Assignment of leasehold rights in plot is not supply of service as same not in course or furtherance of business { Aerocom Cushions (P.) Ltd. vs. Assistant Commissioner (Anti-Evasion), CGST & CX, Nagpur-1 [2026] 182 taxmann.com 432 (Bombay)}
Facts
- Aerocom Cushions Pvt. Ltd. was allotted a plot on a long-term lease (95 years) for industrial use.
- The company entered into an agreement with a third party to assign its leasehold rights in the plot along with the factory building, for a monetary consideration, after obtaining the necessary consent from the land authority.
- The GST authorities issued a show-cause notice seeking to levy GST on the amount received, treating the assignment as a supply of services.
Issue
Whether the assignment of leasehold rights in the plot for consideration constitutes a taxable supply of services under the GST law, or whether it is not a supply because it is essentially a transfer of immovable property rights that does not qualify as a service in the course or furtherance of business.
Held
- The Bombay High Court held that the assignment of long-term leasehold rights in the plot does not amount to a supply of services under the GST law.
- The transaction was not a lease or sub-lease; the assignor’s rights were completely extinguished on transfer.
- It was held to be a transfer of benefits arising out of immovable property rather than a service, and therefore not liable to GST.
- The court quashed the show-cause notice and held that such assignment cannot be taxed as “services” merely by labeling it so.
