C/SCA/11345/2023 CAV JUDGMENT DATED: 03/01/2025

Reserved On : 13/09/2024
Pronounced On : 03/01/2025

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 11345 of 2023

With
R/SPECIAL CIVIL APPLICATION NO. 1278 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 3736 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 4638 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 4224 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 7108 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 9364 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 9845 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 9868 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 10186 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 10924 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12345 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12318 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 19876 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 19880 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 690 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 19418 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 118 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 21840 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 21932 of 2023
With

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R/SPECIAL CIVIL APPLICATION NO. 17214 of 2023

With
R/SPECIAL CIVIL APPLICATION NO. 17792 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 2630 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 2655 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 18222 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 18296 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 1093 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 18593 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 18611 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 19064 of 2023
With
CIVIL APPLICATION (FOR AMENDMENT) NO. 1 of 2024
In R/SPECIAL CIVIL APPLICATION NO. 19064 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 19111 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 19173 of 2023
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 19173 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 1250 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 1653 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 3497 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 4795 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 8347 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 8807 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 10180 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 10501 of 2024

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With
R/SPECIAL CIVIL APPLICATION NO. 11016 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 11943 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12436 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12659 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12764 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12828 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12914 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 12943 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 13157 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 13277 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 13283 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 13322 of 2024

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE BHARGAV D. KARIA

and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA

==========================================================

Approved for Reporting Yes No

==========================================================
GUJARAT CHAMBER OF COMMERCE AND INDUSTRY & ORS.
Versus
UNION OF INDIA & ORS.
==========================================================
Appearance:
Mr.S.N.Soparkar, Senior Advocate with
Mr.Monal Davawala, Senior Advocate Mr.Mihir

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Joshi with Mr.Tarak Damani and Mr.Aditya

Joshi, Senior Advocate Mr.Deven Parikh with
Mr.Nirav P. Shah, Mr.Manav Gupta with Mr.Parth
Shah, Mr.Rajat Bose with Mr.Sarvaswa Chhajer
and Ms.Shohini Bhattacharya, Mr.Hardik Modh,
Mr.Uchit Sheth, Mr.V. Sreedharan, Senior
Advocate, Mr.Sahil Pargi, Mr.Avinash Poddar,
Mr.Hardik Vora with Ms.Palak Kshatriya and
Mr.S.S.Iyer for the respective petitioners.

Advocate General Mr.Kamal Trivedi with

Assistant Government Pleader Mr.Vinay Bairagra
and Mr.Raj Batada and Ms.Nidhi Vyas for the
respective respondents.
==========================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA

CAV JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned Senior Advocate

Mr.S.N.Soparkar with learned advocate Mr.Monal

Davawala, learned Senior Advocate Mr.Mihir

Joshi with learned advocate Mr.Tarak Damani

and learned advocate Mr.Aditya Joshi, learned

Senior Advocate Mr.Deven Parikh with learned

advocate Mr.Nirav P. Shah, learned advocate

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Mr.Manav Gupta with learned advocate Mr.Parth

Shah, learned advocate Mr.Rajat Bose with

learned advocate Mr.Sarvaswa Chhajer and

learned advocate Ms.Shohini Bhattacharya,

learned advocate Mr.Hardik Modh, learned

advocate Mr.Uchit Sheth, learned Senior

Advocate Mr.V. Sreedharan with learned

advocate Mr.Sahil Pargi, learned advocate

Mr.Avinash Poddar, learned advocate Mr.Hardik

Vora with learned advocate Ms.Palak Kshatriya

and learned advocate Mr.S.S.Iyer for the

respective petitioners and learned Advocate

General Mr.Kamal Trivedi with learned

Assistant Government Pleader Mr.Vinay Bairagra

and learned advocate Mr.Raj Batada and learned

advocate Ms.Nidhi Vyas for the respective

respondents.

2. Rule returnable forthwith. Learned

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Assistant Government Pleader Mr.Vinay

Bairagra, learned advocate Mr.Raj Batada and

learned advocate Ms.Nidhi Vyas waives service

of notice of rule on behalf of the respective

respondents.

3. In this group of petitions, the issue

pertains to levy of goods and service tax on

assignment of leasehold rights of the plot of

land allotted on lease by Gujarat Industrial

Development Corporation (GIDC) and building

constructed thereon by the lessee or its

successor (assignor) to a third party

(assignee) on payment of lump-sum

consideration considering the same as

supply of service under the provisions of

Central/State Goods and Service Tax Act, 2017

(For short “the GST Act”).

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4. Special Civil Application No. 11345 of

2023 preferred by Gujarat Chamber of Commerce

and Industry and its members is treated as a

lead matter.

5. It is the case of the petitioners that

GIDC is established under the Gujarat

Industrial Development Act, 1962 and acts as

Nodal agency of Government of Gujarat for the

purpose of development of industrial estates

in the State of Gujarat. GIDC acquires land

and develops same as industrial estate by

creating infrastructure thereon such as road,

water supply, street light, drainage, etc. and

allots plot of land to an industrial

entity/person on long term lease for a period

of 99 years. The terms and conditions of the

allotment letter issued by the GIDC includes

the method and manner in which premium and

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lease rent is required to be paid by the

allottee/lessee.

6. A licensing agreement is also executed

between GIDC and the allottees/lessees to set

up industrial unit subject to approval and

permission from the regulatory authorities.

Licensing agreement also contains a clause

whereby GIDC agrees to execute lease deed for

a period of 99 years in favour of the

allottee/lessee upon fulfilling the terms and

conditions of licensing agreement.

7. Thereafter on fulfilling the terms and

conditions of the license agreement, a

registered lease deed is executed by GIDC in

favour of the allottee/lessee after payment of

applicable stamp duty wherein all terms and

conditions of the allotment letter and

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licensing agreement are incorporated. Lease

deed also permits the allottees/lessee to

assign the leasehold rights and interest in

the plot to any other person subject to

approval of GIDC.

8. After coming into force of the the GST

Act with effect from 1.07.2017, respondent

authorities have issued the summons/show cause

notices to the members of the petitioner no.1

and others who have assigned the leasehold

rights and interest in their plots allotted

by GIDC to assignee to show cause as to why

GST at the rate of 18% should not be levied on

such transaction of assignment of leasehold

rights.

9. The petitioner Gujarat Chamber of Commerce

and Industries made several representations

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before the respondents to clarify that the

levy of tax under the GST Act is not attracted

on transfer of leasehold rights in the plot of

land or in alternative in any case input tax

credit of such tax would be admissible under

the GST Act. However, the respondent

authorities have not considered such

representations and hence the present petition

is filed. Prayers made in Special Civil

Application No.11345 of 2023 are as under:

“(A) Your Lordships be pleased to

admit and allow the present Petition.

(B) Your Lordships be pleased to issue

a writ in the nature of Mandamus and
hold that the notices/summons
(Annexure A) issued by the Respondent
Authorities are ex-facie illegal and
without jurisdiction and further be
pleased to hold and declare that the
Respondents are not entitled to charge
Goods and Service Tax on the
transaction of assignment of the long-
term Leasehold rights under the
provisions of the Goods and Service
Tax, 2017;

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And in the alternate,

(C) Your Lordships be pleased to issue

a writ of mandamus and hold and
declare that the Respondent
Authorities are liable to give Input
Tax Credit under Section 16 of the
Goods and Service Tax Act, 2017 as and
when Goods and Service Tax is paid on
the transaction of assignment of the
long-term Leasehold rights to all the
assignee's in whose favor the long-
term Leasehold rights have been
assigned;

(D) Pending hearing and final disposal

of the present petition, Your
Lordships be pleased to stay the
inquiry/proceedings and any
consequential action being undertaken
by the Respondents Authorities on the
transaction of the assignment of the
long-term Leasehold rights;

(E) This Hon'ble Court be pleased to

grant such other and further relief as
deemed just and proper in the interest
of justice.”

10. To consider the issue as to whether

assignment of leasehold rights would be

covered by the provisions of GST Act as

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“supply of service” or not, it would be

germane to refer to relevant provisions of

law.

:GST Act:

[1] Section 2(17) defines “business” as

under:

“(17) "business" includes—

(a) any trade, commerce,

manufacture, profession, vocation,
adventure, wager or any other
similar activity, whether or not
it is for a pecuniary benefit;
(b) any activity or
transaction in connection with or
incidental or ancillary to sub-
clause (a);
(c) any activity or
transaction in the nature of sub-
clause (a), whether or not there
is volume, frequency, continuity
or regularity of such transaction;
(d) supply or acquisition of
goods including capital goods and
services in connection with
commencement or closure of
business;
(e) provision by a club,

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association, society, or any such

body (for a subscription or any
other consideration) of the
facilities or benefits to its
members;
(f) admission, for a
consideration, of persons to any
premises;
(g) services supplied by a
person as the holder of an office
which has been accepted by him in
the course or furtherance of his
trade, profession or vocation;
(h) activities of a race club
including by way of totalisator or
a license to book maker or
activities of a licensed book
maker in such club; and]
(i) any activity or
transaction undertaken by the
Central Government, a State
Government or any local authority
in which they are engaged as
public authorities;”

[2] “Goods” are defined under section

2(52) of the GST Act as under :

“"goods" means every kind of

movable property other than money
and securities but includes
actionable claim, growing crops,
grass and things attached to or
forming part of the land which are

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agreed to be severed before supply

or under a contract of supply;”

[3] Section 2(94) defines a “registered

person” as under:

““registered person” means a person

who is registered under section 25 but
does not include a person having a
Unique Identify Number.”

[4] “Services” is defined under section

2(102) as under:

“"services" means anything other

than goods, money and securities
but includes activities relating
to the use of money or its
conversion by cash or by any other
mode, from one form, currency or
denomination, to another form,
currency or denomination for which
a separate consideration is
charged;

[Explanation. - For the removal of

doubts, it is hereby clarified
that the expression "services"
includes facilitating or arranging
transactions in securities;]”

[5] section 2(105) defines “supplier” as

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under:

“"supplier" in relation to any

goods or services or both, shall
mean the person supplying the said
goods or services or both and
shall include an agent acting as
such on behalf of such supplier in
relation to the goods or services
or both supplied:”

[6] Section 2(107) defines a “taxable

person” as under:

“(107) "taxable person" means a

person who is registered or liable
to be registered under section 22
or section 24;”

[7] Section 7 of the GST Act falling under

Chapter III for levy and collection of tax
defines the scope of supply as under:
section 7 reads as under:
“Scope of supply.

7.(1) For the purposes of this

Act, the expression "supply"
includes—

(a) all forms of supply of

goods or services or both such as
sale, transfer, barter, exchange,
licence, rental, lease or disposal

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made or agreed to be made for a

consideration by a person in the
course or furtherance of business;

(aa) the activities or

transactions, by a person, other
than an individual, to its members
or constituents or vice versa, for
cash, deferred payment or other
valuable consideration.

Explanation.—For the purposes

of this clause, it is hereby
clarified that, notwithstanding
anything contained in any other
law for the time being in force or
any judgment, decree or order of
any Court, tribunal or authority,
the person and its members or
constituents shall be deemed to be
two separate persons and the
supply of activities or
transactions inter se shall be
deemed to take place from one such
person to another;]

(b) import of services for a

consideration whether or not in
the course or furtherance of
business; [and]

(c) the activities specified

in Schedule I, made or agreed to
be made without a consideration
40[***]

(d) 41[***]

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42(1A) Where certain activities or

transactions constitute a supply
in accordance with the provisions
of sub-section (1), they shall be
treated either as supply of goods
or supply of services as referred
to in Schedule II.]

(2) Notwithstanding anything

contained in sub-section (1),—

(a) activities or transactions

specified in Schedule III; or

(b) such activities or

transactions undertaken by the
Central Government, a State
Government or any local authority
in which they are engaged as
public authorities, as may be
notified by the Government on the
recommendations of the Council,

shall be treated neither as a

supply of goods nor a supply of
services.

(3) Subject to the provisions of

40[sub-sections (1), (1A) and
(2)], the Government may, on the
recommendations of the Council,
specify, by notification, the
transactions that are to be
treated as—

(a) a supply of goods and not

as a supply of services; or

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(b) a supply of services and

not as a supply of goods.”

40. Word “;and” omitted by the

Central Goods and Services Tax
(Amendment) Act, 2018 w.r.e.f 1-7-
2017

41. Omitted ibid Prior to its

omission, clause(d) read as under:
“(d) the activities to be treated
as supply of goods or supply of
services as referred to in
Schedule II.”

[8] Schedule III refers to sub-section (2)

of section 7 for excluding the activities
or transactions which shall be neither
treated as supply of goods nor as supply
of services and includes Entry No.5 as
“sale of land and, subject to clause(b) of
paragraph 5 of Schedule II, sale of
building.”

[9] Clause (b) of paragraph no.5 of

Schedule II refers to supply of services
as per sub-section (1A) of section 7
pertaining to construction of a complex

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building, civil structure or a part

thereof including a complex or building
intended for sale to a buyer, wholly or
partly, except where the entire
consideration has been received after
issuance of completion certificate were
required by the competent authority or
after its first occupation whichever is
earlier. Paragraph no. 5 of Schedule II
reads as under:

“5. Supply of services

The following shall be treated as

supply of services, namely:—

(a) renting of immovable

property;

(b) construction of a complex,

building, civil structure or a
part thereof, including a complex
or building intended for sale to a
buyer, wholly or partly, except
where the entire consideration has
been received after issuance of
completion certificate, where
required, by the competent
authority or after its first
occupation, whichever is earlier.

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Explanation.—For the
purposes of this clause—

(1) the expression

"competent authority" means
the Government or any
authority authorised to
issue completion certificate
under any law for the time
being in force and in case
of non-requirement of such
certificate from such
authority, from any of the
following, namely:—

(i) an architect
registered with the Council
of Architecture constituted
under the Architects Act,
1972 (20 of 1972) ; or

(ii) a chartered
engineer registered with the
Institution of Engineers
(India); or

(iii) a licensed
surveyor of the respective
local body of the city or
town or village or
development or planning
authority;

(2) the expression

"construction" includes

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additions, alterations,
replacements or remodelling
of any existing civil
structure;

(c) temporary transfer or

permitting the use or enjoyment of
any intellectual property right;
(d) development, design,
programming, customisation,
adaptation, upgradation,
enhancement, implementation of
information technology software;

(e) agreeing to the obligation

to refrain from an act, or to
tolerate an act or a situation, or
to do an act; and

(f) transfer of the right to

use any goods for any purpose
(whether or not for a specified
period) for cash, deferred payment
or other valuable consideration.”

:Constitution :

[10] Article 246A of the Constitution of

India pertains to special provision with
respect to goods and service tax and reads
as under:

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“246A Special Provision with

respect to goods and services tax-

1) Notwithstanding anything
contained in Articles 246 and 254,
Parliament, and, subject to clause
(2), the Legislature of every
State, have power to make laws
with respect to goods and services
tax imposed by the Union or by
such State.

(2) Parliament has exclusive

power to make laws with respect to
goods and services tax where the
supply of goods, or of services,
or both takes place in the course
of inter-State trade or commerce.
Explanation.—The provisions of
this article, shall, in respect of
goods and services tax referred to
in clause (5) of Article 279-A,
take effect from the date
recommended by the Goods and
Services Tax Council.]

[11] Clause (12A) of Article 366 of the

Constitution of India, defines “goods and
service tax” as under:

“12-A) “goods and services tax”

means any tax on supply of goods,

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or services or both except taxes

on the supply of the alcoholic
liquor for human consumption;]”

[12] Clause (26A) of Article 366 of the

Constitution of India defies “Services” as
under:
(26-A) “Services” means anything
other than goods;

:Finance Act,1994 (Service Tax ):

[13] Section 65B(44) of the Finance Act,

1994 defines “Services” as under:

“(44) “service” means any activity

carried out by a person for
another for consideration, and
includes a declared service, but
shall not include—

(a) an activity which constitutes

merely,—

(i) a transfer of title in goods

or immovable property, by way of
sale, gift or in any other manner;
or

(ii) such transfer, delivery or

supply of any goods which is

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deemed to be a sale within the

meaning of clause (29-A) of
Article 366 of the Constitution;
or

(iii) a transaction in money or

actionable claim;

(b) a provision of service by an

employee to the employer in the
course of or in relation to his
employment;

(c) fees taken in any court or

tribunal established under any law
for the time being in force.

Explanation 1.—For the removal of

doubts, it is hereby declared that
nothing contained in this clause
shall apply to,—

(A) the functions performed by the

Members of Parliament, Members of
State Legislative, Members of
Panchayats, Members of
Municipalities and Members of
other local authorities who
receive any consideration in
performing the functions of that
office as such member; or

(B) the duties performed by any

person who holds any post in

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pursuance of the provisions of the

Constitution in that capacity; or

(C) the duties performed by any

person as a Chairperson or a
Member or a Director in a body
established by the Central
Government or State Governments or
local authority and who is not
deemed as an employee before the
commencement of this section.

192[Explanation 2.—For the

purposes of this clause, the
expression “transaction in money
or actionable claim” shall not
include—

(i) any activity relating to use

of money or its conversion by cash
or by any other mode, from one
form, currency or denomination, to
another form, currency or
denomination for which a separate
consideration is charged;

(ii) any activity carried out, for

a consideration, in relation to,
or for facilitation of, a
transaction in money or actionable
claim, including the activity
carried out—

195[(a) by a lottery distributor

or selling agent on behalf of the

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State Government, in relation to

promotion, marketing, organising,
selling of lottery or facilitating
in organising lottery of any kind,
in any other manner, in accordance
with the provisions of the
Lotteries (Regulation) Act, 1998
(17 of 1998);]

(b) by a foreman of chit fund for

conducting or organising a chit in
any manner.]

Explanation 3.—For the purposes of

this chapter,—

(a) an unincorporated association

or a body of persons, as the case
may be, and a member thereof shall
be treated as distinct persons;

(b) an establishment of a person

in the taxable territory and any
of his other establishment in a
non-taxable territory shall be
treated as establishments of
distinct persons.

Explanation 4.—A person carrying

on a business through a branch or
agency or representational office
in any territory shall be treated
as having an establishment in that
territory;”

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[14] Entry No. 41 of Notification

No.12/2017 dated 28.06.2017 has granted
exemption from levy of GST on one Time
upfront amount called as premium, salami,
cost price, development charges or by any
other name leviable in respect of the
service, by way of granting long term (30
years, or more) lease of industrial plots,
provided by the State Government
Industrial Development Corporations or
Undertakings to industrial units falling
under Chapter Heading 9972 of Tariff Code
as under:

“One time upfront amount (called as

premium, salami, cost, price,
development charges or by any other
name) leviable in respect of the
service, by way of granting long term
(thirty years, or more) lease of
industrial plots, provided by the
State Government Industrial
Development Corporations or
Undertakings to industrial units.”

11. On conjoint reading of above provisions

and notifications, it is required to be

determined as to whether the

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transfer/assignment of leasehold rights is a

transaction of sale pertaining to immovable

property or is supply of goods or supply of

services in the course or furtherance of

business so as to levy GST as per section 9(1)

of the GST Act at the rate which may be

notified by the Government on recommendations

of the GST Council.

12. Learned advocates for the petitioners have

made submissions referring to various

decisions which are summarised as under:

12.1) Learned Senior Advocate Mr. Mihir

Joshi for learned advocate Mr. Tarak Damani

appearing for the petitioners of Special

Civil Application No.11345 of 2023

contended that lease of immovable property

is an interest in land and building and

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every interest in immovable property or

benefit arising out of land will be

immovable property for the purpose of

Section 105 of Transfer of Property Act. In

support of such submission, reliance was

placed on the decision in case of Sri

Tarkeshwar Sio Thakur Jiu v. Dar Dass Dey &

Co and others reported in (1979) 3 Supreme

Court Cases 106 wherein it is held as

under:

“34. Section 105, Transfer of Property

Act, defines a 'lease' of immovable
property as-

"a transfer of a right to enjoy

such property, made for a a certain
time, express or implied, or in
perpetuity, in consideration of a
price paid or promised, or of
money, a share of crops, service or
any other thing of value, to be
rendered periodically or on
specified occasions to the
transferor by the transferee, who
accepts the transfer on such
terms."

36. The definition of 'immovable

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property' given in Section 3, Para I

of that Act is in the negative, and is
not exhaustive. Therefore, the
definition given in Section 3(26) of
the General Clauses Act (X of 1897)
will apply to the expression used in
this Act, except as modified by the
definition in the first clause of
Section 3. According to the definition
given in Section 3(26) of the General
Clauses Act, "immovable property"
shall include land, benefits to arise
out Or land, and things attached to
the earth, or permanently fastened to
anything attached to the earth". In
short, the expression 'immovable
property' comprehends all that would
be real property according to English
Law and possibly more. (See 1 I.A.
34). Thus, every interest in immovable
property or a benefit arising out of
land, will be 'immovable property' for
the purpose of Section 105, Transfer
of Property Act.”

12.2) It was submitted that an

assignment of leasehold rights

constitutes absolute transfer of right in

immovable property which itself is

immovable property as such transfer

extinguishes all the rights of the

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transferor in the immovable property and

snaps any legal relationship with the

lessor, and the assignee becomes liable

for obligations under the Lease Deed vis-

a-vis the Lessor. It was submitted that

since the assignor steps out of the

equation entirely due to sale, there is no

element of service in the transaction. In

support of this submission, reliance was

placed on the decision in case of Gopal

Saran v. Satyanarayana reported in 1989(3)

SCC 56 wherein it is held as under:

“10 .On the facts found, it cannot

be said or even argued that there
was any assignment by the tenant,
"Assignment", it has been stated in
Black's Law Dictionary, Special
Deluxe Ed., p. 106, "is a transfer
or making over to another of the
whole of any property, real or
personal, in possession or in
action, or of any estate or right
therein". It has further been stated
as "The transfer by a party of all
its rights to some kind of property,
usually intangible property such as

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rights in a lease, mortgage,

agreement of sale or partnership."
It has to be examined whether there
was sub-letting or otherwise parting
with possession in terms of Sec.
13(1)(e) of the Act.”

12.3) Reliance was placed on the

decision in case of State of West Bengal

v. Gautam Sur reported in AIR 2008 Cal 1,

wherein it is held as under:

“2. The facts leading to the writ

petitions are that the lease was
originally granted by the
Government of West Bengal in 1953
in favour of the lessees for a
period of 999 years at a fixed
rent per year on some terms and
conditions viz. (i) there will be
no transfer without permission,
(ii) construction on the leasehold
land is to be completed within the
specified period, (iii) forfeiture
clause will be application etc.
The lessees transferred their
leasehold interest for the
unexpired period in favour of the
petitioners who paid stamp duty
along with fees on the basis of
consideration amount as mentioned
in the deed of transfer.

xxx

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8. The provisions relating to

Articles. 63 and 23 of Schedule IA
of the Indian Stamp Act, 1899, as
amended, are reproduced below:

"63. Transfer of lease by way

of assignment, and not by way
of under-lease The same duty as
a Conveyance (No. 23) for the
market value of the property.
Exemption Transfer of any lease
exempt from Duty.

23. Conveyance (as defined by

Section 2(10), not being a
transfer charged or exempted
under S. 62. (a) Six per centum
of the market value when the
property is situated in the
areas within the jurisdiction
of any Municipal Corporation or
Exemptions Municipality or a
notified area;

(a) Assignment of copyright by

entry made under the Copyright
Act, 1957 (14 of 1957), Section
18.

(b) Co-partnership Deed. See

Partnership (No. 46) (b) five
per centum of the market value
when the property is situated
in the areas other than those
included in clause(a).

9. The object of the said

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provision of Article 63 is to make

the instrument chargeable with
higher duty prescribed for
conveyance in the State. The
Article provides for transfer of
lease by way of assignment and not
by way of underlease which is
provided in Article 35.

10. A lease of immovable property,

as defined in Section 105 of the
Transfer of Property Act, 1882, is
a transfer of a right to enjoy
such property, made for a certain
time, express or implied, or in
perpetuity, in consideration of a
price paid or promised, or of
money, a share of crops, service
or any other thing of value, to be
rendered periodically or on
specified occasions to the
transferor by the transferee, who
accepts the transfer on such
terms.

11. The transferor is called the

lessor, the transferee is called
the lessee, the price is called
the premium, and the money, share,
service or other thing to be so
rendered is called the rent.

12. A lease contemplates, as

observed in Byramjee Jeejeebhoy
(P) Ltd. v. State of Maharashtra ,
"a demise or a transfer of a right
to enjoy land for a term or in
perpetuity in consideration of a

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price paid or promised or services

or other things of value to be
rendered periodically or on
specified occasions to the
transferor." The words "transfer
of a right to enjoy such property"
indicate that all rights of
ownership are not transferred. The
significance of those words as
indicative of the limited estate
transferred is apparent if
contrasted with those in Section
54 where a sale is defined as a
"transfer of ownership in exchange
for a price."

13. An underlease is a grant by a

lessee to another of part of his
whole interest under the original
lease reserving to himself a
reversion: it differs from an
assignment, which conveys the
lessee's whole interest and passes
to the assignee the right and
liability to sue and be sued upon
the covenants in the original
lease (Wharton's Law Lexicon). In
the case on hand, the lessee's
whole interest having been
assigned without reserving a
reversion, the question of calling
the impugned transfer an
underlease or sub-lease, as
contended by the learned advocate
for the respondent, is out of the
way.”

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12.4) Reliance was also placed on the

decision in case of Narendra Dhar v. State

of Uttar Pradesh reported in 2010(4) AIILJ

481.

12.5) Learned Senior Counsel Mr. Joshi

further submitted that such transfer is

also covered as transfer of immovable

property under Section 54 of Transfer of

Property Act and for the purpose of

Section 53-A of the said Act, as also a

right under Section 108 (j) of the

Transfer of Property Act.

