2025 (2) TMI 460 - AAAR - GST

Applicability of an exemption under the GST framework for services related to the leasing of land for a commercial office complex - service of granting a long-term lease of land by Shyama Prasad Mukherjee Port Kolkata (SMPK) to Anmol Industries - exemption under entry 41 of N/N. 12/2017-Central Tax (Rate) - whether the leased plot for setting up of a commercial office complex can be said to have been used for industrial or financial activity? HELD THAT - It is evident from the definition of setting up of a commercial office complex that land is required to be used for construction of office complex which could be used for own corporate use and excess vacant place could be rented out to other corporate entities conference rooms guest houses retail outlets etc. Thus office complex built on the land leased out would be used for commercial purpose by way of sub-leasing/renting of the available space - Industrial buildings are specifically excluded from the purview of the Tender. When Industrial buildings itself are not allowed no stretch of imagination can conclude that industrial activity is allowed under the instant tender. Thus setting up of commercial office complex has a specific purpose and the same cannot be equated to industrial activity. Whether the leased property is used for financial activity ? - HELD THAT - The term financial activity is a specific one and cannot be equated with mere maintenance of accounts and records by a company or a business concern. The appellant is unable to satisfy the pivotal points related to the afore-stated second condition i.e. whether the leased plot is being used for industrial or financial activity in an industrial or financial business area to qualify for the benefit of exemption as specified in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The appellant is unable to satisfy the afore-stated third condition i.e. whether the service provider is a state Government Industrial Development Corporation or Undertaking or any other entity having 20 per cent. or more ownership of Central Government State Government Union territory (either directly or through an entity wholly controlled by the Central Government State Government Union territory) also to qualify for the benefit of exemption as specified in entry number 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Conclusion - Services by way of grant of long term lease of land by SMPK to the applicant for the purpose of setting up commercial office complex as involved in the instant case is found not to be covered under entry 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and therefore cannot be treated as an exempt supply.

The judgment revolves around an appeal by Anmol Industries Ltd. against a ruling by the West Bengal Advance Ruling Authority (WBAAR) regarding the applicability of an exemption under the GST framework for services related to the leasing of land for a commercial office complex. The core legal question is whether the service of granting a long-term lease of land by Shyama Prasad Mukherjee Port, Kolkata (SMPK) to Anmol Industries qualifies for exemption under entry 41 of Notification No. 12/2017-Central Tax (Rate).

Issues Presented and Considered:

The primary issue is whether the upfront premium paid for a long-term lease of land for setting up a commercial office complex qualifies for exemption under entry 41 of Notification No. 12/2017-Central Tax (Rate). The exemption depends on fulfilling four conditions: a lease period of 30 years or more, the property being an industrial plot or for financial business development, the service provider being a government entity with significant ownership, and the service recipient being an industrial unit.

Issue-Wise Detailed Analysis:

1. Legal Framework and Precedents:

The relevant legal framework includes the Central Goods and Services Tax Act, 2017, and Notification No. 12/2017-Central Tax (Rate). The notification provides an exemption for certain services, including long-term leases of industrial plots or plots for financial business development, subject to specific conditions.

2. Court's Interpretation and Reasoning:

The WBAAR and the appellate authority analyzed whether the conditions for exemption were met. They focused on whether the leased land was for industrial or financial activity, whether SMPK qualified as a government entity with sufficient ownership, and whether the lease agreement incorporated necessary conditions for exemption.

3. Key Evidence and Findings:

The evidence included the lease agreement, allotment letters, and tender documents. The authorities examined the nature of the land use, the ownership and control of SMPK, and the terms of the lease agreement.

4. Application of Law to Facts:

The authorities found that the lease did not meet the conditions for exemption. The land was not used for industrial or financial activities as defined, SMPK did not have the requisite government ownership, and the lease agreement did not incorporate the exemption conditions.

5. Treatment of Competing Arguments:

The appellant argued that the land was used for financial activities and that SMPK was a government-controlled entity. However, the authorities found that the activities did not qualify as financial activities under the GST framework, and SMPK's control and ownership did not meet the exemption criteria.

6. Conclusions:

The authorities concluded that the lease did not qualify for exemption under the specified notification due to non-fulfillment of the necessary conditions.

Significant Holdings:

1. Verbatim Quotes of Crucial Legal Reasoning:

The ruling emphasized that "Services by way of grant of long term lease of land by SMPK to the appellant for the purpose of 'setting up commercial office complex' as involved in the instant case is found not to be covered under entry 41 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and therefore cannot be treated as an exempt supply."

2. Core Principles Established:

The judgment reinforced the principle that exemptions under tax law require strict adherence to specified conditions. The use of land and the nature of the service provider are critical factors in determining eligibility for exemptions.

3. Final Determinations on Each Issue:

The appellate authority upheld the WBAAR's ruling, confirming that the lease did not qualify for exemption. The appellant's arguments regarding the nature of financial activities and government control over SMPK were not sufficient to meet the exemption criteria.

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