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2021 (8) TMI 731 - AAR - GSTLevy of GST - transfer of leasehold rights in respect of the consideration of ₹ 15 Crores received by them from M/s. INOX Air products Private Limited for the land allotted by SIPCOT - Subsequent transfer of SIPCOTs allotted land from the Applicant to M/s. Inox Air Products Private Limited - Scope of 'Supply' as defined under Section 7 of the Goods and Services Act 2017 - HELD THAT:- IPL was allotted and were holding lease of 15.34 acres of land in the SIPCOT Industrial Complex at Hosur(phase-II). The Original lease was entered into for a period of 99 years and the lease was entered into vide lease deed dt. 07.07.1993. INOX had approached them to transfer un-utilized portion of the allocated land to the extent of 5.00 acres for setting up a state of the art Ultra High Purity Cryogenic Liquid Medical and Industrial Oxygen Plant. A Memorandum of Understanding (MOU) has been entered into between the applicant and INOX on 20.11.2020 for transfer of leasehold rights for the remaining period of lease from IPL to INOX subject to the approval of SIPCOT in respect of the land measuring 5.00 acres. In the case at hand, it is seen that IPL had been allocated a certain land originally by SIPCOT for lease of 99 years. IPL had taken possession of the land for the purposes meant for allotment - The applicant while entitled to use the land for the purposes agreed upon, i.e., setting up manufacturing facility, is restrained to sub-let or transfer or permit occupation of any other person in the land allotted to them. However, the applicant can part with its interest in the leasehold held by them with the approval of SIPCOT, who may or may not grant the request with or without any further conditions. From the above facts of the case, it is evident that SIPCOT who owns the land has leased the allocated land to IPL for a period of 99 years. IPL by virtue of the lease conditions, do not possess the right to sub-let any part or whole of the property leased to them. However, IPL may transfer the leasehold rights to any other person with the approval of SIPCOT, who may or may not grant such approval. Thus, it is clear that the applicant holds the leasehold rights which he may agree to transfer to any other person but the applicant cannot per-se transfer the leasehold rights to such person - in the case at hand, IPL had agreed to transfer the leasehold rights held by them in respect of the land required by INOX to their favour for a consideration and requested SIPCOT to approve the same. SIPCOT has approved the request and stipulated the payment of differential cost of land & processing fees by INOX and thereupon to execute the modified lease deed by both IPL and INOX for their respective leaseholds. In the case at hand, IPL vide the MOU has agreed to part with their interests in the leasehold rights held by them, on the land required by INOX; Since as per the lease deed executed between SIPCOT and IPL, IPL can part with their interests in the land leased to them only with the approval of SIPCOT, IPL has sought the approval of SIPCOT - The activity of IPL as seen from the Memorandum of Understanding executed between IPL and INOX and the approval letter of SIPCOT, is only a transaction in which IPL agrees to part with the leasehold interests it possess for the remaining lease period in favour of INOX with the approval of SIPCOT in respect of the land required by INOX. Therefore the activity is not transfer of leasehold rights by IPL to INOX but is an activity of agreeing to part with the leasehold interests IPL hold on the land to be leased to INOX by SIPCOT. If it were a transfer of leasehold rights, there should be an agreement for such transfer between IPL and INOX. It is stated by IPL that apart from the Memorandum of Understanding, there is no agreement between IPL and INOX. The activity undertaken by IPL in agreeing to part with the interests of the leasehold rights in the land required by INOX for furtherance of their business, against a consideration is an activity of 'agreeing to do an act', which is a taxable service classifiable under 'Other Miscellaneous Services', with SAC 9997.
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