12.6) It was submitted that the

definition of "Service" under Section

2(102) of GST Act states anything other

than goods, money and securities which

cannot encompass absolute transfer of

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property and since it has been held that

conceptually sale and service are not

interchangeable terms as understood in its

ordinary sense and the term service does

not refer to transfer of property. In

support of such submission, reliance was

placed on the decision in case of Narinder

S. Chadha and others v. Municipal

Corporation of Greater Mumbai and others

reported in (2014) 15 Supreme Court Cases

689, wherein it is held as under:

“13. We cannot accept this

contention for more than one reason.
First and foremost, it is difficult
conceptually to say that "sale" and
"service" are interchangeable items.
"Sale" is defined under the Act as
meaning a transfer of property in
goods for consideration. It is
obvious that "sale" has to be
understood in this sense, and
properly so understood would not
include "service" which would refer
not to transfer of property in goods
but to "service" as is understood in
its ordinary sense. In Northern
India Caterers (India) Ltd. v. Lt.

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Governor of Delhi [1979] 1 S.C.R.

557, a distinction was made between
sale of food and the provision of
services in hotels and restaurants.
The Court held: -

"Like the hotelier, a

restaurateur provides many
services in addition to the
supply of food. He provides
furniture and furnishings,
linen, crockery and cutlery,
and in the eating places of
today he may add music and a
specially provided area for
floor dancing and in some cases
a floor show. The view taken by
the English law found
acceptance on American soil,
and after some desultory
dissent initially in certain
states it very soon became
firmly established as the
general view of the law. The
first addition of American
Jurisprudence [ Vol. 46, p.
207, para 13] sets forth the
statement of the law in that
regard, but we may go to the
case itself, Electa B. Merrill
v. James W. Hodson [1915 B LRA
481] from which the statement
has been derived. Holding that
the supply of food or drink to
customers did not partake of
the character of a sale of
goods the Court commented:

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"The essence of it is not an

agreement for the transfer of
the general property of the
food or drink placed at the
command of the customer for the
satisfaction of his desires, or
actually appropriated by him in
the process of appeasing his
appetite or thirst. The
customer does not become the
owner of the food set before
him, or of that portion which
is carved for his use, or of
that which finds a place upon
his plate, or in side dishes
set about it. No designated
portion becomes his. He is
privileged to eat, and that is
all. The uneaten food is not
his. He cannot do what he
pleases with it. That which is
set before him or placed at his
command is provided to enable
him to satisfy his immediate
wants, and for no other
purpose. He may satisfy those
wants; but there he must stop.
He may not turn over unconsumed
portions to others at his
pleasure, or carry away such
portions. The true essence of
the transaction is service in
the satisfaction of a human
need or desire,- ministry to a
bodily want. A necessary
incident of this service or
ministry is the consumption of
the food required. This

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consumption involves
destruction, and nothing
remains of what is consumed to
which the right of property can
be said to attach. Before
consumption title does not
pass; after consumption there
remains nothing to become the
subject of title. What the
customer pays for is a right to
satisfy his appetite by the
process of destruction. What he
thus pays for includes more
than the price of the food as
such. It includes all that
enters into the conception of
service, and with it no small
factor of direct personal
service. It does not
contemplate the transfer of the
general property in the food
applied as a factor in the
service rendered."
This led to the Constitution 46th
Amendment Act by which Article 366
(29A) was inserted. Article 366
(29A) reads as follows:-

"Article 366 (29-A) "tax on the

sale or purchase of goods"
includes-
(a) a tax on the transfer,
otherwise than in pursuance of
a contract, of property in any
goods for cash, deferred
payment or other valuable
consideration;

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(b) a tax on the transfer of

property in goods (whether as
goods or in some other form)
involved in the execution of a
works contract;
(c) a tax on the delivery of
goods on hire-purchase or any
system of payment by
installments;
(d) a tax on the transfer of
the right to use any goods for
any purpose (whether or not for
a specified period) for cash,
deferred payment or other
valuable consideration;
(e) a tax on the supply of
goods by any unincorporated
association or body of persons
to a member thereof for cash,
deferred payment or other
valuable consideration;
(f) a tax on the supply, by way
of or as part of any service or
in any other manner whatsoever,
of goods, being food or any
other article for human
consumption or any drink
(whether or not intoxicating),
where such supply or service is
for cash, deferred payment or
other valuable consideration,
and such transfer, delivery or
supply of any goods shall be
deemed to be a sale of those
goods by the person making the
transfer, delivery or supply
and a purchase of those goods

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by the person to whom such

transfer, delivery or supply is
made;".
It will be seen that the definition
of tax on the sale or purchase of
goods has been artificially expanded
more particularly by sub-clause (f),
with which we are concerned, where
the distinction between "sale" and
"service" has been done away with.
In the present case, the well
established distinction between
"sale" and "service" would continue
to apply in view of the definition
of "sale" contained in Section 3(m).
It will be noticed that the
definition is a "means" and
"includes" one. It is well settled
that such definition is an
exhaustive definition (see: P.
Kasilingam and others v. P.S.G.
College of Technology and others
1995 Supp (2) SCC 348 at para 19).
There is thus, no scope to include
"service' in such a definition.
Further, even if we were to accept
Mr. Bhatt's contention, Rule 4(3)
would become ultra vires Section 6
of the Act inasmuch as it would
prohibit the sale of cigarettes and
other tobacco products in a smoking
area in hotels, restaurants and
airports, thus, adding one more
exception to the two exceptions
already contained in Section 6. It
is, thus, clear that this condition
would be ultra vires the Cigarettes
Act and the Rules properly so read.”

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12.7) It was submitted that the term

service has not been defined by the

Legislature to include things not

ordinarily covered within the meaning of

the term and therefore, the term service

does not lose its natural meaning, that is

to say, something other than absolute

transfer of property. It was submitted

that the attempt of the respondents to

encompass transfer of property within the

meaning of service amounts to extending

the meaning of the word “service” beyond

its reasonable connotation in an anxiety

to preserve the power of legislature. It

was submitted that the same would amount

to tax on service, something which in no

rational sense can be regarded as service,

which is impermissible.

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12.8) Learned Senior advocate Mr. Joshi

further submitted that the contention of

the respondent that by excluding only sale

of land and building by including the same

in Schedule III as being neither sale nor

service would consequentially imply that

sale of other immovable property would be

covered within service is not tenable for

the following reasons:

i. Such exclusion does not displace the

principle of giving a natural meaning
to the word 'Service' in the definition
clause.

ii. The inclusion is clearly ex

abundanti cautela

iii. The same also supports the

submissions of the petitioners that the
Legislature never intended to tax sale
of immovable property. Therefore, the

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term "land" ought not to be restricted

to land per se but would encompass
rights in relation to land which
constitute immovable property as per
law. Even under Entry 18 of List II to
the Seventh Schedule of the
Constitution, "land" is stated to mean
'Land that is to say, right in or over
land,...", Moreover by excluding both
land and building, the legislative
intent to exclude immovable property is
clearly discernible.

12.9) It was further submitted that the

assignment of Leasehold rights is even

otherwise not covered under Section 7(1)

(a) of the Act because:

i. Assignment of the Leasehold

rights is neither in the course of
nor in furtherance of business as
mentioned under Section 7(1)(a) of
the Act, 2017 and therefore also, it
is not "Supply of Services".

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ii. The assignment of Lease hold

rights is not a "business" as
defined under 2(17) of the Act, 2017
or "input" as defined under 2(59) of
the GST Act, 2017.

iii. The transaction of assignment

is simpliciter selling/transferring
of absolute rights in the land, it
has nothing to do with the business
of the Assignor nor it is in the
course or furtherance of business
and therefore, the said transaction
does not fall within the purview of
Section 7(1)(a) of the Act, 2017 and
therefore also, it is not "Supply of
Services”.

12.10) Learned Senior advocate Mr. Joshi

further submitted the contention that

since the transaction is covered in the

Tariff, the same is taxable, is contrary

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to the judgment of Hon’ble Supreme Court

in case of Commissioner of Central Excise-

I, New Delhi v. S.R. Tissues(P) Ltd. and

another reported in (2005) 6 Supreme Court

Cases 310.

12.11) It was further submitted that the

reliance of the respondents on the Council

Directive dated 28.11.2006 is not

justified for the following reasons:

i. As the title itself indicates, it

is a Directive for adoption by
members of the EU and not Law.

ii. Article 25, which has been

relied upon, states that a supply of
service may consist in the
assignment of intangible property
which means that the same will have
to be examined on case-to-case basis
particularly since a sub-lease and

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assignment in some cases are used

interchangeably. This can be
distinguished with the language of
Articles 24 and 26 which used the
word “shall” while referring to
Services.

12.12) It was therefore, submitted that

the assignment of leasehold rights, which

is an absolute transfer of rights and

interest arising out of land, amounts to

transfer/sale of immovable property and

therefore, cannot be said to be service

under the Act nor can such transfer of

rights and interest be said to be in

course or furtherance of business. The

said assignment/transfer of rights does

not fall within the meaning of the term

'Service' in the Act and the Legislature

has not extended the meaning by including

transactions which are not service and

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therefore the term would have to be

construed as per its natural meaning,

which excludes absolute transfer of

property. The levy/demand of tax on

Assignment may therefore be held to be

illegal and without authority of law.

13. Learned advocate Mr. Uchit Sheth for the

petitioners in Special Civil Application No.

19418 of 2023, Special Civil Application No.

4224 of 2024 and Special Civil Application

No.13157 of 2024 submitted that the GST regime

was brought into force after the One Hundred

and First (Constitution Amendment) Act, 2016.

Statement of objects and reasons of the said

Act clearly stated that the intention of the

constitutional amendment was to subsume some

of the existing indirect taxes so as to reduce

the cascading effect of taxes. It was

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submitted that with such object in mind, Entry

No. 84 of List I of the Seventh Schedule which

is relating to excise duty was curtailed to

only include specific goods which continued

under the old regime. Similarly, Entry No. 92C

of List I of the Seventh Schedule which was

regarding tax on services was deleted. Even

under List II, Entry Nos. 52 and 55 which were

relating to entry tax and luxury tax were

deleted whereas Entry No. 54 regarding tax on

sales and purchases of goods as well as Entry

No. 62 relating to entertainment tax were

curtailed. It was further submitted that

simultaneously, Article 246A of the

Constitution was introduced for giving

parallel power to the Parliament and State

legislatures to impose "goods and services

tax". It was submitted that the constitutional

amendment read with the statement of objects

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and reasons clearly shows that the object of

introducing GST regime was to subsume some of

the indirect taxes so as to reduce cascading

effect of taxes, however, the entries in List

I and List II relating to stamp duty were left

untouched. This shows that GST was not

intended to be imposed on any transfer of

immovable property.

13.1) Learned advocate Mr. Sheth further

submitted that the term "service" was

defined under Section 65B(44) of the

Finance Act, 1994. There was specific

exclusion of transfer of title in

immovable property from the definition of

"service" itself. Thus it was never the

intention of the legislature to impose tax

on transfer of immovable property. It was

submitted that the Customs Excise and

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Service Tax Tribunal, Chandigarh bench in

the case of DLF Commercial Projects

Corporation v/s Commissioner of Service

Tax, Gurugram reported in 2019 SCC Online

CESTAT 9281 held that development rights

are "benefits arising from land" and

therefore not liable for service tax. It

was submitted that while the Government

has filed appeal before Hon’ble Supreme

Court for challenging such decision, the

operation of the order has not been

stayed. It was submitted that while

holding that development rights are

"benefits arising from land", the CESTAT

has followed judgement of Hon’ble Bombay

High Court in the case of Cheda Housing

Development Corporation v/s Bibijan Shaikh

reported in 2007 SCC Online Bom 130. It

was further submitted that leasehold right

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is in fact a greater right and interest in

land than development right and therefore

the principle under the service tax regime

will continue to apply even under the GST

regime particularly when object of

introduction of GST regime is to subsume

existing taxes.

13.2) Learned advocate Mr. Sheth further

submitted that the fact that only existing

taxes were sought to be continued under

the GST regime is fortified by Agenda 2A

to the 5th GST Council meeting wherein,

while noting that service tax was not

leviable on transfer of immovable

property, a specific proposal was made to

impose GST on sale of immovable property

on the ground that there was no

constitutional embargo for imposing such

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tax and that stamp duty was leviable on a

different aspect of the transaction. It

was submitted that this agenda was

discussed in the 7th GST Council meeting

held on 22/23 December, 2016 and a

detailed discussion took place wherein

number of State Finance Ministers pointed

out that stamp duty had not been subsumed

in GST and therefore, imposition of GST on

land and building would lead to double

taxation and it might also be

unconstitutional. Considering such

objections, the GST Council decided to

defer imposition of tax on land and

buildings. It is therefore that Sr. No. 5

of Schedule III to the GST Acts excludes

sale of land and building. It was

submitted that this exclusion is nothing

but manifestation of intention not to

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impose tax on transfer of immovable

property as was the case even under the

erstwhile service tax regime.

13.3) It was further submitted that

proposed imposition of GST on assignment

of leasehold rights leads to double

taxation inasmuch as both stamp duty at

rate equal to conveyance of land as well

as GST are imposed which will lead to

cascading effect of taxes which is

specifically sought to be avoided by

introduction of the GST regime. It was

therefore, submitted that proposed

imposition of GST is contrary to the

object, purpose and scheme of the GST Acts

as well as arbitrary in as much as it

leads to double taxation.

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13.4) Learned advocate Mr. Sheth placed

reliance on the judgment of this Court

in case of Munjaal Manishbhai Bhatt v/s

Union of India reported in (2022) 104

GSTR 419 (Guj.) wherein it was observed

that the intention of introduction of GST

regime was not to change the basis of

taxation of the Vat and service tax regime

and that supply of land in every form was

excluded from the purview of the GST Acts.

13.5) It was further submitted that what

is assigned by the petitioners is not mere

right to use land. In fact building was

constructed on the land allotted by GIDC

and the entire land along with building

thereon have been assigned. In other

words, something which was constructed on

the land is also transferred along with

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the rights and interest in land. The

petitioners thus earned benefit out of the

land by way of constructing and operating

factory building/shed. This constitutes

"profit a pendre" which is an immovable

property and transfer of such immovable

property cannot be subjected to tax under

the GST Acts.

13.6) Reliance was placed on the

following judgements of Hon’ble Supreme

Court wherein different types of rights

have been considered to be profit a pendre

or benefits arising from land:

(1) In case of Anand Behera v/s State

of Orissa AIR 1956 SC 17, wherein it

is held as under:

“9. The facts disclosed in

paragraph 3 of the petition make

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it clear that what was sold was

the right to catch and carry away
fish in specific sections of the
lake over a specified future
period. That amounts to a license
to enter on the land coupled with
a grant to catch and carry away
the fish, that is to say, it is a
profit a prendre: see 11
Halsbury's Laws of England,
(Hailsham Edition), pages 382 and
383. In England this is regarded
as an interest in land (11
Halsbury's Laws of England, page
387) because it is a right to take
some profit of the soil for the
use of the owner of the right
(page 382). In India it is
regarded as a benefit that arises
out of the land and as such is
immoveable property.

10. Section 3 (26) of the General

Clauses Act defines "immoveable
property" as including benefits
that arise out of the land. The
Transfer of Property Act does not
define the term except to say that
immoveable property does not
include standing timber, growing
crops or grass. As fish do not
come under that category the
definition in the General Clauses
Act applies and as a profit a
prendre is regarded as a benefit
arising out of land it follows
that it is immoveable property
within the meaning of the Transfer

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of Property Act.

11. Now a "sale" is defined as a

transfer of ownership in exchange
for a price paid or promised. As a
profit a prendre is immoveable
property and as in this case it
was purchased for a price that was
paid it requires writing and
registration because of section 54
of the Transfer of Property Act.
If a profit a prendre is regarded
as tangible immoveable property,
then the "property" in this case
was over Rs. 100 in value. If it
is intangible, then a registered
instrument would be necessary
whatever the value. The "sales" in
this case were oral: there was
neither writing nor registration.
That being the case, the
transactions passed no title or
interest and accordingly the
petitioners have no fundamental
right that they can enforce.”

(2)In case of State of Orissa v/s

Titaghur Paper Mills Co. Ltd. reported

in (1985) Supp. SCC 285, wherein it is

held as under:

“98. The meaning and nature of a

profit a prendre have been thus

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described in Halsbury's Laws of

England, Fourth Edition, Volume
14, paragraphs 240 to 242 at pages
115 to 117:

"240. Meaning of 'profit a

prendre' A profit a prendre is
a right to take something off
another person's land. It may
be more fully defined as a
right to enter another's land
to take some profit of the
soil, or a portion of the soil
itself, for the use of the
owner of the right The term
'profit a prendre' is used in
contradistinction to the term
'profit a prendre', which
signified a benefit which had'
to be rendered by the possessor
of land after it had come into
his possession.A profit a
prendre is a servitude.

"241. Profit a prendre as an

interest in land. A profit a
prendre is an interest in land
and for this reason any
disposition of it must be in
writing. A profit a prendre
which gives a right to
participate in a portion only
of some specified produce of
the land is just as much an
interest in the land as a right
to take the whole of that
produce...

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"242. What may be taken as a

profit a prendre. The subject
matter of a profit a prendre,
namely the substance which the
owner of the right is by virtue
of the right entitled to take,
may consist of animals,
including fish and fowl, which
are on the land, or of
vegetable matter growing or
deposited on the land by some
agency other than that of man,
or of any part of the soil
itself, including mineral
accretions to the soil by
natural forces. The right may
extend to the taking of the
whole of such animal or
vegetable matters or merely a
part of them. Rights have been
established as profits a
prendre to take acorns and
beech mast, brakes, fern,
heather and litter, thorns,
turf and peat, boughs and
branches of growing trees,
rushes, freshwater fish, stone,
sand and shingle from the
seashore A and ice from a
canal; also the right of
pasture and of shooting
pheasants. There is, however,
no right to take seacoal from
the foreshore. The right to
take animals ferae naturae
while they are upon the soil
belongs to the owner of the
soil, who may grant to others

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as a profit a prendre a right

to come and take them by a
grant of hunting, shooting,
fowling and so forth."

99. A profit a prendre is a

servitude for it burdens the land
or rather a person's ownership of
land by separating from the rest
certain portions or fragments of
the right of ownership to be
enjoyed by persons other than the
owner of the thing itself (see
Jowitt's Dictionary of English
Law, Second Edition, Volume 2,
page 1640. under the heading
"Servitude"). "Servitude" is a
wider term and includes both
easements and profits a prendre
(see Halsbury's Laws of England,
Fourth Edition, Volume 14,
paragraph 3, page 4). The
distinction between a profit a
prendre and an easement has been
thus stated in Halsbury's Laws of
England, Fourth Edition, paragraph
43 at pages 21 to 22:

"The chief distinction between

an easement and a profit a
prendre is that whereas an
easement only confers a right
to utilise the servient
tenement in a particular manner
or prevent the commission of
some act on that tenement, a
profit a prendre confers a
right to take from the servient

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tenement some part of the soil

of that tenement or minerals
under it or some part of its
natural produce or the animals
ferae naturae existing upon it.
What is taken must be capable
of ownership, for otherwise the
right amounts to a mere
easement".

In Indian law an easement is

defined by section 4 of the Indian
Easement Act, 1882 (Act No. V of
1882) as being ' a right which the
owner or occupier of certain land
possesses, as such, for the
beneficial enjoyment of that land,
to do and continue to do
something, or to prevent and
continue to prevent something
being done, in or upon, or in
respect of, certain other land not
his own”. A profit a prendre when
granted in favour of the owner of
a dominant heritage for the
beneficial enjoyment of such
heritage would, therefore, be an
easement but it would not be so if
the grant was not for the
beneficial enjoyment of the
grantee's heritage.

100. Clause (26) of section 3 of

the General Clauses Act, 1897,
defines "immovable property" as
including inter alia "benefit to
arise out of land". The definition
of "immovable property" in clause

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(f) of section 2 of the

Registration Act 1908, illustrates
a benefit to arise out of land by
stating that immovable property
"includes...rights to ways, lights
ferries, fisheries or any other
benefit lo arise out of land". As
we have seen earlier, the Transfer
of Property Act, 1882, does not
give any definition of "immovable
property" except negatively by
stating that immovable property
does not include standing timber,
growing crops, or grass. The
Transfer of Property Act was
enacted about fifteen years prior
to the General Clauses Act,
However, by section 4 of the
General Clauses Act, the
definitions of certain words and
expressions, including "immovable
property" and "movable property",
given in section 3 of that Act are
directed to apply also, unless
there is anything repugnant in the
subject or context, to all Central
Acts made after January 3 1968,
and the definitions of these two
terms, therefore, apply when they
occur in the Transfer of Property
Act. In Ananda Behra and another
v. The State of Orissa and another
(1) this Court has held that a
profit a prendre is a benefit
arising out land and that in view
of clause (26) of section 3 of the
General Clauses Act, it is
immovable property within the

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meaning of the Transfer of

Property Act.

101. The earlier decisions showing

what constitutes benefits arising
out of land have been summarized
in Mulla on The Transfer of
Property Act, 1882", and it would
be pertinent to reproduce the
whole of that passage. That
passage (at pages 16-17 of the
Fifth Edition) is as follows:

"A 'benefit to arise out of

land' is an interest in land
and therefore immovable
property. The first Indian Law
Commissioners in their report
of 1879 said that they had
'abstained from the almost
impracticable task of defining
the various kinds of interests
in immovable things which are
considered immovable property.
The Registration Act, however,
expressly includes as immovable
property benefits to arise out
of land, here diary allowances,
rights of way lights, ferries
and fisheries'. The definition
of immovable property in the
General Clauses Act applies to
this Act. The following have
been held to be immovable (1)
11955] 2 S. C. R. 919
property:-varashasan or annual
allowance charged on land; a
right to collect dues at a fair

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held on a plot of land; a hat

or market; a right to
possession and management of a
saranjam; a malikana; a right
to collect rent or jana: a life
interest in the income of
immovable property; a right of
way; a ferry; and a fishery; a
lease of land".

102. Having seen what the

distinctive features of a profit a
prendre are, we will now turn to
the Bamboo Contract to ascertain
whether it can be described as a
grant of a profit a prendre and
thereafter to examine the
authorities cited at the Bar in
this connection. Though both the
Bamboo Contract in some of its
clauses and the Timber Contracts
speak of "the forest produce sold
and purchased under this
Agreement", there are strong
countervailing factors which go to
show that the Bamboo Contract is
not a contract of sale of goods.
While each of the Timber Contracts
is described in its body as "an
agreement for the sale and
purchase of forest produce", the
Bamboo Contract is in express
terms described as "a grant of
exclusive right and licence to
fell, cut, obtain and remove
bamboos...for the purpose of
converting the bamboos into paper
pulp or for purposes connected

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with the manufacture of paper...."

Further, throughout the Bamboo
Contract, the person who is giving
the grant, namely, the Governor of
the State of Orissa, is referred
to as the "Grantor." While the
Timber Contracts speak of the
consideration payable by the
forest contractor, the Bamboo
Contract provides for payment of
royalty. "Royalty" is not a term
used in legal parlance for the
price of goods sold. "Royalty" is
defined in Jowitt's Dictionary of
English Law, Fifth Edition, Volume
2, page 1595, as follows.

"Royalty, a payment reserved by

the grantor of a patent, lease
of a mine or similar right, and
payable proportionately to the
use made of right by the
grantee. It is usually a
payment of money, but may be a
payment in kind, that is, of
part of the produce of the
exercise of the right.

Royalty also means a payment

which is made to an author or
composer by a publisher in
respect of each copy of his
work which is sold, or to an
inventor in respect of each
article sold under the patent."

We are not concerned with the

second meaning of the word H

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"royalty" given in Jowitt. Unlike

the Timber Contracts, the Bamboo
Contract is not an agreement to
sell bamboos standing in the
contract areas with an accessory
licence to enter upon such areas /
for the purpose of felling and
removing the bamboos nor is it,
unlike the Timber Contracts, in
respect of a particular felling
season only. It is an agreement
for a long period extending to
fourteen years, thirteen years and
eleven years with respect to
different con tract areas with an
option to the Respondent Company
to renew the contract for a
further term of twelve years and
it embraces not only bamboos which
are in existence at the date of
the contract but also bamboos
which are to grow and come into
existence thereafter. The payment
of royalty under the Bamboo
Contract has no relation to the
actual quantity of bamboos cut and
removed. Further, the Respondent
Company is bound to pay a minimum
royalty and the amount of royalty
to be paid by it is always to be
in excess of the royalty due on
the bamboos cut in the contract
areas.”

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13.7) It was submitted that mere fact

that there is an exemption granted for

lease of land by State Industrial

Development Corporations cannot ipso facto

mean that assignment of leasehold rights

by private individuals is taxable and

grant of exemption by State Government

cannot determine as to whether the

transaction is otherwise leviable to tax

under the Act. Reliance is placed in this

regard upon judgement of this Court in the

case of Chunilal Mayachand v/s State of

Gujarat (1992) 86 STC 105 (Guj.).

13.8) It was therefore, submitted that

the exclusion of sale of land and building

as per Sr. no. 5 of Schedule III to the

GST Acts has to be interpreted in light of

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legislative history as well as object and

purpose of the statute to mean sale of

immovable property which would cover sale

of interest in land and benefits arising

out of land and proposed imposition of tax

under the GST Acts on such sale of

interest in land and benefits arising out

of land is wholly without jurisdiction,

contrary to the object, purpose and scheme

of the GST Acts, bad and illegal. It was

therefore, submitted that in any case the

consideration attributable to sale of

building is ex-facie outside the purview

of the GST Acts and proposed imposition of

tax thereon is wholly without jurisdiction

and illegal.

