GST Not Applicable on Assignment of Leasehold Rights | HC

Case Details: Vidarbha Beverages vs. Union of India - [2026] 184 taxmann.com 625 (Bombay)

Judiciary and Counsel Details

• Anil L. Pansare & Nivedita P. Mehta, JJ.
• Shantanu Khedkar & Surendra Chichbankar, Advs. for the Petitioner.
• C. J. Dhumane, Adv. & S. S. Hulke, AGP for the Respondent.

Facts of the Case

The petitioner held a transferable lease of an industrial plot along with a factory building allotted by Maharashtra Industrial Development Corporation (MIDC) and, with prior consent of MIDC, assigned its entire leasehold rights in favour of an individual, resulting in complete extinguishment of its rights in the said immovable property. Subsequently, a show cause notice was issued proposing levy of GST by treating the consideration received as taxable supply of services which was confirmed by adjudication. It was contended that the transaction was an assignment of leasehold rights amounting to the transfer of benefits arising from immovable property and did not qualify as ‘supply’, as it was not in the course or furtherance of business. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the transaction constituted an assignment of leasehold rights leading to the extinguishment of the petitioner’s rights and amounted to the transfer of benefits arising out of immovable property. It held that the essential requirement of ‘supply’ under Section 7 of the CGST Act, namely that the activity must be in the course or furtherance of business, was not satisfied. The Court further held that classification of such transaction under residual entry at Sr. No. 35 of the rate notification as ‘other miscellaneous services’ was legally unsustainable, as the said entry could not be extended to cover assignment of leasehold rights in immovable property. It was observed that the transaction was an assignment and not a sub-lease, and therefore could not be subjected to GST under the said entry. Accordingly, the notice and adjudication order were quashed and set aside.

List of Cases Reviewed

• Gujarat Chamber of Commerce and Industry v. UOI [2025] 170 taxmann.com 251/94 GSTL 113 (Gujarat)
• CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 (Bombay) (para 14) followed

List of Cases Referred to

• Gujarat Chamber of Commerce and Industry v. UOI [2025] 170 taxmann.com 251/94 GSTL 113 (Gujarat) (para 10)
• CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 (Bombay) (para 14).