Harinder Kumar & Associates LLP

08/02/2026

17/01/2026

🚨 GST NOT APPLICABLE on Transfer of Leasehold Rights (MIDC / GIDC etc.) – Bombay HC Ruling 🚨

The Bombay High Court (Nagpur Bench) in Aerocom Cushions Pvt. Ltd. v. AC (CGST) (9 Jan 2026) has held that assignment of leasehold rights is NOT liable to GST.

🔑 Key Takeaways:

✅ Assignment ≠ Lease / Renting
Once leasehold rights are assigned, the original lessee’s rights are extinguished. It is not leasing or sub-leasing under Schedule II.

✅ Transfer of Immovable Property
Long-term leasehold rights (e.g. 95 years) amount to ownership-like rights. Their transfer is a transfer of immovable property, not a service.

✅ No “Supply” under Section 7
If the transaction is not in the course or furtherance of business, it fails the basic requirement of “supply” under GST.

✅ Cannot be taxed as “Other Miscellaneous Services”
Such classification is artificial and invalid. This category is meant for minor services, not property transactions.

✅ Schedule II cannot override Section 7
Schedule II only classifies activities; it cannot create taxability where Section 7 does not apply.

✅ Assignment ≠ Renting
Renting involves retention of rights and recurring consideration. Assignment is a permanent transfer for lump-sum consideration.

✅ Reliance on Gujarat HC upheld
Following Gujarat Chamber of Commerce & Industry v. UOI (2025) — assignment of leasehold rights is outside GST.

✅ High Court rulings binding nationwide
As per Godavari Devi Saraf (SC), unless a contrary ruling exists, such judgments bind tax authorities across India.

📌 GST still applies ONLY to:
• Lease premium charged by development authorities (subject to exemptions)
• Transfer / permission fees charged by authorities (taxable service)

🧾 Conclusion:
👉 Assignment of leasehold rights in industrial land/building is NOT a taxable supply under GST
👉 Section 74 SCNs on such transactions are invalid

⚠️ Issue may continue until settled by the Supreme Court, but this judgment is a major relief for MSMEs.

09/01/2026

**📌 ITAT Varanasi Ruling – Key Takeaways **

**🚨 Chamru Ram vs ACIT | AY 2017–18**

🔍 **Big Relief for Taxpayers!**
ITAT Varanasi has clearly held that **Section 69C cannot be invoked for salary/wages disallowance when the source of payment is explained and recorded in books.**

# # # 🧾 **What was the issue?**

* AO made **ad-hoc disallowance** of salary & wages due to increase over last year
* Disallowed amount was treated as **unexplained expenditure u/s 69C**
* Salary payments were:
✅ Recorded in books
✅ Debited to P&L
✅ Source not disputed

# # # ⚖️ **Difference of Opinion in ITAT**

* **Judicial Member (JM):**
👉 Section 69C applies only when **source of expenditure is unexplained**
👉 Excessiveness ≠ unexplained expenditure

* **Accountant Member (AM):**
👉 Wanted matter to be sent back to AO

➡️ Matter referred to **Third Member**

# # # 🧠 **Third Member’s Final View**

✔️ Only issue was **applicability of Section 69C**
✔️ Expenditure was fully recorded, source explained
✔️ **Ad-hoc disallowance cannot be taxed u/s 69C*

# # # ✅ **Final Outcome**

* ❌ **Section 69C additions deleted**
💰 ₹17,19,275 & ₹9,07,100 allowed
* ✅ Small disallowance of **staff welfare expenses ₹1,38,143 sustained**
* 📊 **Appeal partly allowed**

# # # 📢 **Important Principle**
> **Salary/Wages disallowance due to excessiveness ≠ Unexplained Expenditure u/s 69C**
💡 *A strong precedent against arbitrary additions!*