14. Learned advocate Mr. Rajat Bose for the

petitioner in Special Civil Application

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No.18296 of 2023 submitted that the

consideration for transfer of leasehold

rights paid to the original lessee is nothing

but a consideration for the plot of land. It

was further submitted that after GIDC had

allotted the land on 99 years lease, the

lessee thereafter has to construct building

thereon for running the industry. It was

pointed out that lessee had transferred the

leasehold rights along with the ownership of

the building for a consideration. It was

therefore, submitted that as per Entry No.4 in

Schedule III of the GST Act, such transaction

cannot be considered as supply of goods or

services for levy of GST. It was further

submitted that the leasehold rights are

nothing but benefits arising out of the land.

Reference was also made to section 54 of the

Transfer of Property Act which defines sales

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of immovable property to mean transfer of

ownership in exchange for a price paid or

promised or part-paid or part-promised and

such transfer in the case of tangible

immovable property of the value of one hundred

rupees and upwards or in the case of reversion

or other intangible thing, can be made only by

a registered instrument. It was therefore,

submitted that the transfer of leasehold

rights of the land in question along with the

immovable property constructed thereon is by a

registered deed liable to be compulsorily

registered under section 17 of the

Registration Act, 1908.

14.1) Reliance was also placed on

section 2(6) of the Registration Act which

defines immovable property which includes

land, buildings, hereditary allowances,

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right to ways, lights, ferries, fisheries

or any other benefit to arise out of land

and things attached to the earth or

permanently fastened to anything which is

attached to the earth, but not standing

timber, growing crops nor grass. It was

therefore, submitted that leasehold rights

are nothing but any such benefit to arise

out of land and therefore, same is

required to be considered as an “immovable

property”. It was therefore, submitted

that as per section 7(1) of the Act, no

GST can be levied upon sale of immovable

property.

14.2) Learned advocate Mr. Bose also

referred to section 2(26) of the General

Clauses Act which defines “immovable

property” which includes land, benefits to

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arise out of land, and things attached to

the earth, or permanently fastened to

anything attached to the earth.

14.3) Reference was also made to section

3A of the Land Acquisition Act, 1994.

Reference was also made to Gujarat Stamp

Act which levies stamp duty on the

transfer of leasehold rights equivalent to

rate of conveyance. It was pointed out

that as per Article 265 of the

Constitution of India, no tax can be

levied or collected except by authority of

law. It was therefore, submitted that no

GST can be levied upon transaction of

transfer of leasehold rights.

14.4) In support of his submissions,

reliance was placed on the following

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decisions:

(1) In case of Archaka Sundara Rama

Dikshatulu v. Archakam Seshadri

Dikshathulu and others reported in

(1928) 54 MLJ 76, wherein it was

argued that a lease for 99 years or

for a long term in consideration of

premium paid down is as much an

alienation as a sale or mortgage

and mere use of the word ‘lease’ or

the fact that a long term is fixed

would, having regard to the

mischief which is sought to be

guarded against by holding that

service inam lands are not

alienable make the lease valid.

(2) In case of Rama Varma Tambaran v.

Rraman Nayar reported in I.L.R. , 5

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Madras 89, there was kanam for 96

years and Innes and Muthuswami

Aiyar JJ held that kanam was

invalid by observing that there

seems to be no real distinction

between the mischief of such a

transfer in perpetuity and a

transfer for the long period of

ninety-six years.

(3) In case of Rama Reddy v. Rangadasan

reported in I.L.R., 49 Madras 543,

Davadoss J observed that “A

permanent lease is as much an

alienation as a sale. The mere fact

that rent is payable by the

permanent lessee does not make a

permanent lease any the less an

alienation than a sale.”

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15. Learned advocate Mr. Manav Gupta appearing

for the petitioner in Special Civil

Application No.7108 of 2024 referred to the

show cause notice, offer of allotment, form of

agreement, Notification no. 28/2019,

Notification dated 28.06.2017 and subsequent

deed to point out that there is a transfer of

leasehold rights which cannot be subjected to

levy of GST as the same would amount to

transfer of immovable property which cannot be

considered as supply of either goods or

services as perpetual lease of 99 years

along with right to construct building thereon

on the plot of land, would only suggest that

the lessee was de-facto owner and word

‘lessee’ is a misnomer. In support of his

submission, reliance was placed on decision of

Delhi High Court in case of M/s. Housing &

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Urban Development Corporation Ltd. v.

Municipal Corporation of Delhi reported in ILR

(1999) II Delhi wherein it was held that

section 120(1)(c) of the Delhi Municipal

Corporation Act would not apply to the Housing

Urban Development Corporation as allotment of

land was made merely to develop for the

benefit of Union of India for construction of

community centre. In such circumstances, it

was held by Delhi High Court in para no. 21 of

the decision that for transfer of leasehold

right something more is required and from the

bare reading of the terms of allotment of the

perpetual lease deed, land in question was

released on payment of consideration though of

minimal premium and the annual gross rent was

also payable till the subsistence of lease

period along with right to let out the

properties and accordingly, the petitioner was

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liable to pay the property tax on the

leasehold right in the property under section

120(1)(c) of the Delhi Municipal Corporation

Act. It was therefore, submitted that the

leasehold rights is as an immovable property.

15.1) Reliance was placed on the

decision of Delhi High Court in case of

Union of India & another v. Hotel

Excelsior Ltd and another reported in 2012

SCC OnLine Del 4758, wherein it was held

that right to conversion of leasehold land

into freehold land cannot be permitted as

the lessee can never acquire the status of

an owner and transfer of leasehold rights

cannot be construed as granting permission

to convert the land into freehold land as

transferee cannot become absolute owner of

the property but has only a limited

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leasehold rights and ownership cannot be

smuggled in through back door of lease. It

was therefore, held that whether the term

of the lease be 5 years, 50 years, 99

years or even 999 years, the transaction

is only a lease and there is always a

reversion which continues to vest in the

owner in the entire term of the lease and

the lessee even if for 999 years does not

become the owner and freehold conversion

is in the sole discretion of lessor. It

was therefore, submitted by learned

advocate Mr. Gupta that leasehold rights

are required to be considered as an

immovable property distinct from the

ownership rights.

16. Learned advocate Mr. S.H. Iyer submitted

that transfer of leasehold rights in the

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property cannot be considered as supply of

services.

17. Learned Senior Advocate Mr. Deven Parikh

appearing for the petitioner in Special Civil

Application No.1653 of 2023 submitted that

section 7(1) of the GST Act would not be

applicable as dealing with immovable property

is not covered either under supply of goods or

services. Reference was made to provisions of

section 3(4) of the Bombay land Revenue Code.

Reliance was placed on the decision of

Hon’ble Apex Court in case of The Anant Mills

Co. Ltd. v. State of Gujarat and others

reported in AIR 1975 SC 1234, wherein the Apex

Court held that word "land" has been defined

in clause (30) of section 2 of the

Corporations Act to include land which is

being built upon or is built upon or covered

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with water, benefits to arise out of land,

things attached to the earth or permanently

fastened to anything attached to the earth and

rights created by legislative enactment over

the street. The definition is of inclusive

nature and does not exclude from its ambit the

underground strata of the land. It was

therefore, submitted that the leasehold rights

are nothing but benefits to arise out of land.

17.1) Reliance was also placed on the

decision of Apex Court in case of UT

Chandigarh Administration and another v.

Amarjeet Singh and others reported in

(2009) 4 Supreme Court Cases 660, wherein

subject matter was auction of sites for

grant of lease for 99 years and it

involves neither sale of goods nor

rendering of any service and act of

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leasing plots by auction did not result in

the successful bidder becoming a consumer

or the appellants auctioneer becoming

service provider so as to award penal

interest under the provisions of Consumer

Protection Act. The Hon’ble Apex Court

held as under:

“21. With reference to a

public auction of existing
sites (as contrasted from
sites to be `formed'), the
purchaser/lessee is not a
consumer, the owner is not a
`trader' or `service
provider' and the grievance
does not relate to any
matter in regard which a
complaint can be filed.
Therefore, any grievance by
the purchaser/lessee will
not give rise to a complaint
or consumer dispute and the
fora under the Act will not
have jurisdiction to
entertain or decide any
complaint by the auction
purchaser/lessee against the
owner holding the auction of
sites.”

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17.2) Reliance was placed on the

decision in case of Gaziabad Development

Authority and another v. Mithilesh Goel

reported in (2017) 14 Supreme Court Cases

300, wherein Hon’ble Apex Court held that

allotment of house by Gaziabad Development

Authority was an immovable property and

not services of any kind.

17.3) Reliance was also placed on the

decision of Hon’ble Apex Court in case of

Commissioner, Central Excise and Customs,

Kerala v. Limited and Toubro Limited

reported in (2016) 1 Supreme Court Cases

170, wherein Hon’ble Apex Court while

considering the levy of service tax on

indivisible works contract held that same

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is not leviable prior to amendment in the

Finance Act, 1994 with effect from

1.06.2007 as works contracts is a separate

species of contract distinct from

contracts for services simpliciter

recognised by the world of commerce and

the law and has to be taxed separately as

such.

17.4) Reliance was placed on decision in

case of Narne Construction Private Limited

and others v. Union of India and others

reported in (2012) 5 Supreme Court Cases

359, wherein Hon’ble Apex Court held as

under:

“8. Having regard to the

nature of the transaction
between the appellant-
company and its customers
which involved much more
than a simple transfer of a
piece of immovable property
it is clear that the same

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constituted 'service' within

the meaning of the Act. It
was not a case where the
appellant- company was
selling the given property
with all advantages and/or
disadvantages on "as is
where is" basis, as was the
position in U.T. Chandigarh
Administration and
Anr.v.Amarjeet Singh and
Ors., II (2009) CPJ 1
(SC)=II (2009) SLT
736=(2009) 4 SCC 660. It is
a case where a clear cut
assurance was made to the
purchasers as to the nature
and the extent of
development that would be
carried out by the
appellant-company as a part
of the package under which
sale of fully developed
plots with assured
facilities was to be made in
favour of the purchasers for
valuable consideration. To
the extent the transfer of
the site with developments
in the manner and to the
extent indicated earlier was
a part of the transaction,
the appellant-company had
indeed undertaken to provide
a service. Any deficiency or
defect in such service would
make it accountable before
the competent Consumer Forum

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at the instance of consumers

like the respondents.”

17.5) Reliance was placed on the

decision in case of State of Karnataka and

others v. Pro Lab and others reported in

(2015) 8 Supreme Court Cases 557, wherein

it is held as under:

“20. To sum up, it follows from

the reading of the aforesaid
judgment that after insertion of
clause 29-A in Article 366, the
Works Contract which was
indivisible one by legal fiction,
altered into a contract, is
permitted to be bifurcated into
two: one for "sale of goods" and
other for "services", thereby
making goods component of the
contract exigible to sales tax.
Further, while going into this
exercise of divisibility, dominant
intention behind such a contract,
namely, whether it was for sale of
goods or for services, is rendered
otiose or immaterial. It follows,
as a sequitur, that by virtue of
clause 29-A of Article 366, the
State Legislature is now empowered
to segregate the goods part of the
Works Contract and impose sales

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tax thereupon. It may be noted

that Entry 54, List II of the
Constitution of India empowers the
State Legislature to enact a law
taxing sale of goods. Sales tax,
being a subject-matter into the
State List, the State Legislature
has the competency to legislate
over the subject.

21. Keeping in mind the

aforesaid principle of law,
the obvious conclusion would
be that Entry 25 of Schedule
VI to the Act which makes that
part of processing and
supplying of photographs,
photo prints and photo
negatives, which have "goods"
component exigible to sales
tax is constitutionally valid.
Mr. Patil and Mr. Salman
Khurshid, learned senior
counsel who argued for these
assessees/respondents, made
vehement plea to the effect
that the processing of
photographs etc. was
essentially a service, wherein
the cost of paper, chemical or
other material used in
processing and developing
photographs, photo prints etc.
was negligible. This argument,
however, is founded on
dominant intention theory
which has been repeatedly
rejected by this Court as no

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more valid in view of 46th

Amendment to the
Constitution.”

18. Learned advocate Mr. Hardik Modh for the

petitioner submitted that transfer of

leasehold rights is nothing but a capital

asset as held by the Hon’ble Apex Court in

case of R.K. Palshikar (HUF) v. Commissioner

of Income Tax M.P. Nagpur reported in (1998) 3

Supreme Court Cases 594, wherein it is held as

under:

“8. The next question which we

have to consider is whether
the provisions of Section 12-B
of the said Act can be brought
into play, although, what was
transferred was only lease
hold interests in the lands in
question. In this connection,
it is significant that the
leases are for a long period
of 99 years and in all the
transactions of lease premium
has been charged by the
assessee for the grant of the
lease concerned. In Traders

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and Miners Ltd. V/s. Commr. of

Income-tax, Bihar and Orissa,
(1955) 27 ITR 341, a case
decided by a Division Bench of
the Patna High Court, the
assessee let on lease for 99
years a portion of a Zamindari
acquired by it. The lease
related to the surface right
together with nine mica mines
located in that area. The
consideration for the lease
was the payment of a 'salami'
and a reserve rent per year.
The Income-tax Officer
determined the cost to the
assessee of the mineral rights
and after deducting this
amount from the salami, he
assessed the balance to tax as
capital gains under Section
12-B of the said Act. It was
held by the Patna High Court
that the gains arising from
the said transaction were
rightly taxed. This decision
has been cited without comment
by Kanga and Palkhivala in
their commentary on the Law of
Income-tax (7th Edition) at
page 550 and no contrary case
has been cited in the said
text book or has been brought
to our attention. It is true
that the decision of the Patna
High Court relates to a case
of mining lease, but to our
mind, the principle laid down

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in that case can well be

applied to the case before us.
In the first place, the lease
is for a long period, namely,
99 years, hence it would
appear that under the leases
in question the assessee has
parted with an asset of an
enduring nature, namely, the
rights to possession and
enjoyment to the properties
leased for a period of 99
years subject to certain
conditions on which the
respective leases could be
terminated. A premium has been
charged by the assessee in all
the leases. In these
circumstances, we fail to see
how it could be said that the
provisions of Section 12-B of
the said Act cannot be brought
into play. The grant of the
leases in question, in our
view, amounts to a transfer of
capital assets as contemplated
under Section 12-B of the said
Act.”

19. Learned Senior Advocate Mr. Sreedharan

appearing for the petitioner in Special Civil

Application No.10501 of 2024 reiterated the

submissions made by the learned advocates for

other petitioners. It was submitted that

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leasehold rights transferred by the lessee is

in relation to the property which has been

defined and construed in various ways. It was

submitted that property refers not only to

physical objects that are owned but also to

rights of ownership. He invited the attention

of the Court with regard to property defined

in Corpus Juris Secundum wherein the property

has been defined as under:

“The word "property" has been

defined and construed in various
ways; it refers not only to
physical objects that are owned
but also to rights of ownership.

The word "property" is a very

comprehensive one. In addition to
its meaning in the popular
vernacular, it has a common-law
definition as understood by the
courts, and it may be defined in
statute for a particular purpose
or for a general purpose

The construction of the word

"property" depends on the context
with which it is used. Commonly,
the word "property" is used in two
different senses. First, it is

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applied to external things that

are the objects of rights or
estates; that is, things that are
the object of ownership. Second,
it is applied to the rights or
estates that a person may acquire
in or to things. In strict legal
parlance," "property" is used to
designate a right of ownership or
an aggregate of rights that are
guaranteed and protected by the
government. "Property" has been
defined as the right of any person
to possess, use, enjoy, and
dispose of a thing" and to exclude
everyone else from interfering
with it. More succinctly, it has
been defined as any vested right
of any value

Thus, unless a more specific

definition applies, "property"
refers to both the actual
physical object and the
various incorporeal ownership
rights in the object, such as
the rights to possess, to
enjoy the income from, to
alienate, or to recover
ownership from one who has
improperly obtained title to
the object.”

19.1) Referring to the above definition,

it was submitted that the property

includes the right of ownership or

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aggregate of rights that are guaranteed

and protected by the Government. It was

therefore, submitted that the leasehold

rights is a property which is an

incorporeal ownership right in the objects

such as the rights to possess, to enjoy

income from, to alienate, or to recover

ownership. It was submitted that property

is more than just the physical thing, the

land, the bricks, the mortar, as it is

also the sum of all the rights and powers

incident to ownership of the physical

thing, it is the tangible and intangible.

Reliance was placed on decision in case of

Union Pacific Railroad Company v. Santa Fe

Pacific Pipelines reported in Inc., 231

Cal. App. 4Th 134.

19.2) Reliance was also made to the

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decision in case of Schweihs v. Chase Home

Finance , LLC reported in 2015 IL App(1st)

140683, wherein it is held that a common

idiom describes property as a “bundle of

sticks”, i.e. collection of individual

rights which, in certain combinations,

constitute property, state law determines

only which sticks are in a person’s

bundle.

19.3) Reference was also made to section

54 of the Transfer of Property Act which

defines “Sale” read with section 105 and

108 of Transfer of Property Act. Reliance

was also placed on clause(j) of the

section 108 of the Transfer of Property

Act relating to lease as part of rights

and liabilities of the lessee which reads

as under:

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“108(j) the lessee may

transfer absolute or by way
of mortgage or sub-lease the
whole or any part of his
interest in the property,
and any transferee of such
interest or part may again
transfer it. The lessee
shall not , by reason only
of such transfer, cease to
be subject to any of the
liabilities attaching to the
lease.”

19.4) It was therefore, submitted that

immovable property may be tangible or

intangible right which relates to the

thing as the sale is an absolute

assignment whereas whatever right the

lessee has, is sale of interest in land

which is equivalent to sale of land. It

was therefore, submitted that sale of

leasehold rights cannot fall within the

scope of supply of goods or services as it

is not an activity but an event of

transfer of leasehold right. It was

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submitted that prior to coming into force

of GST, service tax was also not leviable

on transfer of leasehold rights as the

service tax is leviable on bilateral

contract whereas deed of assignment is not

a contract.

19.5) Reference was also made to

commentary on principles of law of

transfer by Shantilal Mohanlal Shah on the

Transfer of Property Act, 1882 wherein it

is opined that “there is a clear

distinction between a contract which is

still to be performed and of which

specific performance may be sought and a

conveyance by which title of property has

actually passed”. It was further pointed

out that scope of Transfer of Property Act

is stated to regulate and deal with the

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transfer of property only by act of

parties other than transfer of property by

operation of law which occurs in cases of

intestate and testamentary succession,

forfeiture, insolvency and Court sales and

the Transfer of Property Act deals with

transfer of property inter vivos i.e. from

one living person to another living

person.

19.6) Considering the aforesaid scope of

Transfer of Property, reference was made

to commentary on Law of Property by K.

Krishna Menon in relation to sections 54

to 57 of the Transfer of Property Act

pertaining to sale. Reference was made to

analysis of the sale transaction where

four points were noted with regard to the

parties, the price, the subject matter and

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the manner of transfer.

19.7) Reference was made to the decision

in case of Mohori Bibi reported in 30 Cal

539, P.C. wherein all the contracts by

infants were declared to be void and

infant cannot be a vendor of property. In

that context it was pointed out that “in

other words as Sulaiman, counsel for the

appellant, put it, conveyance is something

more than a contract; as soon as the sale

deed is executed, the transaction passes

from the domain of contract into that of

conveyance. The former would be governed

by the Contract Act, the latter by the

Transfer of Property Act, and the Transfer

of Property Act nowhere says that an

infant is incapable of being a

transferee.” It was therefore, submitted

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that even as per Indian law, guardian of

an infant is competent to bind the minor

for its estate by contract or purchase of

immovable property.

19.8) Reference was made to the above

commentary to point out that transaction

of sale of leasehold rights is nothing but

sale of immovable property as contract of

sale of leasehold right results into

transfer of property on being reduced into

writing by Deed of Assignment.

19.9) Reliance was also placed on the

following decisions:

(1) In case of Commissioner of Income

Tax, Madras v. Bagyalakshmi & Co.

reported in (1965)55 ITR 550 (SC)

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Court, wherein it is held as under:

“We have held in Commissioner of

Income-tax v. Abdul Rahim & Co.
[1965] 55 ITR 651 that the Income-
tax Officer can reject the
registration of a firm if it is
not genuine or valid and if the
application for registration has
not complied with the rules made
under the Act. Here we have
admittedly a genuine partnership.
It cannot even be suggested that
it is invalid. The only objection
is that Guruswamy Naidu and
Venkatasubba Naidu have less
shares in the partition deed than
those shown in the partnership
deed. If the distinction between
the three concepts is borne in
mind much of the confusion
disappears. A partnership is a
creature of contract. Under Hindu
law a joint family is one of
status and right to partition is
one of its incidents. The income-
tax law gives the Income-tax
Officer a power to assess the
income of a person in the manner
provided by the Act. Except where
there is a specific provision of
the Income-tax Act which derogates
from any other statutory law or
personal law, the provision will
have to be considered in the light
of the relevant branches of law. A
contract of partnership has no
concern with the obligation of the

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partners to others in respect of

their shares of profit in the
partnership. It only regulates the
rights and liabilities of the
partners. A partner may be the
karta of a joint Hindu family; he
may be a trustee ; he may enter
into a sub-partnership with
others; he may, under an
agreement, express or implied, be
the representative of a group of
persons; he may be a benamidar for
another. In all such cases he
occupies a dual position. Qua the
partnership, he functions in his
personal capacity ; qua the third
parties, in his representative
capacity. The third parties, whom
one of the partners represents,
cannot enforce their rights
against the other partners nor the
other partners can do so against
the said third parties. Their
right is only to a share in the
profits of their partner-
representative in accordance with
law or in accordance with the
terms of the agreement, as the
case may be. If that be so,
Guruswamy Naidu could have validly
entered into a genuine partnership
with others taking a 10 annas
share in the business, though in
fact as between the members of the
family he has only a 2 annas share
therein. He would have been
answerable for the profits
pertaining to his share to the

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divided members of the family, but

it would not have affected the
validity or genuineness of the
partnership. So much is conceded
by the learned Attorney-General.
If so, we do not see why a
different result should flow if
instead of one member of the
divided family two members thereof
under some arrangement between the
said members of the family took 10
annas share in the partnership. If
the contention of the revenue was
of no avail in the case of
representation by a single member,
it could not also have any
validity in the case where two
members represented the divided
members of the family in the
partnership. As the partnership
deed was genuine, it must be held
that the shares given to Guruswamy
Naidu and Venkatasubba Naidu in
the said partnership are correct
in accordance with the terms of
the partnership deed.

This court in Charandas Haridas v.

Commissioner of Income-tax [1960]
39 ITR 202, 208; [1960] 3 SCR 296
had to consider a converse
position. There, a karta of a
Hindu undivided family was a
partner in 6 managing agency firms
and the share of the managing
agency commission received by him
as such partner was being assessed
as the income of the family.

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Thereafter, there was a partial

partition in the family by which
he gave his daughter a one pie
share of the commission from each
of two of the managing agencies
and the balance in those agencies
and the commission in the other
four managing agencies were
divided into five equal shares
between himself, his wife and
three minor sons. The memorandum
of partition recited that the
parties had decided that
commission which accrued from
January 1, 1946, ceased to be
joint family property and that
each became absolute owner of his
share. Notwithstanding the
partition, the income-tax
authorities assessed the said
total income as the income of the
joint family. The Bombay High
Court agreed with that view. But
this court held that as the
partition document was a genuine
one, it was fully effective
between the members of the family
and therefore the income in
respect of the divided property
was not the income of the Hindu
joint family. In that context,
Hidayatullah J., speaking for the
court, made the following
observations :

"The fact of a partition in the

Hindu law may have no effect
upon the position of the

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partner, in so far as the law

of partnership is concerned,
but it has full effect upon the
family in so far as the Hindu
law is concerned. Just as the
fact of a karta becoming a
partner does not introduce the
members of the undivided family
into the partnership, the
division of the family does not
change the position of the
partner vis-a-vis the other
partner or partners. The
income-tax law before the
partition takes note,
factually, of the position of
the karta, and assesses not him
qua partner but as representing
the Hindu undivided family. In
doing so, the income-tax law
looks not to the provisions of
the Partnership Act, but to the
provisions of Hindu law. When
once the family has disrupted,
the position under the
partnership continues as
before, but the position under
the Hindu law changes. There is
then no Hindu undivided family
as a unit of assessment in
point of fact, and the income
which accrues cannot be said to
be of a Hindu undivided family.
There is nothing in the Indian
income-tax law or the law of
partnership which prevents the
members of a Hindu joint family
from dividing any asset."

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These observations support the

conclusion we have arrived at. The
division in the joint family does
not change the position of the
karta as a partner vis-a-vis the
other partner or partners in a
pre-existing partnership, because
the law of partnership and Hindu
law function in different fields.
If so, on the same principle, a
divided member or some of the
divided members of an erstwhile
joint family can certainly enter
into a partnership with third
parties under some arrangement
among the members of the divided
family. Their shares in the
partnership depends upon the terms
of the partnership; the shares of
the members of the divided family
in the interest of their
representative in the partnership
depends upon the terms of the
partition deed.”

(2) In case of Vijaya Oil Mills v.

State of Kerala reported in 1980(45)STC

(Ker), wherein it is held as under:

“11. To pay tax is a duty. When it

is levied it becomes a liability.
Consequently, tax after it becomes

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due is a debt. It does not cease

to be a debt from the mere fact
that special provisions for its
collection are made in the Act
imposing its levy. After tax
becomes due the relationship
between the assessee and the
department is really that of
debtor and creditor. Arrears of
sales tax are "debts" and an
assessee who defaults to pay tax
is a "debtor" coming within the
meaning of those expressions in
Sections 59 and 60 of the Indian
Contract Act.

