TaxTMI 
TaxTMI 
2022 (7) TMI 642
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....e functions of the AAI are: • To manage the airports, the civil enclaves and the aeronautical communication stations efficiently; • To provide air traffic service and air transport service at any airport. (3) AAI may undertake various activities specified in Section 12 (3) of AAI Act, as required from time to time to achieve the above objective such as: • Plan, develop, construct and maintain runways, taxiways, aprons and terminals and ancillary buildings at the airports and civil enclaves; • Establish airports or assist in the establishment of private airports by rendering such technical, financial or other assistance which the Central Government may consider necessary for such purpose; • Plan, procure, install and maintain navigational aids, communication equipment, beacons and ground aids at the airports and at such locations as may be considered necessary for safe navigation and operation of aircrafts; • Provide air safety services and search and rescue, facilities in co-ordination with other agencies; • Establish and maintain hotels, restaurants and restrooms at or near the airp....
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....ity of India to M/s. Adani Lucknow International Airport Limited is treated as supply as going concern and covered in clause 4 of schedule II of CGST Act viz-a-viz UPGST? (3) Whether the transfer of business by M/s. Airports Authority of India to M/s. Adani Lucknow International Airport Limited is covered under the Entry No. 2 of the exemption notification No 12/2017 - Central Tax (Rate) dated 28-06-2017 issued u/s Section 11 of CGST Act 2017? (4) If the answer is negative, then whether GST is leviable on the transfer of Existing assets ("RAB"), Aeronautical Assets, non-aeronautical assets and Capital work in progress by M/s. Airport Authority of India to the M/s. Adani Lucknow International Airport Limited? (5) Whether the aforesaid transfer of asset be treated as services and the classification for the same? (6) Whether the concession fees paid by M/s. Adani Lucknow International Airport Limited to M/s. Airports Authority of India be treated as consideration for transfer of business? (7) Whether GST is applicable on Monthly/Annual concession fees charged by the Applicant on the M/s. Adani Lucknow International Airport Limited? If yes a....
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....ns and exercise the rights of selected bidder including the obligation to enter into Concession agreement. (6) After receipt of security clearance from Ministry of Home Affairs, GOI through MOCA, Applicant has accepted the request of the concessionaire and entered into an Concession Agreement dated 14.02.2020 between the Applicant and the Concessionaire for Operations, Management and Development of Airport through Public Private Partnership subject to the terms of the agreement. (7) In accordance with and subject to the provisions of the Agreement and applicable laws, the applicant has granted Concessionaire the exclusive right, lease and authority to operate, manage and develop the Airport for a period of 50 years commencing from the Commercial Operation Date [Clause 15.1.1]. (8) The Scope of the Project is covered under Clause 2.1 of Article 2 of the agreement as under- (a) design, development, financing, construction, upgradation and expansion of the Airport in a phased manner, on the Site and as per the requirements broadly set forth in Schedule A and. Schedule B together-with provision of respective project Facilities as specified in schedule B, and in confor....
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....Base ("RAB") i.e. estimated depreciated value of Investments made by the Applicant in the Aeronautical Assets at the airport as on 31st March 2018. (As per Clause 28.11.3 of the Concession Agreement which is subject to adjustment as per Clause 28.11.3(a) and 28.11.4). * Rs. 4,93,00,000/- towards Estimated Initial Non-Aeronautical Investments i.e. estimated depreciated value of investments made by the applicant towards development of the Non-Aeronautical Assets at the Airport as on 31st March 2018. (As per Clause 28.12.1 and 28.12.2) which is subject to adjustment as per Clause 28.12.3 and 28.12.4 of the Concession Agreement. (One time payment) * Actual amount incurred by AAI in respect of contracts relating to Work-in-Progress as on the Commercial operation Date ("COD") as per Clause 6.4.5 of the Concession Agreement. Reimbursement of salaries incl. of other cost paid to employees of AAI having designation of Asst. General Manager and below during the Joint Management Period and deemed deputation period as per Clause 6.5.4 of the Concession Agreement. Subject to the select employee cost i.e. clause 6.5.4 of the concession agreement, the concessionaire sha....
