Bombay HC: Leasehold Rights Transfer Not a GST Service, Aerocom Wins

Quick Summary: Aerocom Cushions Pvt. Ltd. from Nagpur challenged a GST demand for transferring leasehold rights. The court ruled in their favor, stating it wasn't a supply of services.

The Case Begins: Aerocom vs. GST Authorities

On January 9, 2026, the Bombay High Court in Nagpur heard a case involving Aerocom Cushions Pvt. Ltd., represented by Mr. Shirish Gupta. They were up against the Assistant Commissioner responsible for investigating tax evasion of CGST & CX, Nagpur. Aerocom received a notice on December 20, 2024, asking them to pay Rs. 27,00,000 in GST for transferring leasehold rights.

The GST Notice: What's the Fuss About?

The authorities claimed Aerocom owed GST under a specific section of the Central Goods and Services Tax Act, 2017. They argued that transferring leasehold rights to Sumit Madanlal Pagariya, owner of M/s. Rishita Industries, for Rs. 1.5 crore was a taxable service. Aerocom had paid an extra amount of Rs. 3,95,640 for this transfer.

The Court's Take: Is It Really a Service?

The court, led by Judges Anil L. Pansare and Nivedita P. Mehta, examined whether transferring leasehold rights counted as a "supply of services." The GST Act defines various transactions as services, but the court noted this wasn't a typical lease or sub-lease. The transaction ended Aerocom's rights, meaning it wasn't a service in the usual business sense.

"The essential element of supply of service in the course of business is completely absent."

Gujarat High Court's Influence: A Similar Case

The judges referenced a similar case from the Gujarat High Court. That court ruled that transferring leasehold rights didn't fall under GST's scope. They concluded it was more about transferring benefits from property that can't be moved, not providing a service.

The Final Verdict: Victory for Aerocom

Ultimately, the court canceled the GST notice against Aerocom. They agreed with the Gujarat High Court's view, stating that such transactions aren't subject to GST.

"The transaction would not be subject to levy of GST in terms of the GST Act."

What's Next?

This decision sets an example for similar cases, showing that not all transfers involving property rights are taxable under GST. Aerocom's win is a significant relief for businesses dealing with leasehold rights.