12. When an enactment is said to

be complete what is meant is only
that it is exhaustive to the
extent it goes. It does not mean
that in respect of matters not
specifically covered by it general
principles of law are excluded
from consideration and cannot be
applied even if they are not
inconsistent with it. Otherwise,
even principles of interpretation
of statutes cannot be applied to
it. A statute until it is repealed
is living law. To attempt to
imprison it within the sections in
it is about as reasonable as to
attempt to confine a stream within
a pond. The water in the pond
would soon become a stagnant pool
and there would no longer be a
living stream. General principles
of law to the extent they are not

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specifically excluded are

applicable to any enactment. With
respect we consider the decision
in Jogendra Mohan Sen v. Uma Nath
Guha (1908) I.L.R. 35 Cal. 636, as
laying down the correct law and do
not agree with the decision in
Ganga Bishun Singh v. Mahomed Jan
(1906) I.L.R. 33Cal. 1193.”

(3) In case of Income Tax Officer v.

Mani Ram Etc. reported in (1969) 72 ITR

203, wherein it is held as under:

“7. The argument was that these

sections apply to a case of a
regular assessment and the
enactment of these sections should
be treated as a Parliamentary
exposition of section 18A(3) of
the earlier Act as referring only
to a case of regular assessment.
We are unable to accept this
argument as correct. There is
nothing in the 1961 Act to suggest
that Parliament intended to
explain the meaning or clear up
doubts about the meaning of the
word "assessed" in section 18A(3)
of the earlier Act. Generally
speaking, a subsequent Act of
Parliament affords no useful guide
to the meaning of another Act
which came into existence before

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the later one was ever framed.

Under special circumstances, the
law does, however, admit of a
subsequent Act to be resorted to
for this purpose but the
conditions under which the later
Act may be resorted to for the
interpretation of the earlier Act
are strict; both must be laws on
the same subject and the part of
the earlier Act which it is sought
to construe must be ambiguous and
capable of different meanings. For
example, in Kirkness (Inspector of
Taxes) v. John Hudson & Co. Ltd.
[1955] AC 696, it was held by the
House of Lords that the ordinary
meaning of the word "sale"
importing a consensual relation is
to be attributed to the use of it
in the context of section 17(1)(a)
of the Act of 1945. Since there
was no ambiguity in the section,
it was not permissible to seek
guidance in its construction from
later Finance Acts, although it
was directed by Parliament to be
construed as one with them. At
page 714 of the report Viscount
Simonds states:

"I have looked at the later

Acts to which the Attorney-
General referred in order to
satisfy myself that they do not
contain a retrospective
declaration as to the meaning
of the earlier Act. They

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clearly do not, and I do not

think that it has been
contended that they do. At the
highest it can be said that
they may proceed upon an
erroneous assumption that the
word 'sold' in section 17(1)(a)
of the Income Tax Act, 1945,
has a meaning which I hold it
has not. This may be so and, if
so, it is an excellent example
of the proposition to which
reference was made in the
report of the Committee of the
Privy Council in In re
MacManaway [1951] SC 161 and
again by my noble and learned
friend Lord Radcliffe in Inland
Revenue Commissioners v.
Dowdall, O'Mahoney & Co. Ltd.
[1952] AC 401 that the beliefs
or assumptions of those who
frame Acts of Parliament cannot
make the law."

(4) In case of Commissioner of Income

Tax v. Shaw Wallace and Company

reported in (1932) SCC 515 (SC),

wherein it is held as under:

“15. Some reliance has been placed

in argument upon Section 4 (3)(v)
which appears to suggest that the
word " income " in this Act may

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have a wider significance than

would ordinarily be attributed to
it. The Sub-section says that the
Act " shall not apply to the
following classes of income," and
in the category that follows,
Clause (v) runs:-

Any capital sum received in

commutation of the whole or a
portion of a pension, or in the
nature of consolidated
compensation for death or
injuries, or in payment of any
insurance policy, or as the
accumulated balance at the
credit of a subscriber to any
such Provident Fund.
16. Their Lordships do not
think that any of these sums,
apart from their exemption,
could be regarded in any
scheme of taxation of income,
and they think that the clause
must be due to the over
anxiety of the draftsman- to
make this clear beyond
possibility of doubt. They
cannot construe it as
enlarging the word "income "
so as to include receipts of
any kind'-, which are not
specially exempted. They do
not think that the clause is
of any assistance to the
appellant.”

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19.10) Reliance was placed on the

decision of Hon’ble Apex Court in case of

D.G. Gose and Co.(Agents) Pvt. Ltd. v.

State of Kerala and another reported in

(1980) 2 Supreme Court Cases 410, wherein

Hon’ble Apex Court while considering

validity of provisions of Kerala Building

Tax Act, 1975 interpreted words tax and

taxation in relation to Article 366(28) of

the Constitution of India read with

Article 246 Schedule VII List I and Entry

86 and List II Entry 49 of the

Constitution of India.

19.11) The Hon’ble Apex Court has also

analysed words “assets” in relation to

Schedule VII List I of Entry 86 so as to

interpret the tax on the lands and

building. It was submitted that

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alternatively GST on the consideration of

transfer of leasehold right would also be

taxed on the building which was never

leased by GIDC but constructed by lessee

to run the industry on the leasehold land.

It was further submitted that land

apurtenant to building is also a building.

Reliance was placed on the decision of

Apex Court in case of Dr. K.A. Dhairayawan

and others v. J.R. Thakur and others

reported in 1959 SCR 799, wherein Hon’ble

Apex Court while analysing the provisions

of Bombay Rents, Hotel and Lodging House

Control Act, 1947 held that upon a proper

construction of lease, there was a demise

only of the land and not of the building

and consequently, the provisions of the

Act did not apply to the contract for

delivery of possession of the building as

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the ownership in the building was with the

lessees and in which the lessors had no

right while the lease subsisted. It was

held that there was no absolute rule of

law in India that whatever was affixed or

built on the soil became part of it and

was subjected to the same rights of

property as the soil itself. It was

therefore, submitted that the building

transferred along with leasehold rights

cannot be subjected to levy of GST as per

Entry No.5 in Schedule-III of the GST Act

as it cannot be considered as supply of

goods or services.

19.12) Reference was made to the

Notification No.26/2012-ST dated

20.06.2012 as amended by Notification No.

2/2013 dated 1.03.2013 and 9/2013 dated

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8.5.2013 in section 66B of the Finance Act

1994 pertaining to charge of service tax.

In the said notification, construction as

per Entry No.12 with regard to

construction of a complex, building, civil

structure or a part thereof intended for a

sale, value of the land is included in the

amount charged from the service receiver.

It was therefore, submitted that same

provision is incorporated in the GST Act

while prescribing rate of GST being GST on

service under Heading 9954 with regard to

construction services. Reference was made

to Notification No.11/2017 dated

28.06.2017 more particularly, Note No.2

wherein the rate of GST applicable at 9%

would consider the value of land or

undivided share of land, as the case may

be, in such supply of services to be

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deemed to 1/3rd of total amount charged

for such supply.

19.13) Reference was also made to

Explanation which has been inserted with

effect from 25.01.2018 wherein it is

explained that total amount means the sum

total of consideration charged for

aforesaid service and amount charged for

transfer of land or undivided share of

land as the case may be including by way

of lease or sublease. It was therefore,

submitted that as per Entry No.16 of the

said notification, services by Central

Government, State Government, etc., on

supply of land or undivided share of land

by way of lease or sub-lease where such

supply is a part of composite supply of

construction of flats etc. provides nil

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rate of GST wherein it is further provided

that nothing contained in this entry shall

apply to an amount charged for such lease

or sub lease-in excess of one third of the

total amount charged for the said

composite supply. It was therefore,

submitted in the alternative that if

transaction of transfer of leasehold right

is held to be liable as supply of services

then transferror should also entitled to

take the benefit of input tax credit as

provided in section 11 of the GST Act.

19.14) Reference was also made to

relevant portion of modal GST law

published in November 2016 prior to coming

into force of GST Act to point out that in

Agenda Item 2A, GST Treatment of Land and

Building (Real Estate) was considered.

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Thereafter reference was made to the

minutes of the 7th GST Council Meeting

held on 22-23 December 2016 wherein the

aforesaid agenda was considered and GST

council decided not to introduce GST on

land and building at this stage and agreed

that this issue can be revisited after a

year or so of the implementation of GST.

It was therefore, submitted that there is

no prescribed rate of GST on land and

building but by virtue of Schedule III,

Item No.5, land and building are excluded

from the scope of supply of goods and

services. It was therefore, submitted that

the transfer of leasehold rights being one

of the right of bundle of properties is

nothing but an immovable property and

therefore, would fall within the scope of

land and building which is specifically

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excluded from the purview of scope of

supply of goods and services by Schedule-

III of the GST Act.

19.15) It was submitted that leasehold

rights are nothing but a benefit arising

out of the land which is allotted by GIDC

and such interest in land is also to be

regarded as immovable property.

19.16) It was therefore, submitted that

as per the terms of the lease deed

executed by GIDC, lessee can assign his

interest in any lawful manner and such

interest itself would be an immovable

property which can be validly assigned.

However, it is also true that right of

lessee is not as much absolute as that of

purchaser of property inasmuch as it may

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be excluded altogether by the parties. It

was therefore, submitted that as per the

permission of GIDC, lessee has right to

assign leasehold rights in the property.

19.17) Reference was also made to General

Clauses Act where the immovable property

is defined under section 3 of the said Act

as well as Registration Act and definition

in both the Acts define immovable property

which includes land and building

intangible rights such as easement rights,

rights to ferries and fisheries which

would also include equity of redemption in

mortgaged property, the interest of a

mortgagee and other rights which cannot

come within the ordinary exception of

actual physical moveable property and

those which cannot be included in the

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definition mentioned in Sale of Goods Act.

It was therefore, submitted that there is

a distinction between moveable and

immoveable property and the leasehold

rights would partake the character of

immovable property as it is right in land

and it affects only immovable propety

being incorporeal right as during the

lease, lessee would be entitled to

exclusive possession to enjoy the interest

in the property.

19.18) It was submitted that as per the

guiding rule of statutory interpretation,

purposive interpretation is required to be

made of provisions of section 7 of the GST

Act.

19.19) Reliance was placed on the

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decision of Hon’ble Apex Court in case of

Gopal Saran v. Satyanarayana reported in

(1989) 3 Supreme Court Cases 56, wherein

interpretation of word “assignment” is

made as under:

“10. On the facts found, it cannot

be said or even argued that there
was any assignment by the tenant,
"Assignment", it has been stated
in Black's Law Dictionary, Special
Deluxe Ed., p. 106, "is a transfer
or making over to another of the
whole of any property, real or
personal, in possession or in
action, or of any estate or right
therein". It has further been
stated as "The transfer by a party
of all its rights to some kind of
property, usually intangible
property such as rights in a
lease, mortgage, agreement of sale
or partner- ship." It has to be
examined whether there was sub-
letting or otherwise parting with
possession in terms of Sec. 13(1)
(e) of the Act.”

19.20) Referring to above, it was

submitted that assignment of leasehold

rights is transfer of intangible property

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with interest and possession of the land

and building and therefore, the same can

only be considered as sale of land and

building which would be out of purview of

scope of supply of goods and services

under the GST Act. It was therefore,

submitted that GST cannot be levied upon

the transaction of assignment of leasehold

rights of the land allotted by GIDC under

99 years of lease.

20. Learned Senior Advocate Mr. S.N. Soparkar

appearing for the petitioner in Special Civil

Application No. 3736 of 2024 adopted the

submissions made by other learned advocates

for the petitioners referred to conveyance

deed executed by the original lessee for

assignment of leasehold rights which comprises

both the leasehold rights in land and

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ownership rights in building. It was

therefore, submitted referring to the

provisions of section 7(1) read with section

2(52) and section 2(102) of the GST Act that

transaction in question cannot be considered

as supply of goods or services as it pertains

to the immovable property being land and

building which is excluded from the scope of

supply of goods and services under Schedule

III of the GST Act. Reliance was placed on the

decision of Apex Court in case of Jilubhai

Nanbhai Khachar and others v. State of Gujarat

and another reported in 1995 Supp (10) Supreme

Court Cases 596 wherein the Hon’ble Apex Court

has analysed the definition of land given in

Black’s Law dictionary and Law Lexicon as

under:

“11. In Black's Law Dictionary

(Sixth Edition) at page 877, land
is defined to mean- "in the most
general sense, comprehends any

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ground, soil or earth whatsoever,

including......rocks. "Land" may
include any estate or interest in
lands, either legal or equitable,
as well as easements and
incorporeal hereditaments.
Technically, land signifies
everything comprehending all
things of a permanent nature, and
even of an unsubstantial provided
they be permanent. Ordinarily, the
term is used as descriptive of the
subject of ownership and not the
ownership. Land is the material of
the earth, whatever may be the
ingredients of which it is
composed, weather, soil, rock, or
other substance, and includes free
or occupied space for an
indefinite distance upwards as
well as downwards, subject to
limitations upon the use of
airspace imposed, and rights in
the use of airspace granted by
law.
12. According to the Law
Lexicon (Reprint edn. 1987) by
Ramanatha Iyer p. 701, the
word 'land" in the ordinary
legal sense comprehends
everything of a fixed or
permanent nature and,
therefore, growing trees, land
includes the benefit arise out
of the land and things
attached to the earth or
permanently means everything
attached to the earth and also

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the share in or charges on,

the revenue or rent of
villages or other defined
portions of territory. Land
includes the bed of the sea
below high water mark.....Land
shall extend to messuages, and
all other hereditaments,
whether corporal or
incorporeal and whether
freehold or of any other
tenure and to money to be paid
out in the purchase of land.
Land in its widest
signification would therefore
include not only the surface
of the ground, cultivable,
uncultivable or waste lands
but also everything on or
under it. In Jagannath Singh
v. State of U.P., AIR (1960)
SC 1563 p. 1568, this Court
held that the word "land" is
wide enough to include all
lands whether agricultural or
non-agricultural land. In
State of U.P. v. Sarju Devi,
[1978] 1 SCF 18, this court
held that the definition of
the land in Section 3 (14)
shows that it is not necessary
for the land to fall within
its purview that it must be
actually under cultivation or
occupied for purposes
connected with agriculture.
The requirement is amply
satisfied even if the land is

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either held or occupied for

the purposes connected with
agriculture. The word "held"
only means possession of legal
title and does not require
actual connected occupation.
In State of Gujarat v. Kamla
Ben Jivan Bhai, [1979] Supp. 2
SCC 440, this Court held that
actual cultivation is not
necessary to constitute an
estate and the right to
collect grass is a right
annexed to land which was held
to be an estate and abolition
of the right to pay annual
amount was an agrarian reform.
In Sri Ram Ram Narain Medhi v.
State of Bombay, [1959] Supp.
1 SCR 489, this Court held
that the Code is a law
relating to land tenures. The
right in relation to an estate
.used in Article 31A has been
noted in a very com-prehensive
sense. In Digvijay Singh
Hamirsinhji v. Manji Savda,
[1969] 1 SCR 405, this Court
interpreting Section 18 of
Saurashtra Land Re-forms Act,
1951 held that the Girasdar to
whom the ruler made the grant
was bound by the provisions of
that Act and that he was not
entitled to have his tenant
evicted except in accordance
with the provisions of the
Act.”

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20.1) Referring to above definition, it

was submitted that land includes benefits

arising out of land and leasehold right

is nothing but a benefit arising out of

land and as such assignment of such

leasehold rights is nothing but a transfer

of immovable property subjected to stamp

duty as well as registration. It was

further submitted that under the

provisions of Wealth Tax Act, 1957, asset

and property are defined which are subject

matter of controversy which is before

Hon’ble Supreme Court in case of Ahmed

G.H. Arif and others v. Commissioner of

Wealth Tax, Calcutta reported in (1969) 2

Supreme Court Cases 471, wherein Hon’ble

Apex Court has analysed the property vis-

a-vis assets as under:

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“8. Now "property" is a term

of the widest import and
subject to any limitation
which the context may
require, it signifies every
possible interest which a
person can clearly hold or
enjoy. The meaning of the
word "property" has come up
for examination before this
Court in a number of cases.
Reference may be made to one
of them in which the
question arose whether
Mahantship or Shebaitship
which combines elements of
office and property would
fall within the ambit of the
word "property" as used in
Article 19(1)(f) of the
Constitution. It was
observed in the
Commissioner, Hindu
Religious Endowments, Madras
v. Shri Lakshmindra Thirtha
Swamiar of Sri Shirur
Mutt(1) that there was no
reason why that word should
not be given a liberal and'
wide connotation and should
not be extended to those
well recognised types of
interests which had the
insignia or characeristics
of proprietary right.
Although Mahantship was not
heritable like the ordinary
property, it was still held

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that the Mahant was entitled

to claim protection of Art.
19(1) (f) of the
Constitution. It is stated
in the Halsbury's Laws of
England, Vol. 32 3rd Edn.
page 534 that an annuity
(which is a certain sum of
money payable yearly either
as a personal obligation of
the grantor or out of
property not consisting
exclusively of land) can be
an item of property separate
and distinct from the
beneficial interests therein
and from 'the funds and
other property producing it
is property capable of
passing on a death and can
be separately valued for the
purpose of estate duty.”

20.2) Referring to above analysis, it

was submitted that the word “property”

should be given liberal and wide

connotation including the various types of

interest which have characteristics of

property right and therefore, the

leasehold rights are nothing but property

in land which is an immovable property.

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20.3) Reliance was also made on the

decision of Apex Court in case of

Commissioner of Income Tax Assam, Tripura

and Manipur v. Panbari Tea Co. Ltd

reported in (1965) 57 ITR 422, wherein

with regard to whether premium payable in

installments in addition to rent of a

leasehold property was a revenue or

capital income, the Hon’ble Apex Court

held as under by drawing distinction

between the premium and rent:

“2. The short question that arises

in this appeal is whether the
amount described as premium in the
lease deed is really rent and,
therefore, a revenue receipt.
Before we look at the lease deed
it will be convenient to notice
briefly the law pertaining to the
concept of premium, which is also
described as salami.

The distinction between premium

and rent was brought out by the
Judicial Committee in Raja Bahadur

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Kamakshya Narain Singh of Ramgarh

v. Commissioner of Income-tax
[1943] 11 ITR 513 (PC), thus:

"It (salami) is a single

payment made for the
acquisition of the right of the
lessees to enjoy the benefits
granted to them by the lease.
That general right may properly
be regarded as a capital asset,
and the money paid to purchase
it may properly be held to be a
payment on capital account. But
the royalties are on a
different footing."

It is true that in that case the

leases were granted for 999 years;
but, though it was one of the
circumstances, it was not a
decisive factor in the Judicial
Committee coming to the conclusion
that the salami paid under the
leases was a capital asset. This
court in Member for the Board of
Agricultural Income-tax, Assam v.
Sindhurani Chaudhurani [1957] 32
ITR 169; [1957] SCR 1019 denned
"salami" as follows:

"The indicia of salami are (1)

its single non-recurring
character and (2) payment prior
to the creation of the tenancy.
It is the consideration paid by
the tenant for being let into
possession and can be neither

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rent nor revenue but is a

capital receipt in the hands of
the landlord."

It is true that in that case the

payment was paid in a single lump
sum, but that was not a conclusive
test, for salami can be paid in a
single payment or by instalments.
The real test is whether the said
amount paid in a lump sum or in
instalments is the consideration
paid by the tenant for being let
into possession. This court again
in Chintamani Saran Nath Sah Deo
v. Commissioner of Income-tax
[1961] 41 ITR 506 [1961] 2 SCR 790
considered all the relevant
decisions on the subject in the
context of licences granted to the
assessee to prospect for bauxite
in some cases for six months and
in others for a year or two and
observed:

"The definition of salami was a

general one, in that it was a
consideration paid by a tenant
for being let into possession
for the purpose of creating a
new tenancy."

Applying that test this court

held in that case that under
the said licences there was a
grant of a right to a portion
of the capital of the licensor
in the shape of a general

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right to the capital asset.”

20.4) Referring to above decision, it

was submitted that even the premium is

held to be a capital receipt and not as

revenue receipt by the Hon’ble Apex Court

considering that the real test is whether

the amount paid in a lump-sum or in

installments, is the consideration paid by

the tenant for being let into possession

resulting into grant of right to a portion

of the capital of the lessor in the shape

of a general right to the capital asset.

It was therefore, submitted that leasehold

rights are nothing but a capital asset

in an immovable property which cannot be

subjected to in form of land and building

and therefore, will be out of scope of

supply of goods and services as per the

Schedule-III of the Act.

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21. On the other hand, learned Advocate

General Mr. Kamal Trivedi for the respondent

State submitted that leasehold right with

respect to the immovable property (I.e. land)

is an "interest" in the immovable property. In

fact, it is an intangible estate, which does

not have physical existence or identity as

being commonly understood.

21.1) It was submitted that when

transfer of such a leasehold right takes

place, it would be nothing but transfer of

interest in the immovable property.

21.2) It was submitted that the question

as to what is the meaning of the term

"immovable property", more particularly

when the said term is not defined under

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the CGST Act, 2017, or GGST Act, 2017, as

per well settled legal position, in such

an eventuality, meaning of the said term

should be understood in context of the

provisions of the legislation with which

the question has arisen i.e. GST Act and

not in terms of the definition of the said

expression obtaining under various other

legislations, which are not pari materia

legislations or in other words, which are

enacted for different purposes.

21.3) It was therefore, submitted that

in view of this, even though lease-hold

right is an interest in immovable

property, the said interest cannot be

dubbed as an immovable property' itself,

since, it is not envisaged like this under

various other provisions of the GST Act,

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some of which are referred to hereunder:-

(i) Section 2(119) of the GST Act,

which defines the 'Works Contract,
wherein the term 'immovable property
is used in the sense that it has to
be any immovable property in
tangible form ie in physical form

(ii) Section 17(5)(c) and (d) of the

GST Act dealing with Apportionment
of credit and blocked credits, once
again uses the term an immovable
property (other than plant and
machinery)

(iii) Section 12 of the IGST Act,

which applies by virtue of Section
2(120) of the Act, whereby words and
expressions not defined in the Act
shall have the same meaning as
assigned to them, inter-alia, in the
said IGST Act.

The said Section 12(3) refers to the

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term 'an immovable property with

reference to its physical location
so as to determine the place of
supply of services.

(iv) Section 13(4) of the IGST Act

dealing with place of supply of
services where location of supply or
recipient is outside India uses the
term Immovable property.

21.4) It was submitted that the

aforesaid reasoning of interpretation

would also be applicable with reference to

the erstwhile Finance Act, 1994, which

also did not define the term "immovable

property and its Section 65B(44), dealt

with the term 'service tax, wherein the

activity relating to transfer of title in

immovable property, by way of sale, gift

or in any other manner, was excluded from

the purview of 'service tax. In the

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Finance Act, 1994, also, the interest in

immovable property was not being

considered as immovable property', which

is also discernible from the reading of

other provisions like Sections 65(90a),

65(105)(zzzz) of the Finance Act, which

consider immovable property' in tangible /

physical form.

21.5) It was submitted that if any

benefit arising out of land or anything

attached to the land were to be treated as

land itself ie immovable property by

itself, as defined under Section 3(26) of

the General Clauses Act, 1897, or under

Section 2(6) of the Registration Act,

1908, then in that case, it would, in the

first blush, seem to be highly illogical

to treat growing crops, grass and things

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attached to the land as 'movable property

under Section 2(52) of the GST Act.

However, it is not so, because it has been

deemed fit by the legislature to treat

'growing crops, grass and things attached

to or forming part of the land, as

movable, under the GST Act as well as the

Transfer of Property Act, 1882, though the

same is treated as immovable property

under the above-referred General Clauses

Act, 1897, and the Registration Act, 1908.

21.6) It was submitted that in the

present case, GIDC being the owner of the

land has bundle of rights qua the same,

viz

(i) right to own;

(ii) right to construct:
(iii) right to give a license;
(iv) right to possess and occupy
(v) right to give a lease,
(vi) right to sue.

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(vii) right to compensation; etc.

(viii) reversion right

21.7) It was therefore, submitted that

now, when one of the rights i.e. right to

occupy the land is transferred by GIDC in

in favour of the lessee, it is to be

treated as supply of service under the GST

Act and same is susceptible to GST, then

its further transfer, which is also

transfer of the right to occupy / possess,

will continue to remain as supply of

service, which characteristic will not

change, merely because, the lessee of GIDC

effects absolute transfer thereof in

favour of an assignee, leaving no right

whatsoever with him in respect of the said

lease-hold land.

21.8) It was therefore, submitted that

the interest in land would remain the same

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with the recipient of service. whether he

gets the same supplied directly by GIDC in

form of lease-hold agreement or from the

original lessee of GIDC in form of

assignment of lease-hold rights and in

both these transactions, there is transfer

of lease-hold rights in his favour, which

cannot be considered as "sale of immovable

property.

21.9) In support of his submissions

reliance was placed on the following

decisions:

1) In case of Legal Hiers of Deceased

Fakir Chand Ambaram Patel v. OI of

Amruta Mills Limited reported in

2002(3) GLH 367, wherein it is held as

under:

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“40. To summarise : [a] Leasehold

interest is an intangible asset,
which is valuable in nature though
the valuation may differ from case
to case depending upon the unexpired
period of lease.

[b] Such an asset is transferable

subject to the same terms and
conditions as may be stipulated in
the lease deed.”

2) In case of Greater Noida Industrial

Dev. Authority v. Commr. Of Cus., C,

Ex. reported in 2015(40) STR 95

(All.), wherein it is held as under:

“18. The basic dispute giving rise

to the present appeal is in respect
of the payment of service tax on the
rent which had been received in the
matter of allotment of plots by the
assessee to use for construction for
business/commercial purposes during
the terms of the lease .

