Transfer of Leasehold Rights Not Taxable Under GST { Aerocom Cushions Pvt. Ltd. v. Assistant Commissioner (Anti-Evasion), CGST & CX 2026:BHC-NAG:348-DB (Bombay High Court, Nagpur Bench, 09.01.2026)}
Facts
- Petitioner was allotted an industrial plot by MIDC on a 95-year lease and had constructed a factory building on the leased land.
- Petitioner assigned its leasehold rights, along with the factory building, to a third party after obtaining the prior approval of MIDC, as required under the lease deed.
- Petitioner paid the prescribed transfer charges/additional premium to MIDC for the transfer.
- Department issued a show cause notice under Section 74 of the CGST Act, alleging that the assignment of leasehold rights amounted to a supply of services and demanded GST of Rs. 27 lakh on the transaction.
Issue
Whether assignment/transfer of leasehold rights in an industrial plot and building constitutes a “supply of services” liable to GST under Section 7 of the CGST Act and Schedule II.
Held
The Bombay High Court held that assignment of leasehold rights amounts to transfer of benefits arising from immovable property and not a supply of services. Such transfer is outside the scope of GST. The Court followed the Gujarat High Court’s decision in Gujarat Chamber of Commerce and Industry v. Union of India and quashed the show cause notice.
