The Supreme Court has dismissed the Department’s Special Leave Petition (SLP) challenging the Bombay High Court’s ruling that transfer of leasehold rights in industrial land, through outright assignment, does not attract Goods and Services Tax (GST).
The dispute arose from the Revenue’s challenge to a Bombay High Court judgment which had held that assignment of leasehold rights in industrial land cannot automatically be treated as a taxable commercial activity. The High Court had taken the view that where the original lessee transfers its entire rights to another party, with the required approval from the concerned authority and after payment of premium, the transaction essentially represents a transfer of property rights rather than a supply of services.
By dismissing the SLP, the Supreme Court declined to interfere with the High Court’s interpretation and effectively allowed the earlier ruling to stand. The Court accepted the proposition that transfer of leasehold rights in the facts of the case constituted transfer of immovable property rights rather than a transaction attracting GST liability.
A significant factor that appears to have weighed with the Court was the requirement under Section 7 of the CGST Act that a transaction should take place “in the course or furtherance of business” to qualify as a supply. During the hearing, the Court reportedly sought clarification from the Revenue regarding how the assignment of leasehold rights could be treated as an activity undertaken in the course or furtherance of business.
The department however, was unable to establish a sufficient nexus between the transfer and any continuing business activity. In the absence of this connection, the Court observed that the transaction could not be brought within the scope of taxable supply under GST law.
The Supreme Court also appears to have rejected the Revenue’s reliance on the pendency of challenges in similar matters, including proceedings involving the Gujarat High Court. The Court clarified that GST disputes must be examined on their own factual matrix and legal context and cannot be mechanically decided merely because similar questions are pending elsewhere.
Case Details
Case Title: Assistant Commissioner (Anti Evasion) Versus Aerocom Cushions Private Limited
Citation: JURISHOUR-1341-SC-2026
Case No.: SLP(C) No. 018772 / 2026
Date: 22-05-2026