19. The Explanation to Section 65

(105) (zzzz) of the Finance Act
defines immovable property, which
includes vacant land. The Expression

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renting of immovable property as

defined under Section 65 (90a) means
renting, letting, leasing, licensing
or other similar arrangements of
immovable property for use in the
course or furtherance of business or
commerce. The Explanation to Section
65 (90a) has further clarified the
clause "for use in the course or
furtherance of business or commerce"
to include use of immovable property
as factories, office buildings,
warehouses etc. and it has been
declared that "renting of immovable
property" includes allowing or
permitting the use of space in an
immovable property, irrespective of
the transfer of possession or
control of the said immovable
property.

20. In view of the definition of

expression of "renting of immovable
property" read with Explanation, in
our opinion, will include the lease
of various plots allotted by the
assessee for business/ commercial
purposes and rent charged/ collected
in respect of the lease so executed
would necessarily be subjected to
service tax.

21. We may record that the

term/period of the lease whether it
is for short duration or for 90
years or perpetuity makes absolutely
no difference to the meaning of the
expression "renting of immovable

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property". The contention of the

assessee that since long term lease
of 90 years/perpetuity would
virtually amounts to transfer of
ownership of the land does not
appeal to us especially in view of
the simple meaning of the language
use in the aforesaid sections.

22. The judgment of the Apex Court

in the case of R.K. Palshikar (HUF)
vs. Commissioner of Income Tax
reported in (1988) 3 SCC 594 relied
upon by the assessee deals with the
transfer of property within the
meaning of Section 12-B of the
Income Tax Act and is, therefore,
clearly distinguishable in the facts
of the case.

23. The Tribunal appears to be

justified in recording that the
letting of vacant land by way of
lease or license irrespective of the
duration or tenure for construction
of building or temporary
construction for use in the course
or furtherance of business or
commerce is taxable w.e.f. `st July,
2010 in view of Clause (v) of
Explanation 1 to Section 65 (105)
(zzzz) of the Finance Act, 1994.

24. So far as the term lease is

concerned, it may be recorded that
it has not been defined under the
Finance Act, 1994. The term "lease"
would cover a lease for any period

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including a lease in perpetuity, as

will follow from simple reading of
Section 65 (90a). The Finance Act,
1994 does not carve out any
distinction in the mater of long
term lease/lease in perpetuity or
lease for short duration, so far as
the charging section is concerned.

25. The word "lease" as contemplated

by the Transfer of Property Act,
vis-a-vis 'license' has been
explained by the Apex Court in the
case of Associated Hotels of India
Ltd. vs. R.N. Kapoor reported in AIR
(1959) SC 12262, Pr. 28, wherein it
has been held that if the document
creates an interest in the property,
it is a lease and if it further goes
on to show exclusive possession of
the property, it would be a strong
case for the same being treated as a
lease. It has been held that under
Section 105 of the Transfer of
Property Act, transfer of a right to
enjoy immovable property made for a
certain time in consideration for a
price paid or promised would be a
lease.

26. Judged in the aforesaid

background we do not find any
illegality in the conclusions drawn
by the Tribunal that the lease of
immovable property under Section 65
(105) (zzzz) would be covered for
service tax, irrespective of the

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fact that the lease is short term or

long term or lease in perpetuity.”

3) In case of Builders Association of

Navi Mumbai and Anr. v. Union of India

and others reported in AIR 2018 Bombay

138, wherein it is held as under:

“14. On a plain reading of the GST

Act, we do not see how we can agree
with Mr. Nankani. Mr. Nankani also
relies upon Schedule II, which is
referable to section 7. These are
the activities to be treated as
supply of goods or services. The
substantive provision section 7 in
clearest terms says that the
activities specified in Schedule I
made or agreed to be made without a
consideration and the activities to
be treated as supply of goods or
supply of services referred to in
Schedule II would be included in the
expression "supply". However, clause
(a) of sub-section (1) of section 7
includes all forms of supply of
goods or services or both such as
sale, transfer, barter, exchange,
licence, rental, lease or disposal
made or agreed to be made for a
consideration by a person in the
course or furtherance of business.

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We referred to J.V.Salunke,PA 907-

WP.12194.2017.doc the definitions
simply to reinforce our conclusion
that the CIDCO is a person and in
the course or in furtherance of its
business, it disposes of lands by
leasing them out for a consideration
styled as one-time premium.
Therefore, if one refers to Schedule
II, section 7, then, Item No. 2
styled as land and building and any
lease, tenancy, licence to occupy
land is a supply of service. Any
lease or letting out of a building,
including commercial, industrial or
residential complex for business,
either wholly or partly is a supply
of service. It is settled law that
such provisions in a taxing statute
would have to be read together and
harmoniously in order to understand
the nature of the levy, the object
and purpose of its imposition. No
activity of the nature mentioned in
the inclusive provision can thus be
left out of the net of the tax. Once
this law, in terms of the
substantive provisions and the
Schedule, treats the activity as
supply of goods or supply of
services, particularly in relation
to land and building and includes a
lease, then, the consideration
therefor as a premium/one-time
premium is a measure on which the
tax is levied, assessed and
recovered. We cannot then probe into
the legislation any further.

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xxx

20. In the passing, we are of the

opinion that the High Court of
Judicature of Allahabad, while
considering the demand, not arising
out of the GST, but under the
Finance Act in relation to the
services of renting of immovable
property of Greater Noida, has
rightly arrived at the conclusion
that the same was a taxable service
and on the consideration received,
the service tax could have been
levied and demanded. Once we agree
with the reasoning of the Division
Bench, then, we do not feel it
necessary to reproduce the
paragraphs in the Division Bench
judgment. We are not in agreement
with the learned senior counsel
appearing for the petitioners that
the demand is contrary to law or
unfair, unjust and unreasonable in
any manner.”

4) The above decision of Bombay High

Court was upheld by the Hon’ble

Supreme Court in case of Builders

Association of Navi Mimbai v. Union of

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India and others reported in (2023)

109 GSTR 463(SC) as under:

“We do not find any good ground and

reason to take a different view than
the one expressed by the High Court.
However, it is clarified that we
have not examined the question of
exemption granted by Notification
No. 12 of 2017-CT (Rate) dated June
28, 2017 with effect from, July 1,
2017. We have also not examined the
scope and ambit of the expression in
clause 2(a) of Schedule II "licence
to occupy land is a supply of
services" of the Central Goods and
Services Tax Act, 2017. These
aspects are left open.

Recording the aforesaid, the

special leave petition is dismissed.

Pending application(s), if any,

shall stand disposed of.”

5) In case of Residents Welfare

Association, Noida v. State of Uttar

Pradesh and others reported in (2009)

14 Supreme Court Cases 716, wherein it

is held as under :

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“25. It was also contended by him

that the main condition for
registration of an instrument is
that it must be chargeable to duty
on the market value and the same is
possible in case of an out right
sale. In case of lease, only partial
rights are transferred and the right
of reversion remains with the lessor
whereas in case of sale, there is an
absolute transfer of ownership.
Therefore, we have to establish
whether the documents presented for
registration were, in fact, an out
right sale or a deed of lease.
26. The learned counsel appearing
on behalf of the respondent no 4.
(i.e. being the Noida authorities)
contended that the deed was a
composite deed of assignment and
sale owing to which both Articles 23
and 63 would be applicable. The
Division Bench of the High Court in
its impugned judgment also agreed to
this contention. Thus, considering
this, it becomes essential for us to
determine the nature of the deed.

27. "Sale" has been defined under

section 54 of the Transfer of
Property Act. Although the Indian
Stamp Act 1899 has not included the
definition of "sale", Section 2,
sub-section (10) of the Act defines
"conveyance" as including a

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conveyance on sale and every

instrument by which property,
whether movable or immovable, is
transferred intervivos and which is
not otherwise specifically provided
for by Schedule 1-A or Schedule 1-B,
as the case may be.

28. "Lease" has been defined under

section 105 of the Transfer of
Property Act and also in section 2
sub section (16) of the Indian Stamp
Act 1899. According to section 2 sub
section (16) of the Indian Stamp
Act, "Lease" means a lease of
immovable property and includes a
Patta, a kabuliyat or any instrument
by which tolls of any description
are let, any writing on an
application for lease intended to
signify that the application is
granted and finally any instrument
by which mining lease is granted in
respect of minor minerals as defined
in clause (e) of section 3 of the
Mines and Minerals (Regulation and
Development) Act, 1957.

29. From a plain reading of Section

54 and Section 105 of the Transfer
of Property Act, there cannot be any
doubt in our mind that in case of a
lease, there is a partial transfer
and the right of reversion remains
with the lessor. Whereas in case of
a sale, there must be an absolute
transfer of ownership and not some

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rights only as in the case of a

lease. Therefore, it is to be
considered whether the document in
question, which was presented for
registration, was a partial transfer
and accordingly, it was a lease, or
whether it involved any outright
sale therein.

30. As noted herein earlier, a lease

deed was executed by the lessor in
favour of the co- operative
societies and its members. It is an
admitted position that the lessor
namely Noida Authorities had entered
into the lease agreement with the
co-operative societies and their
members, being lessees and the sub-
lessees respectively, and the sub-
lessees further entered into the
agreements with the assignees
(members of the appellant
association). Such being the
position, it is amply clear to us
that the document in question
presented for registration before
the registration officer was, in
fact, a lease and the transfer to
the members of the association was
an assignment of the leasehold
rights. It cannot be doubted that
the demised land was merely an
enjoyment of the land and not
transfer of the ownership.

31. In order to appreciate whether a

document is a sale or a lease,

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reference can be made to the case of

Byramjee Jeejeebhoy (P) Ltd. vs
State of Maharashtra (AIR 1965 SC
590), where this Court formulated
the following principles for
determination of the aforesaid
question:

"8. Such a grant cannot be

regarded as a lease, for a lease
contemplates any right for a
transfer of a right in a
consideration price paid or
promised or service or other
things of value to be rendered
periodically or on specified
again to the transferor. The
grant does not purport to demise
a right of enjoyment of land. It
confers right of ownership in
then land. There is gain no
contractual right reserved. It is
specifically or by implication to
determine the right. The
reservation and reversion
remained and remains yearly and
runs, years and profits of all
lands determine and property in
the premise is of nature of a
restriction upon the said
transfer and does not restrict
the equality of the said. The
rent to be demanded was again not
stipulated as consideration for
the grnat of the right to enjoy
the land but expressly in
consideration of grnating freedom

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from liability to pay

assessment."

32. The High Court in the present

case decided that the document given
for registration contained a
composite deed of lease as well as a
deed of sale. Therefore, both
Article 63 as well as Article 23 of
the said Act would apply. We cannot
agree with these observations of the
Division Bench of the High Court.

33. As mentioned earlier, the said

document consists of a single deed
of assignment of lease. The Division
Bench construed the transfer of the
land as an assignment of lease
whereas the transfer of the building
appurtenant thereto to be through a
deed of sale. It appears to us that
the High Court has clearly not
interpreted the true essence of the
lease deed executed between the
lessor and the lessees.

34. The learned counsel appearing on

behalf of the appellant has brought
to our notice that the said lease
deeds categorically provided that
not only the land but the
appurtenants attached thereto are
also governed by its covenants as
per para "k" of the said deed which
states that every transfer,
assignment, relinquishment, mortgage

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or sublet of the property shall be

bound by the covenants of the deed
along with the assignee being
answerable to the Noida authorities
in all respects.

35. The appellant has also brought

to our notice that para "g" of the
said deed states that the lessee/
sub lessee would only be allowed to
make any alterations in the building
with the prior permission of the
authority and would also be liable
if any deviations from the
permission obtained is brought to
light. Moreover, the concerned lease
deed specifically provides for a
lease of 99 years of the land along
with its appurtenances thereto with
the right of reversion. So it is
clear from the above-mentioned
provision that the land along with
its appurtenants would be reversed
back to the lessor after the
stipulated period. The alleged
document is therefore a transfer of
the assignment of lease and not an
outright sale of its appurtenants.

36. The learned counsel appearing on

behalf of the respondent No.4 (being
the Noida Authorities) had contended
that the lessee or the sub lessee
have absolute rights over the
buildings constructed by them and
hence the lessor has no right over
them. Therefore, the lessee or the

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sub- lessee can transfer such

buildings by way of an outright sale
and the same cannot be the subject
matter of an assignment of lease. We
are in a position to accept this
submission of the Noida Authorities.

37. It is clear from para (b) of

section III of the lease deed
executed between Noida and the sub-
lessees that:

"At the time of re-entry the demised

premises shall not have been
occupied any building constructed by
the sub-lessee therein the sub
lessee shall within a period of
three months from the date of re-
entry, removes from the demised
premises all erections or buildings,
fixtures and things which at any
time and during the said terms shall
be affixed or set up within or upon
the said premises and leave the said
premises in as good a condition as
it was on the date of demise, in
default whereof the same shall
become the property of the lessor
without payment of any compensation
to the lessee/ sub lessee for the
land and the building fixtures and
things thereon, but upon the sub
lessee removing the erection
buildings, fixtures and things
within the period hereinbefore
specified, the demised premises
shall be re-allotted and the lessee/

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sub lessee may be paid such amounts

as may works out in
accordance......."

Therefore, the only question which

comes to our mind is that if the
lessee or the sub lessee has an
absolute right over the
constructions constructed by him and
he can transfer it by an out right
sale and not through an assignment
of lease.
38. As contended by the Noida
Authorities, the lease deed would
not have provided for such a clause
wherein the Noida authorities have a
right over the buildings and the
appurtenants on the land in case of
any failure of the sub-lessee to
remove such constructions at the
time of re-entry. Thus the said
lease deed specifically provides for
a right of reversion to the land and
appurtenances thereto including
buildings, on the termination or
expiry of the lease. It is thus
clear that the buildings and all
other appurtenants attached to the
land become a part of the assigned
transfer through lease and not a
separate sale.

39. Moreover section 3 of the

Transfer of Property Act states that
when an immovable property such as
land is transferred by way of

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assignment of lease, all

appurtenances thereto attached to
the earth such as buildings and
fixtures thereto would also stand
assigned. Accordingly, on a plain
reading of the deed of assignment,
we are of the view that the
assignees became liable to the
lessor, namely Noida on the
covenants running with the land. In
conclusion, we are, therefore of the
view that the deed presented for
registration was a deed of
assignment.

40. Before we part with this aspect

of the matter, that is to say,
whether the document/instrument was
in fact a deed of assignment or an
outright sale, we must also keep in
mind that the nomenclature to the
document of assignment cannot be
said to be determining factor in
deciding whether a particular deed
or document was a lease or a deed of
assignment.

41. In Madras Refinery Ltd. V/s.

C.S. [AIR 1977 SC 500], it was held
that in order to decide whether a
particular document is a lease or a
deed of assignment, one has to look
at the substance of the deed of
assignment to the document and not
the nomenclature. Therefore, it must
be held that no importance can be
given to the nomenclature to the

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document. Although some of the

members of the association had
termed the document as a deed of
sale or transfer cum sale deed
instead of as a deed of assignment,
it remains as a deed of assignment
as has been noted above by us.”

6) Reference was made to Notification

No.11/2017 – Central Tax (Rate) dated

28th June, 2017 wherein at Serial No.16

Heading 9972 refers to Real Estate

Services and the prescribed rate is

9%. Reference was also made to

Explanation given in Note No.4(ii) to

the said notification which reads as

under:

“(ii) Reference to “Chapter”,

“Section” or “Heading”, wherever
they occur, unless the context
otherwise requires, shall mean
respectively as “Chapter”. “Section”
and “Heading” in the annexed scheme
of classification of services
(Annexure).”

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7) Thereafter reference was made to

Annexure to the said notification

providing Scheme of Classification of

Services under Heading 9972. Reference

was made to Serial no.223, sub-heading

997212 prescribing rental or leasing

services involving own or leased non-

residential property. It was also

pointed out that at Serial No.305 of

the aforeaid Annexure, Group 99832,

Architectural services, urban and land

planning and landscape architectural

services are classified and further at

Serial No.338 Group 99836 Advertising

services and provisons of advertising

space or time inlcudes sub-heading

998363 to 998366 as under:

998363 Sale of advertising space in print

media (Except on Commission)
998364 Sale of television and radio

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advertising time
998365 Sale of internet advertising space
998366 Sale of other advertising space or
time (Except on Commission)

8) Reference was made to Serial No.345

where Group 99837 which prescribes

sub-heading 998371 as market research

services and to serial no.356 Group

99839 wherein other professional,

technical and business services are

classified to show the distinction

that rental or leasing services

involving own or leased non-

residential property is classified as

a real estate services vis-a-vis other

services which are shown to

demonstrate that the price paid for

providing leasing services of leased

non residential property is a real

estate service.

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9) Refernce was also made to Serial

No.716 of Group 99979 providing other

miscellaneous services having sub-

heading 999792 agreeing to do an act.

It was therefore, submited that

agreeing to transfer the leasehold

rights is nothing but agreeing to do

an act which would also be considered

as supply of services.

10) In case of T.N. Kalyana Mandapam Assn.

v. Union of India and others reported

in (2004) 5 Surpeme Court Cases 632,

wherein it is held as under:

“40. In the present case, service

tax levied on services rendered by
mandap-keeper as defined in the said
Act under sections 65, 66 and 67 of
the Finance Act has been challenged
by the appellants on the following
two grounds:

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a) That it amounts to the tax on

land and, therefore, by reason of
Entry 49 of List 2 of the Seventh
Schedule of the Constitution, only
the State government is competent to
levy such tax and;

b) Insofar as it levies a tax on

catering services, it amounts to a
tax on sale and purchase of goods
and, therefore, is beyond the
competence of Parliament,
particularly in view of the
definition of tax on sale and
purchase of goods contained in Art.
366 (29A) (f) of the Constitution.

41. With regard to the first aspect,

it is submitted that in order to
constitute a tax on land, it must be
a tax directly on land and a tax on
income from land cannot come within
the purview of the said Entry. This
was affirmed by a seven-judge bench
of this Court in India Cement Ltd. &
Ors. V/s. State of Tamil Nadu & Ors.
(supra) relying upon several
judgments of this Court including
S.C. Nawn V/s. W.T.O., Calcutta;
Asstt. Commissioner of Urban Land
Tax v. Buckingham & Carnatic Co.

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Ltd. Second Gift Tax Officer V/s.

D.H. Nazareth; Union of India V/s.
H.S. Dhillon; Bhagwan Dass Jain V/s.
Union of India and Western India
Theatres Ltd. V/s. Cantonment Board,
Poona Cantonment. The proposition
has been followed in several
judgments of this Court.
xxx
45. The concept of catering
admittedly includes the concept of
rendering service. The fact that tax
on the sale of the goods involved in
the said service can be levied does
not mean that a service tax cannot
be levied on the service aspect of
catering. Mr. Mohan Parasaran,
learned senior counsel for the
appellant submitted that the High
Court before applying the aspect
theory laid down by this Court in
the case of Federation of Hotel and
Restaurant V/s. Union of India &
Ors. (supra) ought to have
appreciated that in that matter Art.
366 (29A) (f) of the Constitution
was not considered which is of vital
importance to the present matter and
that the High Court ought to have
differentiated the two matters. In
reply, our attention was invited to
paras 31 and 32 of the Judgement of
the High Court in which service

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aspect was distinguished from the

supply aspect. In our view, reliance
placed by the High Court on
Federation of Hotel and Restaurant
(supra) and, in particular, on the
aspect theory is, therefore,
apposite and should be upheld by
this Court. In view of this, the
contention of the appellant on this
aspect is not well founded.
xxxx
53. It is also emphasized that a tax
cannot be struck down on the ground
of lack of legislative competence by
enquiring whether the definition
accords what the layman's view of
service. It is well settled that in
matters of taxation laws, the court
permits greater latitude to pick and
chose objects and rates for taxation
and has a wide discretion with
regard there to. We may in this
context refer to the decision of
Mafatlal Industries Ltd. and Others
V/s. Union of India and Others
(supra)

"In the matter of taxation laws,

the court permits a great
latitude to the discretion of the
legislature. The State is allowed
to pick and choose districts,

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objects, persons, methods and

even rates for taxation, if it
does so reasonably. The courts
view the laws relating to
economic activities with greater
latitude than other matters."

54. Therefore, a levy of service tax

on a particular kind of service
could not be struck down on the
ground that it does not conform to a
common understanding of the word
"service" so long as it does not
transgress any specific restriction
contained in the Constitution.

55. In fact, making available a

premises for a period of few hours
for the specific purpose of being
utilized as a mandap whether with or
without other services would itself
be a service and cannot be
classified as any other kind of
legal concept. It does not certainly
involve transfer of moveable
property nor does it involve
transfer of moveable property of any
kind known to law either under the
Transfer of Property Act or
otherwise and can only be classified
as a service.”

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11) In case of Commissioner of Income Tax,

Bangalore v. Venkateswara Hatcheries

(P) Ltd. reported in (1999) 3 Supreme

Court Cases 632, wherein it is held as

under:

“17. From a perusal of the self-

stated steps taken by the assessee
for the alleged production of
chicks it is clear that the
assessee does not contribute to the
formation of chicks. The formation
of chicks is a natural and
biological process over which the
assessee has no hand or control. In
fact, what the assessee is doing is
to help the natural or biological
process of giving birth to chicks.
The chicks otherwise can also be
produced by conventional or natural
method and in that process also,
same time is taken when the chicks
come out from the eggs. What the
assessee by application of
mechanical process does in the
hatchery is to preserve and protect
the eggs at a particular
temperature. But the coming out of
chicks from the eggs is an event of
nature. The only difference seems
to be that, by application of
mechanical methods, the mortality
rate of chicks is less and the
assessee may got chicks more in

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number. This however, would not

mean that the assessee produces
chicks and that chicks are
'articles or things'. We are,
therefore, of the opinion that the
assessee is neither an industrial
undertaking nor does the business
of hatchery carried out by the
assessee fall within the meaning of
Sec. 32A and Sec. 88J of the Act.

18. It was then urged by the

learned counsel for the assessee
that the Act uses the words
'articles or things' at several
places and the meaning assigned to
them in other places of the Act
should also be assigned under Sec.
32A and Sec. 88J of the Act. Fifth
Schedule of the Act sets out a list
of items which are treated as
articles or things manufactured or
produced for the purpose of Sec.
33(1)(b) of the Act. In this
Schedule we find that processed
seeds which are products of plants
have been shown as 'articles or
things'. Similarly, Item No. (30)
of the said Schedule is 'fish',
which is an animate object, it has
been shown under heading 'articles
of things'. On the strength of the
meaning assigned to articles and
things in the Fifth Schedule of the
Act, it was urged that hatching of
chicks is also production of
'articles or things'. It is, no
doubt, true that processed seeds

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and fish have been described under

the heading 'articles or things' in
the Fifth Schedule. Generally, the
same words in a statute have the
same meaning whenever used in that
statute, but they may also have
different meaning in different
provisions of the same statute. In
Shamrao Vishnu Parulekar V/s. The
District Magistrate, Thana, 1956
SCR 644 , it was held, thus

"But it is contended by Mr.

Chatterjee that the expression
'grounds on which the order has
been made' occurring in sec. 3(3)
is, word for word, the same as in
sec. 7, that the same expression
occurring in the same statute must
receive the same construction, that
what sec. 3 requires is that on the
making of an order for detention,
the authority is to formulate the
grounds for that order, and send
the same to the State Government
under Section 3(3) and to the
detenu u/s. 7, and that therefore
it was not sufficient merely to
send to the State Government a
report of the materials on which
the order was made. Reliance was
placed on the following passage in
Maxwell's Interpretation of
Statutes :

"It is, at all events,

reasonable to presume that the

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same meaning is implied by the

use of the same expression in
every part of an Act."

The rule of construction

contended for by the petitioners is
well-settled, but that is only one
element in deciding what the true
import of the enactment is, to
ascertain which it is necessary to
have regard to the purpose behind
the particular provision and its
setting in the scheme of the
statute. "The presumption," says
Craies, "that the same words are
used in the same meaning is however
very slight, and it is proper 'if
sufficient reason can be assigned,
to construe a word in one part of
an Act in a different sense from
that which it bears in another part
of an Act." And Maxwell, on whose
statement of the law the
petitioners rely observes further
on :

"But the presumption is not of

much weight. The same word may be
used in different senses in the
same statute, and even in the
same section."

19. The same word, if read in the

context of one provision of the
Act, may mean or convey one meaning
and another in a different context.

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The Legislature in its wisdom had

chosen to place processed seeds and
fish under the heading articles or
things in the Fifth Schedule as
Legislature is competent to give
artificial meaning to any word. We
are, therefore, of the opinion that
the meaning assigned to words
'articles or things' in the Fifth
Schedule cannot be assigned to the
words 'articles or things' used in
Sections 32A and 80J of the Act.”

12) In case of Hotel & Restaurant Assn.

and another v. Star India (P) Ltd. And

others reported in (2006) 13 Supreme

Court Case 753, wherein it is held as

under:

“41. An attempt has been made by Mr.

Desai to contend that the 1986 Act
is a cognate legislation. Section
2(2) of TRAI Act provides that words
and expression used and not defined
in the said Act but defined in
Indian Telegraph Act, 1885 or the
Indian Wireless Telegraphy Act, 1933
shall have the meanings respectively
assigned to them in those Acts.
Thus, meaning of only such words
which are not defined under TRAI Act
but defined under those Acts could

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be taken into consideration. It is

furthermore well known that the
definition of a term in one statute
cannot be used as a guide for
construction of a same term in
another statute particularly in a
case where statutes have been
enacted for different purposes.

42. In Hari Khemu Gawali V/s. Deputy

Commissioner of Police, Bombay and
another, AIR 1956 SC 559, a
Constitution Bench of this Court
stated:

"It has been repeatedly said by

this Court that it is not safe to
pronounce on the provisions of
one Act with reference to
decisions dealing with other Acts
which may not be in pari
materia."

