT COMMISSIONER OF INCOME TAXThe Supreme Court on Wednesday (December 10) held that any income earned by a statutory corporation outside its core activity of providing long-term finance for industrial, agricultural, or infrastructure development in India cannot qualify for the 40% deduction available under Section 36(1)(viii) of the Income Tax Act, 1961 (“Act”).A bench of Justice P.S. Narasimha and Justice Atul S. Chandurkar dismissed National Cooperation Development Corporation's appeal, reiterating that only profits directly derived from long-term financing activities, with repayment periods of five years or more for supporting the agricultural sector, are eligible for deduction under Section 36(1)(viii) of the Act.Income Tax | Foreign Companies' Head Office Expenses For Indian Business Subject To Deduction Limit Under S. 44C : Supreme CourtCause Title: DIRECTOR OF INCOME TAX (IT)-I, MUMBAI. VERSUS M/S. AMERICAN EXPRESS BANK LTD. (and connected case)In a set-back to foreign companies doing business operations in India, the Supreme Court on Monday (December 15) held that all head office expenditure incurred by them outside India, whether common or exclusively for their Indian business operations, must be subjected to the statutory ceiling prescribed under Section 44C of the Income Tax Act,...

Tax Monthly Digest: December 2025

LIVELAW NEWS NETWORK

Tags