The Bombay High Court (Nagpur Bench) has clarified that the assignment of long-term leasehold rights of a plot of land, allotted by a State Industrial Development Corporation (like MIDC), by a lessee to a third-party assignee for consideration constitutes a sale or transfer of benefits arising out of an “immovable property”.
The High Court, therefore, ruled that such a transaction is not a “supply of services” under the CGST Act, 2017, and therefore is not subject to the levy of GST. Accordingly, the Court quashed the show cause notice No.47/AC/GST/NGP-I/2024 dated 20-12-2024, issued by the Assistant Commissioner (Anti-Evasion), CGST.
The Division Bench comprising Justice Anil L. Pansare and Justice Nivedita P. Mehta observed that the transaction in question is an assignment of leasehold rights, which is not a lease or a sub-lease, a fact the show cause notice itself mentioned. It noted that classifying the assignment of leasehold rights under “other miscellaneous services” alongside petty services like washing, cleaning, and dyeing is incorrect.
The Bench found that the transaction pertains exclusively to the transfer of benefits arising out of an immovable property and has “no nexus whatsoever with the business of the petitioner company”. Consequently, the essential element of a supply of service “in the course of business or in furtherance of business” is completely absent.
Referring to the judgment of the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India [(2025) 170 taxmann.com 251 (Gujarat)], the Bench concluded that the assignment of leasehold rights is a transfer of benefits arising out of “immovable property” and would not be subject to GST.
Briefly, the petitioner challenged a show cause notice issued by the Assistant Commissioner (Anti-Evasion), CGST & CX, that demanded GST amounting to Rs. 27 lakhs under Section 74(1) of the CGST Act, 2017. This demand was based on the petitioner’s assignment of its leasehold rights in a plot belonging to the Maharashtra Industrial Development Corporation (MIDC) to M/s. Rishita Industries for a consideration of Rs. 1.50 Crores.
The respondents (Department) claimed that this transfer of assignment rights amounted to a “supply of services” under Section 7(1) of the CGST Act, read with sub-clause (b) of Clause 2 of Schedule II. The respondents thus classified this activity as “other miscellaneous services” taxable at 18% under Sr. No. 35 of Notification No. 11/2017 CT (Rate) dated 28-06-2017.
Appearances:
Advocates Vinay Shraff and Darshana Bhaiya, for the Petitioner/ Taxpayer
Advocate K.K. Nalamwar, for the Respondent/ Revenue