43. In M/s. MSCO. Pvt. Ltd. V/s.

Union of India and Others, 1985 1
SCC 51, this Court held:

"4. The expression 'industry' has

many meanings. It means 'skill',
'ingenuity', 'dexterity',
'diligence', 'systematic work or
labour', 'habitual employment in
the productive arts',
'manufacturing establishment'ect.
But while construing a word which

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occurs in a statute or a
statutory instrument in the
absence of any definition in that
very document it must be given
the same meaning which it
receives in ordinary parlance or
understood in the sense in which
people conversant with the
subject matter of the statute or
statutory instrument understand
it. It is hazardous to interpret
a word in accordance with its
definition in another statute or
statutory instrument and more so
when such statute or statutory
instrument is not dealing with
any cognate subject..."

44. In Maheshwari Fish Seed Farm

V/s. T.N. Electricity Board and
Another, 2004 4 SCC 705, this Court
in regard to different meanings of
'agriculture' as noticed in
different decisions held:

"9A reading of the judgment shows

a research by looking into
several authorities, meaning
assigned by dictionaries and
finding out how the term is
understood in common parlance.
The Court held that the term
'agriculture' has been defined in
various dictionaries both in the
narrow sense and in the wider
sense. In the narrow sense
agriculture is the cultivation of

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the field. In the wider sense it

comprises of all activities in
relation to the land including
horticulture, forestry, breeding
and rearing of livestock,
dairying, butter and cheese-
making, husbandry etc. Whether
the narrower or the wider sense
of the term 'agriculture' should
be adopted in a particular case
depends not only upon the
provisions of the various
statutes in which the same occurs
but also upon the facts and
circumstances of each case. The
definition of the term in one
statute does not afford a guide
to the construction of the same
term in another statute and the
sense in which the term has been
understood in the several
statutes does not necessarily
throw any light on the manner in
which the term should be
understood generally."

45. In Tata Consultancy Services

V/s. State of A.P., 2005 1 SCC 308,
this Court held:

"40. Copyright Act and the Sales

Tax Act are also not statutes in
pari materia and as such the
definition contained in the
former should not be applied in
the latter. See Jagatram Ahuja

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V/s. Commr. of Gift-tax,

Hyderabad.

41. In absence of incorporation

or reference, it is trite that it
is not permissible to interpret a
word in accordance with its
definition in other statute and
more so when the same is not
dealing with any cognate subject"

46. Reliance has been placed upon

a decision of this Court in
Deputy Chief Controller of
Imports and Exports, New Delhi
V/s. K.T. Kosalram and Others,
1970 3 SCC 82 wherein the
provisions of the Indian Tariff
Act, 1934 were called in aid to
interpret import licence granted
under the Imports and Exports
Control Act, 1947 on the premise
that both relates to the larger
import scheme of the Government
of India. In that case, the
Central Government made Imports
Control Order under the Imports
and Exports Control Act. Item No.
67(1) in Schedule I, Part V
contained a very large number of
various components of a printing
press corresponding to Item No.
72(2) of the Indian Tariff Act
which consolidates the law
relating to customs duties. This
Court opined that although
dictionary meanings are helpful

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in understanding the general

sense of the word but it cannot
control a situation where the
scheme of the statutes or the
instrument considered as a whole
clearly conveys a somewhat
different shade of meaning. In
that fact situation, it was
opined:

"It is not always a safe way to

construe a statute or a
contract by dividing it by a
process of etymological
dissection and after separating
words from their context to
give each word some particular
definition given by
lexicographers and then to
reconstruct the instrument upon
the basis of those definitions.
What particular meaning should
be attached to words and
phrases in a given instrument
is usually to be gathered from
the context, the nature of the
subject matter, the purpose or
the intention of the author and
the effect of giving to them
one or the other permissible
meaning on the object to be
achieved. Words are after all
used merely as a vehicle to
convey the idea of the speaker
or the writer and the words
have naturally, therefore, to
be so construed as to fit in
with the idea which emerges on

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a consideration of the entire

context. Each word is but a
symbol which may stand for one
or a number of objects......"

13) Reliance was placed on the Major Law

Lexicon, 4th Edition defining the term

“Services” as under:

“ Services. 'SERVICES' includes-

(i) providing personnel (including

skilled or unskilled workmen and
persons for rendering technical or
other services) for the purpose of
any work or project (by whatever
name called) or any activity;

(ii) transferring of technology,

including trans- ferring, or
securing the transfer of rights,
knowhow, expertise or other skill
with respect to any patent,
invention, model, design, secret
formula or process or similar
property;

iii) furnishing any information,

blueprints, plans or advice with
respect to any matter, and

iv) making available any other

resources. [Export-Import Bank of
India Act (28 of 1981), S. 2(j)].”

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14) Reference was made to Council

Directive of 2006 dated 28th November,

2006 on the common system of value

added tax of the Council of the

European Union wherein Chapter-3

refers to Supply of Services and

Article 25 which consists of supply of

services reads as under:

“A. “supply of services may consist,

inter alia, in one of the following
transactions:

(a) the assignment of intangible

property, whether or not the subject
of a document establishing title;

(b) the obligation to refrain from

an act, or to tolerate an act or
situation;

(c) the performance of services in

pursuance of an order made by or in
the name of a public authority or in
pursuance of the law.”

15) Reliance was placed on the decision of

UP Authority for Advance Ruling in

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case of Remarkable Industries Private

Limited reported in 2023 SCC Online

UP AAR-GST 14, wherein it is held as

under:

“38. The activity of assignment is

in the nature of agreeing to
transfer one's leasehold rights. It
does not amount to further sub-
leasing, as the applicant's rights
as per the Deed stands extinguished.
Neither does it create fresh benefit
from land other than the leasehold
right. It is like a compensation for
agreeing to do the transfer of the
applicant's rights in favour of the
assignee. It is a service
classifiable under Other
miscellaneous service (SAC 999792)
and taxable @ 18% under SI No. 35 of
Nolification No. 11/2017 CT (Rate)
dated 28/06/2017.

xxx

40. Under the GST provisions,

whether activity relating to
sale/Transfer of leasehold Land and
building and also to obtain
permission for such sale would be
taxable?

Question: a) In the instant case the

GST as applicable on the upfront

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called premium amount as a cost of

land and building.

Anwer: The activity of the applicant

is in the nature of agreeing to
transfer one's leasehold rights. It
does not amount to further sub-
leasing, as the applicant 's right
as per the Deed of sub-lease stands
extinguished after assignment.
Neither does it create fresh benefit
from the land. It is in nature of
compensation for agreeing to do the
transfer of the applicant's rights
in favour of the assignee. It is a
service classifiable under Other
miscellaneous service (SAC 999792)
and taxable 18% under SI No. 35 of
Notification No. 11/2017 CT (Rate)
dated 28/06/2017.”

16) In support of his submission that

exemption notification should be

interpreted strictly, reliance was

placed on the decision in case of

Commissioner of Customs (Import),

Mumbai v. Dilip Kumar and company and

others reported in (2018) 9 Supreme

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Court Cases 1, wherein it is held as

under:

“66. To sum up, we answer the

reference holding as under -

66.1 Exemption notification should

be interpreted strictly; the burden
of proving applicability would be on
the assessee to show that his case
comes within the parameters of the
exemption clause or exemption
notification.

66.2 When there is ambiguity in

exemption notification which is
subject to strict interpretation,
the benefit of such ambiguity cannot
be claimed by the subject/assessee
and it must be interpreted in favour
of the revenue.

66.3 The ratio in Sun Export case

(supra) is not correct and all the
decisions which took similar view as
in Sun Export Case (supra) stands
over-ruled.”

17) In case of Krishi Upaj Mandi Samiti,

New Mandi Yard, Alwar v. Commissioner

of Cental Excise and Service Tax,

Alwar reported in (2022) 5 Supreme

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Court Cases 62, wherein it is held as

under:

“8. The exemption notification

should not be liberally construed
and beneficiary must fall within the
ambit of the exemption and fulfill
the conditions thereof. In case such
conditions are not fulfilled, the
issue of application of the
notification does not arise at all
by implication.
8.1 It is settled law that the
notification has to be read as a
whole. If any of the conditions laid
down in the notification is not
fulfilled, the party is not entitled
to the benefit of that notification.
An exception and/or an exempting
provision in a taxing statute should
be construed strictly and it is not
open to the court to ignore the
conditions prescribed in the
relevant policy and the exemption
notifications issued in that regard.
8.2 The exemption notification
should be strictly construed and
given a meaning according to
legislative intendment. The
Statutory provisions providing for
exemption have to be interpreted in
light of the words employed in them
and there cannot be any addition or
subtraction from the statutory
provisions.

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8.3 As per the law laid down by this

Court in a catena of decisions, in a
taxing statute, it is the plain
language of the provision that has
to be preferred, where language is
plain and is capable of determining
a defined meaning. Strict
interpretation of the provision is
to be accorded to each case on hand.
Purposive interpretation can be
given only when there is an
ambiguity in the statutory provision
or it results in absurdity, which is
so not found in the present case.
8.4 Now, so far as the submission on
behalf of the respondent that in the
event of ambiguity in a provision in
a fiscal statute, a construction
favourable to the assessee should be
adopted is concerned, the said
principle shall not be applicable to
construction of an exemption
notification, when it is clear and
not ambiguous. Thus, it will be for
the assessee to show that he comes
within the purview of the
notification. Eligibility clause, it
is well settled, in relation to
exemption notification must be given
effect to as per the language and
not to expand its scope deviating
from its language. Thus, there is a
vast difference and distinction
between a charging provision in a
fiscal statute and an exemption
notification.”

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18) In support of his submission that two

taxes/imposts which are separate and

distinct imposts and on two different

aspects of transaction are permissible

in law and there is no overlapping,

reliance was placed on the decision of

Apex Court in case of Union of India

and another v. Mohit Mineral Private

Limited reported in (2019) 2 Supreme

Court Cases 599, wherein it is held as

under:

“61. The petitioner elaborating his

contention submits that as per
Section 8 of impugned legislation
there shall be levied a cess on
intra-State supply of goods and
services as provided in Section 9 of
the CGST Act whereas CGST Act has
been enacted to levy tax as provided
under Article 246A of the
Constitution. This is also true in
respect of the cesses imposed on
inter-State supplies of goods and
services covered by Section 5 of
IGST Act, 2017. Therefore, on the
same very transaction there cannot
be two levies, one under CGST Act

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and another under impugned

legislation as it would amount to
double taxation as levy is on the
same taxable event and same subject.
Thus, there is an overlapping on law
which is not permissible. The
petitioner contends that goods and
services tax being already imposed
by three enactments of 2017 as
noticed above imposition of States
Compensation Cess is levied on the
same taxing event and has
overlapping effect.

62. The principle is well-settled

that two taxes/imposts which are
separate and distinct imposts and on
two different aspects of a
transaction are permissible as "in
law there is no overlapping".

63. A Constitution Bench of this

Court in Federation of Hotel and
Restaurant Associate of India, Etc.
v. Union of India and others, (1989)
3 SCC 634 : (AIR 1990 SC 1637, Para
14), held that a law with respect to
a subject might incidentally affect
another subject in some way, but
that is not the same thing. There
might be overlapping but the
overlapping must be in law. The fact
that there is an overlapping does
not detract from the distinctiveness
of the aspects. Therefore, if the
taxes are separate and distinct
imposts and levied on the different

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aspects, then there is no

overlapping in law. Following was
laid down in paragraph 31:

"31. Indeed, the law 'with

respect to' a subject might
incidentally 'affect' another
subject in some way; but that is
not the same thing as the law
being on the latter subject.
There might be overlapping; but
the overlapping must be in law.
The same transaction may involve
two or more taxable events in its
different aspects. But the fact
that there is an overlapping does
not detract from the
distinctiveness of the aspects,
Lord Simonds in Governor General
in Council v. Province of Madras
[1945] FCR 179 P.C. at 193 : (AIR
1945 PC 98 at p. 101 ), in the
context of concepts of Duties of
Excise and Tax on Sale of Goods
said:

"...The two taxes, the one

levied on a manufacturer in
respect of his goods, the other
on a vendor in respect of his
sales, may, as is there pointed
out, in one sense overlap. But
in law there is no overlapping.
The taxes are separate and
distinct imposts. If in fact
they overlap, that may be
because the taxing authority,

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imposing a duty of excise,

finds it convenient to impose
that duty at the moment when
the excisable article leaves
the factory or workshop for the
first time on the occasion of
its sale....""

64. Justice Krishna Iyer in Avinder

Singh and others v. State of Punjab
and others, (1979) 1 SCC 137 : (AIR
1979 SC 321), laid down that if on
the same subject matter the
legislature chooses to levy tax
twice over there is no inherent
invalidity in the fiscal adventure
unless there are some other
prohibitions. In the above case
Government of Punjab had issued a
notification under Section 90(4) of
the Punjab Municipal Corporation
Act, 1976 imposing tax at the rate
of Rupee 1 per bottle on Indian made
Foreign Liquor within the Municipal
Corporation of Ludhiana. One of the
contentions raised was that tax
imposed is on sale, hence, beyond
Government power. In paragraph 4
following was laid down:

"4.......A feeble plea that the

tax is bad because of the vice of
double taxation and is
unreasonable because there are
heavy prior levies was also
voiced. Some of these contentions
hardly merit consideration, but

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have been mentioned out of

courtesy to counsel. The last
one, for instance, deserve the
least attention. There is nothing
in Article 265 of the
Constitution from which one can
spin out the constitutional vice
called double taxation. (Bad
economics may be good law and
vice versa). Dealing with a
somewhat similar argument, the
Bombay High Court gave short
shrift to it in Wester India
Theatres (AIR 1954 Bom 261). Some
undeserving contentions die hard,
rather survive after death. The
only epitaph we may inscribe is :
Rest in peace and don't be reborn
! If on the same subject matter
the legislature chooses to levy
tax twice over there is no
inherent invalidity in the fiscal
adventure save where other
prohibitions exist."

65. Goods and Services Tax imposed

under the 2017 Acts as noticed above
and levy of cess on such intra-State
supply of goods and services or both
as provided under Section 9 of the
CGST Act and such supply of goods
and services or both as part of
Section 5 of IGST Act is, thus, two
separate imposts in law and are not
prohibited by any law so as to
declare it invalid.

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66. We, thus, do not find any

substance in the submission that
levy of Compensation to States
Cess on same taxable event is
not permissible.”

-:Analysis:-

22. Interesting question which arises in this

group of petitions pertains to levy of goods

and service tax on assignment of leasehold

rights by the lessee in whose favour GIDC has

granted lease of the plot of land for

industrial purpose.

23. Chapter III of the GST Act provides for

levy and collection of tax. The GST Act is

based upon levy of tax on the concept of

“supply” of goods or services. Scope of supply

is provided under section 7 of the GST Act.

Sub-section(1)(a) thereof stipulates that for

the purpose of the GST Act, the expression

“supply” includes all forms of supply of goods

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or services or both such as sale, transfer,

barter, exchange, license, rental, lease or

disposal made or agreed to be made for a

consideration by a person in the course or

furtherance of business.

24. Therefore, it is necessary to determine as

to whether the assignment of leasehold rights

of the land along with the building thereon

would be covered by the supply of goods or

supply of services because as per the

provision of section 7(1)(a), supply of goods

or services or both covers (i) sale (ii)

transfer (iii) barter (iv) exchange (v)

license (vi) rental (vii) lease or (viii)

disposal made or agreed to be made for a

consideration by a person in course or

furtherance of business.

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25. Assignment of leasehold rights would be

covered by sale, transfer, exchange for a

consideration by a person. It would also be

required to be considered as to whether such

sale, transfer, exchange for a consideration

by a person is in course or furtherance of

business or not because once the transaction

of assignment of leasehold rights takes place,

business would be transferred by assignor in

favour of the assignee.

26. Sub-section(1)(a) of section 7 of the GST

Act is amended with effect from 01.07.2017 by

the Central Goods and Services Tax (Amendment)

Act, 2018 in place of clause(d) of sub-

section(1) whereby reference is made to

Schedule-II to treat certain activities or

transactions either as supply of goods or

supply of services as prescribed therein

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whereas sub-section(2) of section 7 refers to

Schedule III which stipulates activities or

transactions which are to be treated neither

as supply of goods nor supply of services

including the activities and transactions

undertaken by the Government or local

authority. Sub-section(3) provides for the

powers vested with the Government on

recommendation of the Council to specify by

notification the transactions that are to be

treated either as a supply of goods and not as

a supply of services and vice-versa.

27. Therefore, moot question which arises for

consideration is whether assignment of the

leasehold rights of the land along with the

building thereon would be covered by the scope

of supply so as to levy GST as per the

provisions of section 9 of the GST Act or not?

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28. The submissions made on behalf of the

petitioners to canvas that the transactions of

assignment of leasehold rights shall not be

covered within the scope of supply vis-a-vis

the submissions canvassed by the respondent

authority that such transactions would be

covered within the scope of supply is required

to be analyzed by referring to the various

aspects which are highlighted by both the

sides in support of their contentions along

with the decisions which are relied upon.

29. Firstly, we have to consider as to what is

the nature of transaction which is brought

within the scope of supply and whether such

transactions can be considered as supply of

goods or supply of services.

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30. GIDC is established under section 3 of

Chapter II of Gujarat Industrial Development

Act, 1962 which reads as under:

“3. Establishment and incorporation.

(1) For the purposes of securing
and assisting in the rapid and
orderly establishment, and
organisation of industries in
industrial areas and industrial
estates in the State of Gujarat
[and for the purpose of
establishing commercial centres in
connection with the establishment
and organisation of such
industries] [These words were
inserted by Gujarat 11 of 1986,
Section 4 (w.e.f. 01-07-1986).],
there shall be established by the
State Government by notification
in the Official Gazette, a
Corporation by the name of the
Gujarat Industrial Development
Corporation.

(2)The Corporation shall be a

body corporate with perpetual
succession and a common seal,
and may sue and be sued in its
corporate name, and shall be
competent to acquire, hold and
dispose of property, both
movable and immovable, and to
contract, and do all things
necessary, for the purposes of

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this Act.”

31. The functions and powers of the GIDC are

prescribed under Chapter III of the GIDC Act

for growth and development of industries in

the State of Gujarat by establishing and

managing the industrial estate and develop

such industrial area.

32. Sub-clause(a) of section 14 of the GIDC

Act empowers the GIDC to acquire and hold such

property, both movable and immovable as may be

necessary for the performance of any of its

activities and to lease, sell, exchange or

otherwise transfer any property held by it on

such conditions as may be deemed proper by the

Corporation. In exercise of such powers, GIDC

enters into lease agreement of 99 years for

allotment of land for industrial purpose in

the industrial estate developed by it.

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33. The ownership of the plot of land allotted

by GIDC remains with it and only the right of

possession and occupation are transferred by

way of leasehold rights in favour of allottee-

lessee.

34. Schedule-II of the GST Act provides for

activities or transactions to be treated

either as supply of goods or supply of

services. As per clause 5(a) of Schedule II

renting of immovable property is to be treated

as supply of services. Therefore, allotment of

land which is undisputedly an immovable

property on lease would be covered by clause

5(a) of the Schedule II of the GST Act and

therefore, the same would be covered by the

scope of supply of services liable to levy of

tax under the provisions of section 9 of the

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GST Act.

35. However, by Notification no.12/2017-

Central Tax (Rate) dated 28.06.2017 issued in

exercise of powers conferred by sub-section

(1) of section 11 of the GST Act, on

recommendations of the GST Council, levy of

tax under sub-section(1) of section 9 of the

GST Act on intra-State supply of services

mentioned therein has been exempted. At Serial

no.41 of the said notification, under Chapter

Heading 9972, Nil rate is prescribed for one

time upfront amount (called as premium,

salami, cost, price, development charges or by

any other name) leviable in respect of the

service, by way of granting long term (30

years, or more) lease of industrial plots,

provided by the State Government Industrial

Development Corporations or Undertakings to

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industrial units.

36. Therefore, even if the assignment of

leasehold rights on the land on charge of one

time upfront amount by the GIDC for allotment

of plot of land to the industrial unit is

covered within the scope of “supply of

services” as per clause 5(a) of the Schedule

II read with section 7(1) of the GST Act,

charging of one time upfront amount as premium

by the GIDC would attract Nil rate of tax as

per the aforesaid notification. Therefore,

when the industrial unit is allotted land by

the GIDC, no GST is required to be paid under

the provisions of GST Act as per entry no. 41

of Notification No. 12/2017.

37. As per the lease deed executed by GIDC in

favour of industrial unit for allotment of

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plot of land, the industrial unit is entitled

to transfer such leasehold land in favour of

any third party with the prior permission of

the GIDC on payment of transfer charges as

prescribed by GIDC. However, such transfer fee

would be subject to levy of GST at the rate of

18% under the GST Act as it would amount to

supply of services by GIDC giving permission

to transfer the leasehold rights by the

industrial unit in favour of a third party who

will become the lessee-assignee in place of

the original allottee-assignor of the plot by

the GIDC. Deed of assignment of leasehold

rights which is executed by the lessee-

assignor in favour of the third party is also

subjected to levy of stamp duty under the

provisions Gujarat Stamp Act, 1958 as well as

it is compulsorily required to be registered

under the provisions of the Registration Act,

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1908.

38. Hence the contention on behalf of the

petitioner that transfer/assignment of the

leasehold rights is nothing but a sale and

transfer of benefits arising out of immovable

property i.e. plot of land which cannot be

considered as supply of services because

sale, transfer and exchange of benefit arising

out of immovable property is nothing but sale,

transfer and exchange of the immovable

property itself and, therefore, such

transactions would not be subject to levy of

tax under the provisions of GST Act as same

cannot be covered within the scope of supply

as per section 7 of the GST Act is required to

be considered by analyzing various provisions

of the GST Act vis-à-vis provisions of

different Acts as to what is an “immovable

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property” and whether leasehold rights can be

said to be benefits arising out of such

immovable property.

39. Immovable property is not defined under

the provisions of the GST Act, however, same

is defined in the following enactments:

i) Section 3(26) of the General Clauses

Act 1897 defines “immovable property”

as under:

“immovable property” shall include

land, benefits to arise out of land,
and things attached to the earth, or
permanently fastened to anything
attached to the earth.”

ii) Section 3 of the Transfer of Property

Act, 1882 pertains to interpretation

clause. In this Act, unless there is

something repugnant in the subject or

context- “immovable property” does not

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include standing timber, growing crops

or grass.

iii) Section 2(6) of the Registration

Act, 1908 defines “immovable property”

as under:

(6) “immovable property”

includes land, buildings,
hereditary allowances, rights to
ways, lights, ferries, fisheries
or any other benefit to arise
out of land, and things attached
to the earth, or permanently
fastened to anything which is
attached to the earth, but not
standing timber, growing crops
nor grass.”

40. The definition of immovable property as

per the Registration Act, 1908 is an

exhaustive definition. Section 17 of the

Registration Act provides for documents of

which registration is compulsory. Clause (d)

of section 17 provides for compulsory

registration of the leases of immovable

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property from year to year or for any term

exceeding one year or reserving a yearly rent.

Therefore, the lease deed executed by the GIDC

is required to be compulsorily registered

under section 17 of the Registration Act,

1908.

41. It is pertinent to note that what the

petitioner has transferred by way of

assignment/sale is leasehold rights which is

over and above the actual physical plot of

land and building, encompasses incorporeal

ownership right in such land and building such

as the right to possess, to enjoy the income

from, to alienate, or to recover ownership of

such right from one who has improperly

obtained the title. Therefore, immovable

property includes in addition to right of

ownership, aggregate of rights that are

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guaranteed and protected by the further

agreement or contract between the owner and

the lessee. Therefore, as held in case of

Schweihs v. Chase Home Finance, LLC reported

in 2015 IL App(1st) 140683, property is

nothing but a “bundle of sticks”, i.e.

collection of individual rights which, in

certain combinations, constitute property and

law determines only which sticks are in bundle

of a person.

42. In the above context, it would be germane

to refer to section 54 of the Transfer of

Property Act, 1882 which defines “sale” as

transfer of ownership in exchange for a price

paid or promised or part-paid and part-

promised. It further defines “sale how made”

as transfer in the case of tangible immovable

property of the value of one hundred rupees

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and upwards or in the case of a reversion or

other intangible thing, can be made only by a

registered instrument.

43. Sections 105 and section 108 of the

Transfer of Property Act, 1882 pertains to

leases of immovable property. Section 105 of

the said Act defines “lease” to mean a lease

of immovable property is a transfer of a right

to enjoy such property, made for a certain

time, express or implied, or in perpetuity, in

consideration of a price paid or promised, or

of money, a share of crops, service or any

other thing of value, to be rendered

periodically or on specified occasions to the

transferor by the transferee, who accepts the

transfer on such terms. Lessor, lessee,

premium and rent is further defined as the

transferor is called the lessor, the

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transferee is called the lessee, the price is

called the premium and the money, share,

service or other thing to be so rendered is

called the rent.

44. Section 108 prescribes the rights and

liabilities of lessor and lessee. Clause (j)

of section 108 pertains to rights and

liabilities of lessee and stipulates that a

lessee may transfer absolutely or by way of

mortgage or sub-lease the whole or any part of

his interest in the property, and any

transferee of such interest or part may again

transfer it. It further provides that the

lessee shall not, by reason only of such

transfer, cease to be subject to any of the

liabilities attaching to the lease.

45. Considering the provisions of Transfer of

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Property Act, it emerges that immovable

property would either be tangible or

intangible right, which relates to plot of

land as sale is an absolute transfer by

assignment along with whatever interest,

lessee-assignor is having on the land and

building.

