AEROCOM CUSHIONS PVT. LTD., NAGPUR v. ASSISTANT COMMISSIONER (ANTI-EVASION), CGST AND CX, NAGPUR-1, COMMISSIONERATE, NAGPUR AND ANR.
GST on Assignment of Leasehold Rights: Transfer of Immovable Property Benefits Not Taxable as Supply of Service; Gujarat High Court Precedent Binding.
Court: Bombay High Court
Citation: 2026:BHC-NAG:348-DB
Decision Date: 09-01-2026
List of Laws
Central Goods and Services Tax Act, 2017; Section 7 of the Central Goods and Services Tax Act, 2017; Schedule II of the Central Goods and Services Tax Act, 2017; Notification No. 12/2017-Central Tax (Rate); General Clauses Act, 1987; Transfer of Property Act, 1882; Registration Act, 1908; Gujarat Stamp Act, 1958
- Facts: Aerocom Cushions Private Limited challenged a show cause notice issued by the Assistant Commissioner (Anti-Evasion), CGST & CX, Nagpur-1, demanding Rs. 27,00,000/- as goods and services tax on the transfer of leasehold rights. The petitioner had assigned leasehold rights in a plot belonging to MIDC to Rishita Industries for Rs. 1,50,00,000/-, with MIDC's consent and after paying an additional premium. The department considered this a "supply of services" under Section 7(1) of the Central Goods and Services Tax Act, 2017, read with Schedule II.
- Procedural Posture: The case came before the Nagpur Bench of the Bombay High Court as a writ petition filed by Aerocom Cushions Private Limited against the show cause notice issued by the CGST authorities.
- Issue: Does the assignment of leasehold rights by a lessee to a third party, with the consent of the lessor (MIDC), constitute a "supply of service" under Section 7 of the Central Goods and Services Tax Act, 2017, thereby attracting GST?
- Holding: No, the assignment of leasehold rights in this case does not constitute a "supply of service" and is not subject to GST. The show cause notice was quashed.
- Reasoning: The Court relied on a judgment by the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India, which addressed an identical issue. The Court reasoned that the assignment of leasehold rights is essentially a transfer of benefits arising out of immovable property, and lacks the essential element of "supply of service in the course of business". The court also noted that Notification No. 12/2017-Central Tax (Rate) exempts the one-time upfront amount charged for long-term leases of industrial plots by State Government Industrial Development Corporations from GST. The court further stated that the Gujarat High Court's view is binding on authorities within the State of Bombay, referencing Commercial of Income-Tax, Vidarbha v. Smt. Godavari Devi Saraf.
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