Case Of: Aerocom Cushions Pvt Ltd
Issued By: Bombay High Court
Order No: WP No. 2145 of 2025
Date: 9th Jan 2026
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Judgement
Assignment of Long-Term Leasehold Rights in Industrial Land Treated as Transfer of Immovable Property and Held Outside GST Levy
Observations
The petitioner, Aerocom Cushions Private Limited, challenged a show cause notice issued under Section 74(1) of the CGST Act proposing recovery of GST on the alleged supply arising from assignment of long-term leasehold rights in an industrial plot allotted by MIDC, Nagpur.
The department alleged that the petitioner had concealed a transaction involving assignment of leasehold rights for consideration of ₹1.50 crore and treated the same as a taxable supply of services under Section 7 read with Schedule II, classifying it as “other miscellaneous services.”
It was undisputed that the petitioner held a 95-year lease, had constructed a factory building on the land, and transferred its leasehold rights to a third party with prior approval of MIDC, along with payment of applicable transfer charges.
The petitioner contended that the transaction amounted to transfer of benefits arising out of immovable property, was not in the course or furtherance of business, and therefore fell outside the scope of “supply” under GST.
Findings
The Court held that assignment of leasehold rights is neither a lease nor a sub-lease, and once the assignor’s rights stand extinguished, the transaction cannot be artificially classified as a supply of services under Schedule II.
It was observed that the transaction constituted transfer of immovable property rights, lacked any nexus with the petitioner’s business activities, and therefore failed the essential requirement of being “in the course or furtherance of business.”
The Court rejected the department’s attempt to classify the transaction as “other miscellaneous services,” noting that such residual entries cannot be stretched to cover transfer of valuable immovable property rights.
Relying on the Gujarat High Court decision in Gujarat Chamber of Commerce and Industry, the Court held that assignment of leasehold rights by an industrial allottee amounts to transfer of benefits arising from immovable property and is not liable to GST, consequently quashing the show cause notice.