46. The Indian Stamp Act, 1899 also defines

lease under section 2(16) as under:

2(16). “Lease” means a lease of

immovable property and includes also

(a) a patta;

(b) a Kabuliyat or other undertaking

in writing, not being a counterpart
of a lease, to cultivate, occupy, or
pay or deliver rent for, immovable
property;

(c) any instrument by which tolls of

any description are let;

(d) any writing on an

application for a lease intended

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to signify that the application

is granted.”

47. Gujarat Stamp Act 1958 with amendments

made therein also defines lease in section

2(n) as under :

“(n) “Lease” means a lease of

immovable property and includes also

(a) a patta;

(b) a Kabuliyat or other undertaking

in writing, not being a counterpart
of a lease, to cultivate, occupy, or
pay or deliver rent for, immovable
property;

(c) any instrument by which tolls of

any description are let;

(d) any writing on an

application for a lease intended
to signify that the application
is granted.”

48. The instrument of lease is liable to levy

of stamp duty as per Article 30 of the

Schedule-I of the Gujarat Stamp Act, 1958,

where lease is more than ninety eight years,

same duty is prescribed as is leviable for

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conveyance under Article 20.Therefore, as per

the provisions of the Gujarat Stamp Act,

instrument of lease is considered at par with

the conveyance for the sale of immovable

property.

49. Learned Advocate General Mr. Kamal

Trivedi has drawn distinction between

“immovable property” and “interest in

immovable property” i.e. difference between

tangible rights and intangible rights in the

immovable property so as to submit that

immovable property as such is not liable to

levy of GST whereas interest in immovable

property like leasehold rights which is

transferred by way of sale is liable to levy

of GST falling within the scope of “supply of

services”.

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50. Therefore, the submission was made to the

effect that right to occupy the land which is

one of the bundle of rights falling within the

interest of immovable property when

transferred by GIDC in favour of lessee is to

be treated as supply of service under the GST

Act and any further transfer which is the same

right to occupy/possess will continue to

remain as supply of service. It was submitted

that characteristics of interest in immovable

property on further transfer would not change

only because the lessee-assignor effects

absolute transfer in favour of assignee with

respect to leasehold rights.

51. This submission seems to be very

attractive at the first blush, however, there

are two transactions, one when the GIDC allots

plot of land along with right to occupy, right

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to construct, right to possess on long term

lease basis, it is nothing but supply of

service as right of ownership of plot in

question remains with the GIDC which will

revert back on expiry of lease period whereas

transaction of sale and transfer of leasehold

rights by the lessee- assignor in favour of

assignee divest lessee-assignor of all the

absolute rights in the property. Therefore,

interest in the immovable property in form of

leasehold rights cannot be said to be

different than the immovable property itself.

Section 2(119) of the GST Act defines “works

contract” being a contract for building,

construction, fabrication, completion,

erection etc., of any immovable property

wherein transfer of property in goods is

involved in execution of such contract.

Therefore, there is no reference to the

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interest in immovable property in works

contract. Similarly section 17(5)(c) and (d)

of the GST Act refers to the immovable

property regarding works contract services and

goods or services both received by taxable

person for construction of an immovable

property. Section 12 of the Integrated Goods

and Service Tax Act,2017 (for short ‘the IGST

Act’) refers to place of supply of services in

reference to section 2(120) of the GST Act

which applies to the IGST Act also and as per

sub-section(3) of section 12, place of supply

of services in relation to immovable property

includes services provided by architect,

interior decorators etc. and includes any

service provided by way of grant of right to

use immovable property or for carrying out or

coordination of construction work by way of

lodging accommodation by a hotel, by way of

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accommodation in any immovable property for

organizing marriage or any services ancillary

to the services referred to in other clauses,

shall be the location at which the immovable

property is located.

52. Therefore, the place of supply of service

may be at the location of the immovable

property, however when the lessee-assignor

transfers absolute right by way of sale of

leasehold rights in favour of the assignee,

the same shall be transfer of “immovable

property” as leasehold rights is nothing but

benefits arising out of immovable property

which according to the definition contained in

other statutes would be “immovable property”.

Therefore, the question of supply of services

or place of supply of services does not arise

in view of the above analysis of the

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provisions of the GST Act as the term

“immovable property” is not defined under the

GST Act.

53. Lord Wensleydale reaffirmed by Lord

Halsbury and Lord Simonds in Micklehwait,

(1885) 11 Ex 452 referred to in Tenant v.

Smith (1892) AC 150 154 (HL) and St. Aubyn v

AG, (1951) 2 ALL ER 473(HL) as well as in

case of Member Secretary, Andhra Pradesh State

Board for Prevention and Control of Water

Pollution v. Andhra Pradesh Rayons Ltd.

reported in (1989) 1 SCC 44 and Saraswati

Sugar Mills v. Haryana State Board reported in

(1992) 1 SCC 418, it is held that “ taxing

statute is to be strictly construed”. It is

observed by Lord Wensleydale that “the subject

is not to be taxed without clear words for

that purpose; and also that every Act of

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Parliament must be read according to the

natural construction of its words.”

54. Rowlatt J, has expressed the principle in

following words “In a taxing Act one has to

look merely at what is clearly said. There is

no room for any intendment. There is no equity

about a tax. There is no presumption as to

tax. Nothing is to be read in, nothing is to

be implied. One can only look fairly at the

language used.”

55. Therefore, it is clear that in a taxing

statute there is no room for any intendment

but regard must be had to the clear meaning of

the words and entire matter is governed only

by the language of the provision.

56. The Hon’ble Apex Court in case of CIT

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Madras v. Kasturi and Sons reported in (1999)

3 SCC 346, has held that the principle of

strict construction of taxing statute is

required to be implemented in the facts of the

said case where the words “moneys” in the

expression “”moneys payable” in section 41(2)

of the Income Tax Act, 1961 was not construed

to include “money’s worth”.

57. Hon’ble Justice Bhagwati in case of AV

Fernandez v. State of Kerala reported in AIR

1957 SC 657 enunciated the principle of

interpretation of taxation laws as under:

“In construing fiscal statute

and in determining the liability
of a subject to tax one must
have regard to the strict letter
of the law. If the Revenue
satisfies the Court that the
case falls strictly within the
provisions of the law, the
subject can be taxed. If, on the
other hand, the case is not
covered within the four corners
of the taxing statute, no tax

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can be imposed by interference

or by analogy or by trying to
probe into the intention of the
legislature and by considering
what was the substance of the
matter.”

58. Considering the above conspectus of law

for construing the provisions of the GST Act,

relating to the scope of supply as per section

7, regard must be given to the clear meaning

of the words as the entire issue is governed

only by the language of the provisions.

59. Section 7 of the GST Act read with

Schedule II and Schedule III thereof indicates

wide scope for interpretation of concept of

supply which is the basis to levy the tax as

per the charging provision of section 9 of the

GST Act.

60. Statement of object and reasons stated in

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Central Goods and Service Tax Bill, 2017 reads

as under:

“STATEMENT OF OBJECTS AND REASONS

Presently, the Central Government

levies tax on, manufacture of
certain goods in the form of Central
Excise duty, provision of certain
services in the form of service tax,
inter-State sale of goods in the
form of Central Sales tax.
Similarly, the State Governments
levy tax on and on retail sales in
the form of value added tax, entry
of goods in the State in the form of
entry tax, luxury tax and purchase
tax, etc. Accordingly, there is
multiplicity of taxes which are
being levied on the same supply
chain.

2. The present tax system on goods

and services is facing certain
difficulties as under-

(i) there is cascading of taxes as

taxes levied by the Central
Government are not available as set
off against the taxes being levied
by the State Governments;

(ii) certain taxes levied by State

Governments are not allowed as set
off for payment of other taxes being
levied by them;

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(iii) the variety of Value Added Tax

Laws in the country with disparate
tax rates and dissimilar tax
practices divides the country into
separate economic spheres; and

(iv) the creation of tariff and non-

tariff barriers such as octroi,
entry tax, check posts, etc., hinder
the free flow of trade throughout
the country. Besides that, the large
number of taxes create high
compliance cost for the taxpayers in
the form of number of returns,
payments, etc.

3. In view of the aforesaid

difficulties, all the above
mentioned taxes are proposed to be
subsumed in a single tax called the
goods and services tax which will be
levied on supply of goods or
services or both at each stage of
supply chain starting from
manufacture or import and till the
last retail level. So, any tax that
is presently being levied by the
Central Government or the State
Governments on the supply of goods
or services is going to be converged
in goods and services tax which is
proposed to be a dual levy where the
Central Government will levy and
collect tax in the form of central
goods and services tax and the State
Government will levy and collect tax
in the form of state goods and

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services tax on intra-State supply

of goods or services or both.

4. In view of the above, it has

become necessary to have a Central
legislation, namely the Central
Goods and Services Tax Bill, 2017.
The proposed legislation will confer
power upon the Central Government
for levying goods and services tax
on the supply of goods or services
or both which takes place within a
State. The proposed legislation will
simplify and harmonise the indirect
tax regime in the country. It is
expected to reduce cost of
production and inflation in the
economy, thereby making the Indian
trade and industry more competitive,
domestically as well as
internationally. Due to the seamless
transfer of input tax credit from
one stage to another in the chain of
value addition, there is an in-built
mechanism in the design of goods and
services tax that would incentivise
tax compliance by taxpayers. The
proposed goods and services tax will
broaden the tax base, and result in
better tax compliance due to a
robust information technology
infrastructure.

5. The Central Goods and Services

Tax Bill, 2017, inter alia, provides
for the following, namely:-

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(a) to levy tax on all intra-State

supplies of goods or services or
both except supply of alcoholic
liquor for human consumption at a
rate to be notified, not exceeding
twenty per cent. as recommended by
the Goods and Services Tax Council
(the Council);

(b) to broad base the input tax

credit by making it available in
respect of taxes paid on any supply
of goods or services or both used or
intended to be used in the course or
furtherance of business;

(c) to impose obligation on

electronic commerce operators to
collect tax at source, at such rate
not exceeding one per cent. of net
value of taxable supplies. out of
payments to suppliers supplying
goods or services through their
portals;

(d) to provide for self-assessment

of the taxes payable by the
registered person:

(e) to provide for conduct of audit

of registered persons in order to
verify compliance with the
provisions of the Act;

(f) to provide for recovery of

arrears of tax using various modes
including detaining and sale of
goods, movable and immovable

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property of defaulting taxable

person;

(g) to provide for powers of

inspection, search, seizure and
arrest to the officers;

(h) to establish the Goods and

Services Tax Appellate Tribunal by
the Central Government for hearing
appeals against the orders passed by
the Appellate Authority or the
Revisional Authority;

(i) to make provision for penalties

for contravention of the provisions
of the proposed Legislation;

(j) to provide for an anti-

profiteering clause in order to
ensure that business passes on the
benefit of reduced tax incidence on
goods or services or both to the
consumers; and

(k) to provide for elaborate

transitional provisions for smooth
transition of existing taxpayers to
goods and services tax regime.

6. The Notes on clauses explain in

detail the various provisions
contained in the Central Goods and
Services Tax Bill, 2017.

7. The Bill seeks to achieve the

above objectives.”

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61. A bare perusal of the above Statement of

Object and Reasons, clearly indicates the

legislative intention to subsume all the

existing indirect taxes in a single tax called

Goods and Services Tax to be levied on supply

of goods or services or both at each stage of

supply chain by converging any tax that was

being levied on the supply of goods or

services to be converged in Goods and Service

tax to be levied under the GST Act.

62. In view of the legislative intention,

section 7 of the GST Act which provides for

the scope of supply of good or services or

both for the purpose of the GST Act includes

all forms of supply of goods or services or

both by any form such as transfer, sale,

barter, exchange, license, rental, lease or

disposal made or agreed to be made for a

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consideration by a person in the course or

furtherance of business. Therefore,

considering the settled legal position as held

by the Hon’ble Supreme Court and other High

Courts from time to time, it is true that any

lease or letting out of a building including

commercial, industrial, residential complex

for business either wholly or partly would be

“supply of service”. Therefore, reading the

provisions of the Act together and

harmoniously to understand the nature of levy

and the object and purpose of its imposition,

no activity of the nature mentioned in the

inclusive provision of section 7 of the GST

Act can be left out of the net of tax.

Simultaneously, the provisions of section 7

has to be read in terms of substantive

provision and Schedules which treats the

activity as supply of service, particularly,

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in relation to land and building and includes

a lease. The consideration, therefore, as

premium/one time premium is a measure on which

tax is to be levied, assessed and recovered.

Therefore, when the GIDC allots the plot of

land on lease of 99 years and charges premium

for such allotment followed by periodical

lease rent to be paid, is to be considered as

supply of service in relation to land and

building read with clause 5(a) of Schedule-II

which specifically provides that renting of

immovable property shall be treated as supply

of services.

63. However, when such leasehold right is

transferred by the lessee-assignor in favour

of a third person-assignee by execution of

deed of assignment , it would be nothing but

transfer of an “immovable property” in view of

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the settled legal position to the effect that

lease for 99 years or for a long term in

consideration of premium paid is as much an

alienation as sale or mortgage.

64. Corpus Juris Secundum relied upon on

behalf of the petitioner defines the word

“property” which depends on the context with

which it is used. Firstly, it is applied to

the external things that are the objects of

rights or estates that is things that are the

object of the ownership and secondly, it is

applied to the rights or estates that a person

may acquire in or to things. Therefore, in

strict legal parlance “property” is used to

designate a right of ownership or an aggregate

of rights that are guaranteed and protected by

the Government and has been defined as the

right of any person to possess, use, enjoy and

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dispose of a thing and to exclude everyone

else from interfering with it and more

succinctly, it has been defined as any vested

right of any value which refers to both the

actual physical object and various incorporeal

ownership rights in the object i.e. plot of

land and building thereon in facts of the case

as the right to possess, to enjoy the income

from, to alienate or to recover ownership from

one who has obtained title to the object.

65. Under the GST Act and IGST Act relating to

Rate of Tax, Exemption, Reverse Charge Scheme

and other matters concerning supply of

services are covered by notifications issued

in exercise of powers conferred by sub-

sections (1), (3) and (4) of section 9, sub-

section (1) of section 11, sub-section (5) of

section 15 and sub-section (1) of section 16

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of the GST Act on the basis of recommendations

of the GST Council.

66. As per the notification no. 11/2017, lease

of property is included in Heading No. 9954

relating to construction services which

provides rates of GST involving transfer of

land or undivided share of land, as the case

may be, and value of such supply shall be

equivalent to the total amount charged for

such supply less the value of transfer of land

or undivided share of land, as the case may

be, and value of such transfer of land or

undivided share of land shall be deemed to be

1/3rd of the total amount charged for such

supply and total amount means sum total of

consideration charged for the aforesaid

service and amount charged for transfer of

land or undivided share of land, as the case

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may be, including by way of lease or sub-

lease. Therefore, levy of GST on construction

services are exclusive of 1/3rd of total

amount charged for such supply which includes

transfer by way of lease or sub-lease meaning

thereby even for levy of GST on construction

services, value of the land by way of lease is

to be excluded considering such value being

the value of immovable property which is

transferred.

67. In such circumstances, the contention

raised on behalf of the petitioner that

leasehold rights are nothing but interest in

immovable property as per the provision of

section 105 read with section 108(j) of the

Transfer of Property Act constituting absolute

transfer of right in such property because

transfer of such leasehold right extinguishes

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the estate of the transferor-lessee-assignor

in the immovable property and all legal

relationships with lessor-GIDC are severed and

third party-assignee becomes lessee liable for

obligation under the assignment deed vis-à-vis

the lessor-GIDC. As the assignor transfers

leasehold rights after receiving the

consideration as determined on the basis of

value of such leasehold rights, such

transaction therefore would of an “immovable

property” and cannot be considered as “supply

of services” as held by Hon’ble Apex Court in

case of Gopal Saran v. Satya Narayana reported

in (1989) 3 Supreme Court Cases 56 wherein

definition of “assignment” as stated in

Black's Law Dictionary, Special Deluxe Edition

page 106, is referred to as assignment means

"is a transfer or making over to another of

the whole of any property, real or personal,

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in possession or in action, or of any estate

or right therein". It has further been held

that assignment would include "The transfer by

a party of all its rights to some kind of

property, usually intangible property such as

rights in lease, mortgage, agreement of sale

or a partnership." Considering such

definition of assignment, assignment of

leasehold rights is also subject to levy of

stamp duty being transfer of “immovable

property”.

68. The Hon’ble Apex Court in case of

Byramjee Jeejeebhoy (P) Ltd vs State Of

Maharashtra reported in AIR 1965 Supreme Court

590 while holding as to what a lease

contemplates has observed that a demise or a

transfer of a right to enjoy land for a term

or in perpetuity in consideration of a price

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paid or promised or services or other things

of value to be rendered periodically or on

specified occasions to the transferor. The

words “transfer of right to enjoy such

property” indicates that all the rights of

ownership are not transferred. Therefore, the

significance of those words as indicative of

the limited estate transfer is apparent in

contrasted which flows in section 54 where a

sale is defined as “transfer of ownership in

exchange for a price”. Therefore, while

assignment conveys the whole interest in the

property which passes to the assignee along

with rights and liability to sue and be sued

upon the covenants in the original lease.

69. The Hon’ble Supreme Court in case of Sri

Tarkeshwar Sio Thakur Jiu v. Dar Dess Dey Co.

and others reported in (1979) 3 Supreme Court

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Cases 106 while considering the provisions of

West Bengal Estates Acquisition Act, 1953

regarding mining operation has interpreted the

scope of term “lease” in section 3(c) of the

Mines and Minerals (Regulation and

Development) Act (67 of 1975) in juxtaposition

to sections 105 and 108 of the Transfer of

Property Act 1882 as under :

“34. Section 105, Transfer of

Property Act, defines a 'lease' of
immoveable property as ---

"a transfer of a right to enjoy

such property made for a certain
time, express or implied, or in
perpetuity, in consideration of a
price paid or promised, or of
money, a share of crops, service
or any other thing of value, to be
rendered periodically or on
specified occasions to the
transferor by the transferee, who
accepts the transfer on such
terms."

35. In the second paragraph of the

Section, it is expressly stated
that the price so paid in
consideration of the transfer is
called "the premium, and the

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money, share, service, or other

thing to be so rendered, is called
the rent."

36. The definition of

"immoveable property" given in
Section 3, para 1 of that Act
is in the negative, and is not
exhaustive. Therefore, the
definition given in Section 3
(26) of the General Clauses
Act (X of 1897) will apply to
the expression used in this
Act, except as modified by the
definition in the first clause
of Section 3. According to the
definition given in section 3
(26) of the General Clauses
Act, "immoveable property"
shall include land, benefits
to arise out of land, and
things attached to the earth,
or permanently fastened to
anything attached to the
earth." In short, the
expression 'immoveable
property' comprehends all that
would be real property
according to English Law and
possible more. Thus, every
interest in immovable property
'or a benefit arising out of
land, will be "immovable
property" for the purpose of
section 105, Transfer of
property Act.”

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70. The Hon’ble Apex Court in case of Narinder

S. Chadha and others v. Municipal Corporation

of Greater Mumbai and others reported in

(2014) 15 Supreme Court Cases 689 has held

that words “sale” and “service” are not

interchangeable terms as “sale” is defined

under the Act as to mean a transfer of

property in goods for consideration which

would not include “service” which would not

refer to transfer of property in goods but to

services.

71. In case of Northern India Caterers (India)

Ltd. Lt. Governor of Delhi reported in (1978)

4 SCC 36, the Hon’ble Apex Court has made a

distinction between sale of food and the

provisions of services in hotels and

restaurants which has led to Constitution 46th

Amendment Act by which Article 366 (29-A) was

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inserted expanding the scope of tax on the

sale or purchase of goods artificially, more

particularly, by sub-clause (f) thereof which

stipulates tax on supply, by way of or part of

any service or in any other manner whatsoever

of goods being food etc.

72. Considering above dictum of law, when

section 7 of the GST Act refers to the scope

of supply, it is well settled that such

definition is an exhaustive definition as held

by Hon’ble Apex Court in case of P. Kasilingam

v. P.S.G. College of Technology reported in

1995 Supp (2) SCC 348 as under:

“19. We will first deal with the

contention urged by Shri Rao based
on the provisions of the Act and
the Rules. It is no doubt true
that in view of clause (3) of
Section 1 the Act applies to all
private colleges. The expression
"college" is, however, not defined
in the Act. The expression
"'private college" is defined in

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Clause (8) of Section 2 which can,

in the absence of any indication
of a contrary intention, cover all
colleges including professional
and technical colleges. An
indication about such an intention
is, however, given in Rules
wherein the expression "college"
has been defined in Rule 2(b) to
mean and include Arts and Science
College, Teachers Training
College, Physical Education
College, Oriental College, School
of Institute of Social Work and
Music College. While enumerating
the various types of colleges in
Rule 2(b) the Rule making
authority has deliberately
reframed from including
professional and technical
colleges in the said definition.
It has been urged that in Rule
2(b) the expression "means and
includes" has been used which
indicates that the definition is
inclusive in nature and also
covers categories which are not
expressly mentioned therein. We
are unable to agree. A particular
expression is often defined by the
Legislature by using the word
'means' or the word 'includes'.
Sometimes the words 'means and
includes' are used. The use of the
word' ' indicate that "definition
is a hard- and-fast definition.
and no other meaning can be
assigned to the expression that is

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put down in definition." [See

Gough v. Gough, (1891) 2 QB 665;
Punjab Land Development and
Reclamation Corpn. Ltd. v.
Presiding Officer, Labour Court,
(1990 (3) SCC 682, at p. 717]. The
word 'includes' when used,
enlarges the meaning of the
expression defined so as to
comprehend not only such things as
they signify according to their
natural import but also those
things which the clause declares
that they shall include. The words
'means and includes', on the other
hand, indicate "an exhaustive
explanation of the meaning which,
for the purposes of the Act, must
invariably be attached to these
words or expressions."' [See :
Dilworth v Commissioner of Stamps,
(1899 AC 99 at pp. 105-106 (Lord
Watson);1 Mahalakshmi Oil Mills v.
State of Andhra Pradesh, (1989) 1
SCC 164, at p. 169]. The use of
words 'means and includes' in Rule
2(b) would, therefore, suggest
that the definition of "college"
is intended to be exhaustive and
not extensive and would cover only
the educational institutions
failing in the categories
specified in Rule 2(b) and other
educational institutions are not
comprehended…………..”

73. Therefore, the scope of “supply of

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services” would not include transfer of

leasehold rights as supply of service as it

would be transfer of “immovable property”

being a benefit arising out of immovable

property consisting of land and building.

74. Clause 5 of Schedule III of the GST Act

clearly provides that sale of land cannot to

be treated as supply of goods or services.

Therefore, leasehold rights which are to be

considered as sale of land would be out of

purview of the provisions of scope of supply

as per section 7 of the GST Act.

75. As the GST Act is nothing but a levy of

tax upon all the indirect taxes which were

levied under different legislation, it would

be germane to refer to definition of “service”

as provided in section 2(102) of the GST Act

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to mean as anything other than goods, money

and securities. Considering such definition in

juxtaposition to provisions of section 65B(44)

of the Finance Act, 1944, there was specific

exclusion of transfer of title in immovable

property from definition of ‘service’ itself

which clearly shows that there was no

intention of the legislature to impose tax on

transfer of immovable property. Under the

Service Tax Act, even the development rights

which are the benefits arising from land were

not liable to tax. Leasehold right is in fact

a greater right and interest in land than

development rights and the principle under the

service tax regime would therefore, continue

even to apply under the GST regime as the

object of introduction of GST is to subsume

the existing taxes.

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76. It would also be necessary to refer to the

Minutes of the meeting of 5th GST Council to

the Agenda 2A which clearly notes that service

tax was not leviable on transfer of immovable

property and a specific proposal was made to

impose GST on sale of immovable property on

the ground that there was no constitutional

embargo for imposing such tax and the stamp

duty was leviable on a different aspect. 7th

GST Council meeting held on 22nd and 23rd

December, 2016 after a detailed discussion

decided to defer imposition of tax on land and

building and thereafter, clause 5 of Schedule

III of the GST Act clearly excludes sale of

land and building which fortifies the

intention of the GST Council not to impose tax

on transfer of immovable property continuing

the underlying object of erstwhile service tax

regime.

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77. In case of Munjaal Manishbhai Bhatt v.

Union of India reported in (2022) 104 GSTR 419

(Guj), this court has observed that the

intention of introduction of GST regime was

not to change the basis of taxation of the

Value Added and Service Tax regime and that

supply of land in every from was excluded from

the purview of GST Act.

78. Moreover, in the facts of the various

cases, GIDC had only allotted the plot of land

to the lessee who constructed the building and

developed the land to run the business or

industry for which such plot of land was

allotted. Therefore, what is assigned by the

lessee/assignor to the assignee for a

consideration is not only the land allotted by

GIDC on lease but the entire land along with

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building thereon which was constructed on such

land. The entire land and building is

therefore, transferred along with leasehold

rights and interest in land which is a capital

asset in form of an immovable property and the

lessee/assignor earned benefits out of land by

way of constructing and operating factory

building/shed which constitutes a “profit a

pendre” which is also an immovable property

and therefore, would not be subject to tax

under the GST Act.

79. The Hon’ble Apex Court in case of Anand

Behera v. State of Orissa reported in AIR 1956

SC 17 has held as under:

“9. The facts disclosed in

paragraph 3 of the petition make
it clear that what was sold was
the right to catch and carry away
fish in specific sections of the
lake over a specified future
period. That amounts to a license
to enter on the land coupled with

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a grant to catch and carry away

the fish, that is to say, it is a
profit a prendre: see 11
Halsbury's Laws of England,
(Hailsham Edition), pages 382 and
383. In England this is regarded
as an interest in land (11
Halsbury's Laws of England, page
387) because it is a right to take
some profit of the soil for the
use of the owner of the right
(page 382). In India it is
regarded as a benefit that arises
out of the land and as such is
immoveable property.

