Functionality Test

When Is a Building a “Plant”? The Supreme Court in Safari Retreats on Section 17(5)(d), Blocked Credit and the Functionality Test

A mall developer with more than Rs. 34 crores of input tax credit was told that Section 17(5)(d) blocked it. The Supreme Court upheld the blocked-credit clauses, refused to read “plant or machinery” as “plant and machinery”, and held that whether a building is a “plant” turns on a fact-specific functionality test — with hotels and cinema theatres excluded.