2026-VIL-663-TEL
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VAT High Court Cases

Andhra Pradesh General Sales Tax Act, 1957 – Levy of tax on rental income received on renting of immovable property along with Furniture and Fixtures, Validity of bifurcation of service contract - Transfer of Right to Use Goods – Petitioners-developers entered into lease agreements with IT companies for renting immovable properties along with various facilities and amenities including generators, air conditioners, transformers, lifts, furniture, and cafeteria equipment - Authorities bifurcated the composite lease rentals and levied tax on the portion attributable to movable items and fixtures, treating such transaction as a transfer of right to use goods under Section 5E of the APGST Act, 1957 - Whether rent received by the petitioners towards the supply of immovable property along with movable furniture, fixtures, and amenities constitutes a transfer of right to use goods liable to tax under the APGST Act, 1957 or whether it remains a service contract not amenable to such taxation – HELD – It is well settled that unless there is a transfer of the right to use goods from one person to another, the essential ingredients of a sale or purchase are not satisfied and, consequently, the transaction would not be liable to tax – In the present case, the petitioners have not parted with possession or control of the properties, except to the limited extent of permitting the tenants to use them as part of the common amenities and facilities provided under the lease. In several instances, such facilities are intended for the common use of more than one tenant. Further, the petitioners have challenged the levy of tax on lease rentals, which are charged on a per square foot basis and not separately in respect of furniture and fixtures. Therefore, the revisional authority could not have, merely on the basis of presumption, bifurcated the composite lease rentals into components attributable to movable and immovable properties - In Bharat Sanchar Nigam Limited case, the Hon’ble Supreme Court held that the goods involved in a transaction of transfer of the right to use must be in existence, deliverable, and actually delivered. However, in the present matters the facilities such as lifts, the sewage system, bathrooms, and the cafeteria are common facilities shared by more than one tenant. Consequently, they are incapable of being exclusively delivered or made deliverable to any particular tenant – The finding that the petitioners are liable to pay tax under Section 5E of the APGST Act, 1957 on the lease rentals realized in respect of interiors, furniture and fixtures, as well as movable items provided in the kitchen and cafeteria, cannot be sustained and set aside – The writ petitions are allowed
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