10. Section 3 (26) of the General

Clauses Act defines "immoveable
property" as including benefits
that arise out of the land. The
Transfer of Property Act does not
define the term except to say that
immoveable property does not
include standing timber, growing
crops or grass. As fish do not
come under that category the
definition in the General Clauses
Act applies and as a profit a
prendre is regarded as a benefit
arising out of land it follows
that it is immoveable property
within the meaning of the Transfer
of Property Act.

11. Now a "sale" is defined as

a transfer of ownership in
exchange for a price paid or

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promised. As a profit a
prendre is immoveable property
and as in this case it was
purchased for a price that was
paid it requires writing and
registration because of
section 54 of the Transfer of
Property Act. If a profit a
prendre is regarded as
tangible immoveable property,
then the "property" in this
case was over Rs. 100 in
value. If it is intangible,
then a registered instrument
would be necessary whatever
the value. The "sales" in this
case were oral: there was
neither writing nor
registration. That being the
case, the transactions passed
no title or interest and
accordingly the petitioners
have no fundamental right that
they can enforce.”

80. In case of State of Orissa v. Titaghur

Paper Mills Co. Ltd reported in (1985) Supp.

SCC 285, it is held as under :

“98. The meaning and nature of a

profit a prendre have been thus
described in Halsbury's Laws of
England, Fourth Edition, Volume 14,
paragraphs 240 to 242 at pages 115
to 117:

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"240. Meaning of 'profit a

prendre' A profit a prendre is a
right to take something off
another person's land. It may be
more fully defined as a right to
enter another's land to take some
profit of the soil, or a portion
of the soil itself, for the use of
the owner of the right The term
'profit a prendre' is used in
contradistinction to the term
'profit a prendre', which
signified a benefit which had' to
be rendered by the possessor of
land after it had come into his
possession. A profit a prendre is
a servitude.

241. Profit a prendre as an

interest in land. A profit a
prendre is an interest in land and
for this reason any disposition of
it must be in writing.A profit a
prendre which gives a right to
participate in a portion only of
some specified produce of the land
is just as much an interest in the
land as a right to take the whole
of that produce…

242. What may be taken as a profit

a prendre. The subject matter of a
profit a prendre, namely the

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substance which the owner of the

right is by virtue of the right
entitled to take, may consist of
animals, including fish and fowl,
which are on the land, or of
vegetable matter growing or
deposited on the land by some
agency other than that of man, or
of any part of the soil itself,
including mineral accretions to
the soil by natural forces. The
right may extend to the taking of
the whole of such animal or
vegetable matters or merely a part
of them. Rights have been
established as profits a prendre
to take acorns and beech mast,
brakes, fern, heather and litter,
thorns, turf and peat, boughs and
branches of growing trees, rushes,
freshwater fish, stone, sand and
shingle from the seashore A and
ice from a canal; also the right
of pasture and of shooting
pheasants. There is, however, no
right to take seacoal from the
foreshore. The right to take
animals ferae naturae while they
are upon the soil belongs to the
owner of the soil, who may grant
to others as a profit a prendre a
right to come and take them by a
grant of hunting, shooting,
fowling and so forth."

99. A profit a prendre is a

servitude for it burdens the land or

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rather a person's ownership of land

by separating from the rest certain
portions or fragments of the right
of ownership to be enjoyed by
persons other than the owner of the
thing itself (see Jowitt's
Dictionary of English Law, Second
Edition, Volume 2, page 1640. under
the heading "Servitude").
"Servitude" is a wider term and
includes both easements and profits
a prendre (see Halsbury's Laws of
England, Fourth Edition, Volume 14,
paragraph 3, page 4). The
distinction between a profit a
prendre and an easement has been
thus stated in Halsbury's Laws of
England, Fourth Edition, paragraph
43 at pages 21 to 22:

"The chief distinction between an

easement and a profit a prendre is
that whereas an easement only
confers a right to utilise the
servient tenement in a particular
manner or prevent the commission
of some act on that tenement, a
profit a prendre confers a right
to take from the servient tenement
some part of the soil of that
tenement or minerals under it or
some part of its natural produce
or the animals ferae naturae
existing upon it. What is taken
must be capable of ownership, for

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otherwise the right amounts to a

mere easement".

In Indian law an easement is

defined by section 4 of the Indian
Easement Act, 1882 (Act No. V of
1882) as being ' a right which the
owner or occupier of certain land
possesses, as such, for the
beneficial enjoyment of that land,
to do and continue to do
something, or to prevent and
continue to prevent something
being done, in or upon, or in
respect of, certain other land not
his own".A profit a prendre when
granted in favour of the owner of
a dominant heritage for the
beneficial enjoyment of such
heritage would, therefore, be an
easement but it would not be so if
the grant was not for the
beneficial enjoyment of the
grantee's heritage.

100. Clause (26) of section 3 of the

General Clauses Act, 1897, defines
"immovable property" as including
inter alia "benefit to arise out of
land". The definition of "immovable
property" in clause (f) of section 2
of the Registration Act 1908,
illustrates a benefit to arise out
of land by stating that immovable
property "includes...rights to ways,
lights ferries, fisheries or any

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other benefit lo arise out of land".

As we have seen earlier, the
Transfer of Property Act, 1882, does
not give any definition of
"immovable property" except
negatively by stating that immovable
property does not include standing
timber, growing crops, or grass. The
Transfer of Property Act was enacted
about fifteen years prior to the
General Clauses Act, However, by
section 4 of the General Clauses
Act, the definitions of certain
words and expressions, including
"immovable property" and "movable
property", given in section 3 of
that Act are directed to apply also,
unless there is anything repugnant
in the subject or context, to all
Central Acts made after January 3
1968, and the definitions of these
two terms, therefore, apply when
they occur in the Transfer of
Property Act. In Ananda Behra and
another v. The State of Orissa and
another (1) this Court has held that
a profit a prendre is a benefit
arising out land and that in view of
clause (26) of section 3 of the
General Clauses Act, it is immovable
property within the meaning of the
Transfer of Property Act.

101. The earlier decisions showing

what constitutes benefits arising
out of land have been summarized in
Mulla on The Transfer of Property

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Act, 1882", and it would be

pertinent to reproduce the whole of
that passage. That passage (at pages
16-17 of the Fifth Edition) is as
follows:

"A 'benefit to arise out of land'

is an interest in land and
therefore immovable property. The
first Indian Law Commissioners in
their report of 1879 said that
they had 'abstained from the
almost impracticable task of
defining the various kinds of
interests in immovable things
which are considered immovable
property. The Registration Act,
however, expressly includes as
immovable property benefits to
arise out of land, here diary
allowances, rights of way lights,
ferries and fisheries'. The
definition of immovable property
in the General Clauses Act
applies to this Act. The
following have been held to be
immovable (1) 11955] 2 S. C. R.
919 property:-varashasan or
annual allowance charged on land;
a right to collect dues at a fair
held on a plot of land; a hat or
market; a right to possession and
management of a saranjam; a
malikana; a right to collect rent
or jana: a life interest in the
income of immovable property; a

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right of way; a ferry; and a

fishery; a lease of land".

102. Having seen what the

distinctive features of a profit a
prendre are, we will now turn to the
Bamboo Contract to ascertain whether
it can be described as a grant of a
profit a prendre and thereafter to
examine the authorities cited at the
Bar in this connection. Though both
the Bamboo Contract in some of its
clauses and the Timber Contracts
speak of "the forest produce sold
and purchased under this Agreement",
there are strong countervailing
factors which go to show that the
Bamboo Contract is not a contract of
sale of goods. While each of the
Timber Contracts is described in its
body as "an agreement for the sale
and purchase of forest produce", the
Bamboo Contract is in express terms
described as "a grant of exclusive
right and licence to fell, cut,
obtain and remove bamboos...for the
purpose of converting the bamboos
into paper pulp or for purposes
connected with the manufacture of
paper...." Further, throughout the
Bamboo Contract, the person who is
giving the grant, namely, the
Governor of the State of Orissa, is
referred to as the "Grantor." While
the Timber Contracts speak of the
consideration payable by the forest
contractor, the Bamboo Contract

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provides for payment of royalty.

"Royalty" is not a term used in
legal parlance for the price of
goods sold. "Royalty" is defined in
Jowitt's Dictionary of English Law,
Fifth Edition, Volume 2, page 1595,
as follows.

"Royalty, a payment reserved by

the grantor of a patent, lease of
a mine or similar right, and
payable proportionately to the use
made of right by the grantee. It
is usually a payment of money, but
may be a payment in kind, that is,
of part of the produce of the
exercise of the right.

Royalty also means a payment which

is made to an author or composer
by a publisher in respect of each
copy of his work which is sold, or
to an inventor in respect of each
article sold under the patent."

We are not concerned with the

second meaning of the word H
"royalty" given in Jowitt. Unlike
the Timber Contracts, the Bamboo
Contract is not an agreement to
sell bamboos standing in the
contract areas with an accessory
licence to enter upon such areas /
for the purpose of felling and
removing the bamboos nor is it,

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unlike the Timber Contracts, in

respect of a particular felling
season only. It is an agreement
for a long period extending to
fourteen years, thirteen years and
eleven years with respect to
different con tract areas with an
option to the Respondent Company
to renew the contract for a
further term of twelve years and
it embraces not only bamboos which
are in existence at the date of
the contract but also bamboos
which are to grow and come into
existence thereafter. The payment
of royalty under the Bamboo
Contract has no relation to the
actual quantity of bamboos cut and
removed. Further, the Respondent
Company is bound to pay a minimum
royalty and the amount of royalty
to be paid by it is always to be
in excess of the royalty due on
the bamboos cut in the contract
areas.

103. We may pause here to note what

the Judicial Committee of the Privy
Council had to say in the case of
Raja Bahadur Kamkashya Narain Singh
of Ramgarh v. Commissioner of
Income- tax, Bihar and Orissa about
the payment of minimum royalty under
a coal mining lease. The question in
that case was whether the annual
amounts payable by way of minimum
royalty to the lessor were in his

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hands capital receipt or revenue

receipt. The Judicial Committee held
that it was an income flowing from
the covenant in the lease. While
discussing this question, the
Judicial Committee said (at pages
522-3):

"These are periodical payments, to

be made by the lessee under his
covenants in consideration of the
benefits which he is granted by
the lessor. What these benefits
may be is shown by the extract
from the lease quoted above, which
illustrates how inadequate and
fallacious it is to envisage the
royalties as merely the price of
the actual tons of coal. The
tonnage royalty is indeed only
payable when the coal or coke is
gotton and despatched: but that is
merely the last stage. As
preliminary and ancillary to that
culminating act, liberties are
granted to enter on the land and
search, to dig and sink pits, to
erect engines an (1) (1943)11
I.T.R. 513 P.C. machinery, coke
ovens, furnaces and form railways
and , roads. All these and the
like liberties show how fallacious
it is to treat the lease as merely
one for the acquisition of a
certain number of tons of coal, or
the agreed item of royalty as

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merely the price of each ton of

coal."

Though the case before the Judicial

Committee was of a lease of a coal
mine and we have before us the case
a grant for the purpose of felling,
cutting and removing bamboos with
various other rights and licences
ancillary thereto, the above
observations of the Judicial
Committee are very pertinent and
apposite to what we have to decide.

104. Under the Bamboo Contract, the

Respondent Company has the right to
use all lands, roads and streams
within as also outside the contract
areas for the purpose of free
ingress to and egress from the
contract areas. It is also given the
right to make dams across streams,
cut canals, make water courses,
irrigation works, roads, bridges,
buildings, tramways and other work
useful or necessary for the purpose
of its business of felling, cutting,
and removing bamboos for the purpose
of converting the same into paper
pulp or for purposes connected with
the manufacture of paper. For this
purpose it has also the right to use
timber and other forest produce to
be paid for at the current schedule
of rates. The Respondent Company has
the right to attract fuel from areas

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allotted for that purpose in order

to meet the fuel requirements of the
domestic consumption in the houses
and offices of the persons employed
by it and to pay a fixed royalty for
this purpose. Further, the
Government was bound, if required by
the Respondent Company, to lease to
it a suitable site or sites selected
by it for the erection of store
houses, sheds, depots, bungalows,
staff offices, agencies and other
buildings of a like nature.

105. We have highlighted above only

the important terms and conditions
which go to show that the bamboo
Contract is not and cannot be a
contract of sale of goods. It
confers upon the Respondent Company
a benefit to arise out of land,
namely, the right to cut and remove
bamboos which would grow from the
soil couple with several ancillary
rights and is thus a grant of a
profit a prendre. It is equally not
possible to view it as a composite
contract one, an agreement relating
to standing bamboos agreed to be
severed H and the other, an
agreement relating to bamboos to
come into existence in the future.
The terms of the Bamboo Contract
make it clear that it is one,
integral and indivisible contract
which is not capable of being
severed in the manner canvassed on

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behalf of the Appellant. It is not a

lease of the contract areas to the
Respondent Company for its terms
clearly show that there is no demise
by the State Government of any area
to the Respondent Company. The
Respondent dent Company has also no
right to the exclusive possession of
the contract areas but has only a
right to enter upon the land to take
a part of the produce thereof for
its own benefit. Further, it is also
pertinent that while this right to
enter upon the contract areas is
described as a "licence", under
clause XXV of the Bamboo Contract
the Respondent (company has the
right to take on lease a suitable
site or sites of its choice within
the contract areas for the erection
of store houses, sheds, depots,
bungalows, staff offices, agencies
and other buildings of alike nature
required fourth purpose of its
business. The terms and conditions
of the Bamboo Contract leave no
doubt that it confers upon the
Respondent Company a benefit to
arise out of land and it would thus
be an interest in immovable
property. As the grant is of the
value exceeding Rs. 100, the Bamboo
Contract is compulsorily
registrable. It is, in fact, not
registered. This is, however,
immaterial because it is a grant b
the Government of an interest in
land and under section Registration

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Act it is exempt from registration.

The High Court was, therefore, right
in holding that the Bamboo Contract
was a grant of a profit prendre,
though the grant of such right not
being for the beneficial enjoyment
of any land of the Respondent
Company it would not be an easement.
Being a profit a prendre or a
benefit to arise out of land any
attempt on the part of the State
Government to tax the amounts
payable under the Bamboo Contract
would not only be ultra vires the
Orissa Act but also unconstitutional
as being beyond the State's taxing
power under Entry 54 in List II in
the Seventh Schedule to the
Constitution of India.”

81. Therefore, the contention of the

respondents that by excluding only sale of

land and building as per Schedule-III would

not amount to transfer of leasehold rights as

the interest in immovable property being an

intangible form would be covered by the scope

of supply of service, is not tenable as

transaction of assignment is nothing but

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absolute transfer of right and interest

arising out of the land which would amount to

transfer/sale of immovable property which

cannot be said to be “service” as contemplated

under the provisions of GST Act. Moreover,

assignment/transfer of rights would be out of

scope of supply of service.

82. In view of above discussion and analysis

of the provisions of section 7 read in context

of the facts of the case, the decisions relied

upon on behalf of the respondent are required

to be dealt in support of the proposition that

interest in immovable property cannot be

considered as an immovable property as it is

not envisaged as such in the GST Act, as

immovable property is nothing but bundle of

rights and right to give such property on

lease is one of such rights and further

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transfer of the right to occupy or possess

will continue to remain as supply of service

which character will not change merely because

lessee of GIDC affects absolute transfer

thereof in favor of the assignee leaving no

right whatsoever in respect of such leasehold

land and building.

(1) Decision in case of Legal Hiers of

Deceased Fakir Chand Ambaram Patel

(supra) of this Court holding that

lease creates an interest in immovable

property which is an intangible asset

and therefore, would amount to supply

of service, would not be applicable as

along with the leasehold rights, there

is an absolute transfer of all rights

in the land and building.

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(2) Similarly, decision of Allahabad High

Court in case of Greater Noida

Industrial Development Authority

(supra) would also not be applicable

in the facts of the case as it related

to the demand of service tax on

renting of immovable property on lease

for any period and the term of lease

would not determine the character of

service of renting on property under

section 65 (105) (zzzz) of the Finance

Act, 1994 as now under Schedule II,

clause 5(a) renting of immovable

property is deemed to be supply of

services. Therefore, there is a thin

line of distinction as to renting of

immovable property and assignment of

such leasehold rights in immovable

property for a consideration. In facts

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of the case, therefore, such

assignment of leasehold right for a

consideration in immovable property

would be out of scope of purview of

the supply of service as it would

amount to sale of immovable property

in form of land and building which

would not be covered by definition of

section 7(1)(a) read with clause 5 to

Schedule III of the Act.

(3) Therefore, merely because GIDC is

having title of the ownership over the

land in question would not be

sufficient to exclude the assignment

of leasehold rights to be included as

supply of service as levy of GST would

depend upon the nature of transaction

in question . In facts of the case

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when the lessee/assignor transfers the

land having leasehold rights and

building to the assignee, same cannot

be considered as supply of service as

it would be a transfer of immovable

property. Therefore, reliance placed

on decision of Hon’ble Apex Court in

case of Residents Welfare Association,

Noida (supra) is in context of levy of

stamp duty on the deed of assignment

of lease not being an outright sale of

land in context of section 47-A of the

Stamp Act, 1989 for the purpose of

valuation of the property for levy of

stamp duty.

(4) Whereas in facts of the case, levy of

GST considering the nature of

transaction, the assignment deed

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executed by the lessee/assignor is not

a composite deed of lease as well as

deed of sale but by deed of assignment

executed by the lessee there is no

lease or sub-lease by the lessee but

it is a deed of divesting all the

rights of lessee in favour of assignee

and the assignee becomes liable to the

lessor on the covenants running with

the land and liable to the stamp duty

accordingly.

(5) Reliance was placed on the decision in

case of P. Kishore Kumar v. Vittal K.

Patkar reported in 2023 SCC OnLine SC

1483 to canvas the proposition that a

vendor cannot transfer a title to the

vendee better than he himself

possesses and the principle arising

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from the maxim Nemo dat quod non habet

i.e. “no one can confer a better title

than what he himself has”. Considering

the nature of transaction when lessor

assignor transfers the entire

leasehold rights along with building

constructed thereon to the lessee

assignee, it would amount to

assignment of all the rights in the

immovable property by the lessor

assignor.

(6) Reliance placed by the respondent on

levy of GST under Heading 9972 and

Group 997212 for rental or leasing

service vis-a-vis Group 99979 for

other miscellaneous services in which

Sub-group 999792 providing for

agreeing to do an Act would not

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attract the transaction of assignment

of leasehold rights along with

building on the plot of land as

lessee/assignee is not liable to

receive any rental from the assignee.

Similarly, reliance placed on Group

99836 for Advertising services and

sub-group 998363 to 998366 for Sale

of advertising space in print media,

Sale of television and radio

advertising time etc. would also not

apply to the transaction of assignment

of leasehold rights over land and

building as such assignment is nothing

but transfer of immovable property for

consideration. Therefore, reliance

placed on the decision in case of T.N.

Kalyana Mandapam Assn.(supra), for

levy of service tax on the mandap-

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keeper and caterer service provided by

them cannot be applied in the facts of

the case, as in case of catering

service provided by mandap-keeper it

was a tax on service and not a tax on

sale or purchase of goods by applying

doctrine of pith and substance whereas

in the facts of the case there cannot

be any element of service for

assignment of leasehold rights of the

land and building as interest in

leasehold rights of land and building

would be transfer/sale of the

immovable property.

(7) Reliance placed on the decision of

Apex Court in case of Venkateswara

Hatcheries (P) Ltd.(supra) wherein it

is observed that as per principle of

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interpretation of statute that

external aids to other statutes cannot

be imported for definition of a word

in the statute as the word occurring

in the provisions of the Act must take

its colour from the context in which

they are so used. In other words, for

arriving at the true meaning of a

word, the said word should not be

detached from the context. Therefore,

in the facts of the case when

legislative intent is not to levy GST

on the sale of immovable property by

specific provision in clause 5 of

Schedule-III, then attempt on part of

the revenue to consider assignment of

leasehold rights equal to the renting

of immovable property as per clause

5(b) of the Schedule II would be

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contrary to such legislative intent.

Therefore, when the legislature in its

wisdom has chosen to exclude the sale

of land and building from purview of

GST Act, there is no ambiguity that

section 7(1)(a) would be applicable to

the sale of immovable property and

once it is held that assignment of the

leasehold rights being the

benefit/interest arising out of

immovable property would partake the

character as such, cannot be covered

under the scope of supply of services

by any stretch of imagination.

(8) Reliance placed on the decision of

Hon’ble Apex Court in case of Hotel &

Restaurant Assn. and another (supra)

wherein it is held that it is

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hazardous to interpret a word in

accordance with its definition in

another statute or statutory

instrument and more so, when such

statute or statutory instrument is not

dealing with any cognate subject and

definition of the term in one statute

does not afford a guide to the

construction of the same term in

another statute would not be

applicable in the facts of the case as

the very nature of transaction of

assignment of the absolute right in

the property has to be considered as

transfer of immovable property and

accordingly, would be out of purview

of the scope of supply for levy of

GST.

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(9) Reliance placed on the definition of

“services” in the Major Law Lexicon by

the respondent which includes transfer

of technology including transferring

or securing the transfer of rights

etc. would not be applicable to the

nature of the transaction of

assignment of leasehold rights.

(10) Reliance placed on Articles 24 and

25 of the Council Directive of the

Council of the European Union on the

common system of value added tax, more

particularly, Article 25 which

stipulates that a supply of service

may consist inter-alia the transaction

of assignment of immovable property

whether or not the subject to document

establishing title, would also be not

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applicable in facts of the case

inasmuch as the assignment of

leasehold rights along with building

constructed thereon or otherwise is an

immovable property itself and not an

intangible property as leasehold

rights transferred by lessee/assignee

is with the concurrence of lessor GIDC

in facts of the case and therefore,

transfer charges paid by the assignee,

would be subject to levy of GST but at

the same time consideration paid by

the assignee to the lessee/assignor

would amount to transfer of immovable

property which would be out of purview

of provision of section 7(1)(a) of the

GST Act read with Schedule II and

Schedule III thereof.

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(11) Contention of the respondent that

activity of lessee/assignor to

transfer the leasehold rights is in

nature of compensation for agreeing to

do the transfer in favour of the

assignee is a service classifiable

under other miscellaneous service

under Group 999792 and taxable at the

rate of 18% under serial no.35 of

Notification No.11/2017 - Central Tax

(Rate) dated 28.06.2017 would not

cover the nature of transaction as

consideration received by

lessee/assignee is not in nature of

premium but is a consideration for

outright sale of leasehold rights

which cannot be equated with

subleasing in any manner as tried to

be applied by Uttar Pradesh Authority

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for Advance Ruling (GST) in case of

Remarkable Industries Private Limited

reported in 2023 SCC OnLine UP AAR-GST

14 so as to bring the transaction

within the purview of clause 5(b) of

Schedule II of the GST Act.

12) It is true that exemption

granted as per Sr no.41 of the

Exemption Notification No.12/2017

dated 28.06.2017 would not be

applicable to the transaction of

assignment of leasehold rights by

lessee who is neither a State

Government Industrial Development

Corporation or undertaking. Fine line

of distinction to be drawn for

assignment of leasehold rights vis-a-

vis allotment of plot of land by GIDC

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on lease by charging one time premium

which is exempt under the said

notification is that subsequent

transaction of assignment of leasehold

rights is transfer of interest in

immovable property which would be

equivalent to transfer of immovable

property, would be covered by Clause 5

of Schedule III whereas renting of the

plot of land by GIDC would be covered

by clause 5(b) of Schedule II.

Lessee/Assignor is not transferring

leasehold right by way of a sub-lease

so as to earn rent on such assignment

of leasehold rights, so as to apply

clause 5(b) of Schedule II to such

transaction. As nature of transaction

in facts of the case is outright

assignment resulting into

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sale/transfer of the leasehold rights

in favour of assignee by

lessee/assignor for a consideration

would be covered by clause 5 of

Schedule III which provides that sale

of land and building shall not be

considered as supply of services.

Therefore, it cannot be said that

assignment of the outright leasehold

rights would be a service or

transferring of leasehold right.

-:CONCLUSION:-

83. In view of foregoing reasons, assignment

by sale and transfer of leasehold rights of

the plot of land allotted by GIDC to the

lessee in favour of third party-assignee for a

consideration shall be assignment/sale/

transfer of benefits arising out of

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“immovable property” by the lessee-assignor in

favour of third party-assignee who would

become lessee of GIDC in place of original

allottee-lessee. In such circumstances,

provisions of section 7(1)(a) of the GST Act

providing for scope of supply read with clause

5(b) of Schedule II and Clause 5 of Schedule

III would not be applicable to such

transaction of assignment of leasehold rights

of land and building and same would not be

subject to levy of GST as provided under

section 9 of the GST Act.

84. In view of above, question of utilisation

of input tax credit to discharge the liability

of GST on such transaction of assignment

would not arise.

85. The petitions accordingly succeed and

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impugned show cause notices and orders in

original or appeal as the case may be, are

hereby quashed and set aside. Rule is made

absolute to the aforesaid extent. No order as

to costs.

(BHARGAV D. KARIA, J)

(NIRAL R. MEHTA,J)

FURTHER ORDER

After pronouncement of the judgment,

learned Advocate General Mr.Kamal Trivedi

prays for stay of the operation and

implementation of the judgment.

Considering the facts of the case and the

reasons assigned for arriving at the

conclusion, the request is rejected.

(BHARGAV D. KARIA, J)

(NIRAL R. MEHTA,J)
RAGHUNATH R NAIR
Original copy of this order has been signed by the Hon'ble Judges.
Digitally signed by: RAGHUNATH RAVINDRANATHAN NAIR(HC00196), PRINCIPAL PRIVATE SECRETARY, at High Court of Gujarat on 07/01/2025 09:18:24

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