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.... but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply". Therefore, to be called as goods, it has to be movable property. As business cannot be said to be movable, transfer of business cannot be said to be a transfer of goods. (17) Now the next question arises is whether the transfer of business will come under the purview of definition of services. Section 2 (102) of the CGST Act defines 'services' as: "'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." As per the definition of services, anything other than goods is called a service. Therefore the above transaction of transfer of business will be supply of services. (18) It is worth noting that Section 7(1A) of the CGST Act provides a reference to Schedule II of the CGST Act which provides for the classification of the underlying tran....
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....the word 'transfer'. Given that there is no definition of 'transfer', two views are possible. The first view is that it could mean an outright sale. The second view could be that it may not necessarily mean outright sale because if the intention of the legislature was to exempt sale of going concern, it could have used the term sale. However, it has used the word transfer of going concern to be an exempt transaction. (23) In the present case, there is transfer of business of operating, managing and developing of the airport for a period of 50 years as per clause 3.1.1 of the concession agreement. The rights of the concessionaire shall lapse after the said period and will be transferred back to the applicant as mentioned in clause 36.1 of the agreement. Hence, it can be said that there is temporary transfer of business. (24) However, in exemption entry 2 of the Notification No.12/2017 -Central Tax (Rate) dated 28 June 2017, there is no specific mention to cover only permanent transfer. Hence, it can be concluded that even temporary transfers are covered in the said entry. It is settled law that the words shall be interpreted with its literal meaning. (25) cl....
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....ious definitions of the term transfer are summarized below for ready reference: Arms Act. 1959 Section 2 (1Xk) Transfer with its grammatical variations and cognate expressions, includes letting on hire, lending, giving and parting with possession. Foreign Exchange Management Act 1999 Section 2(za) Transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien. Prevention of Money Laundering Act, 2003 Section 2(za) Transfer includes sale, purchase, mortgage, pledge, gift, loan or any other forms of transfer of right, title, possession or lien. Rashtriya Ispat Nigam Ltd. vs Commercial Tax Officer, Company Circle, Visakhapatnam [(1990) 77 STC 182(AP)] - Andhra Pradesh High Court "The essence of transfer is passage of control over the economic benefits of property which results in terminating rights and other relations in one entity and creating them in another. While construing the word "transfer" due regard must be had to the thing to be transferred." This ruling was confirmed by Supreme Court [Refer State of An....
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....nt case, the above test is satisfied because, even after transfer, concessionaire will be in position to manage, operate airport and undertake the functions as were undertaken by applicant. Moreover, there will not be any interruption in the operations of the airport on account of the underlying transaction. Hence, it can be said that there is a going concern. (31) The clause 3.1.1, 3.1.2 and 16.1.1 of concession agreement reflects that the Business Arrangement between the AM and concessionaire has been set in place for 50 years, which is for a forseeable future spanning 5 decades. (32) The business arrangement between the AAI and concessionaire satisfies the concept for foreseeable future. Hence it is clear that the underlying transaction involves transaction relating to "a going concern for a foreseeable future. (33) Now the third question arises is whether the transfer is a whole or an independent part thereof. In the present case the applicant is not transferring the entire business, however the applicant is transferring its independent unit i.e. Chaudhary Charan Singh International Airport. Hence, it becomes necessary to determine whether operation of the airport can ....
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....h African Airways (Pty) Ltd and Others MANU/SACC/0030/2011, while interpreting the provision o, Section 197 of Labour Relations Act, it was held that transfer of operations of airport from first person to second and subsequently from second person to first amounts to transfer of business by one person to another as a going concern. b. In case of Robinson Family Limited vs. the Commissioners for Her Majesty's Revenue and Customs t20121 UKFTT 360 GC), Hon'ble United Kingdom First Tier Tribunal has held that transfer of property by way of lease for the letting business amounts to transfer of a going concern. (38) Therefore the applicant submits that a view can be taken that the transaction amounts to services by way of transfer of a going concern, as a whole or an independent part thereof which is covered in the entry 2 of the exemption Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017. (39) As per the concessionaire agreement, apart from a lump sum consideration, monthly concession charges would also be paid by the Company to AAI. Thus it can regarded that the entire arrangement as one and covered within the meaning of transfer of going concern and....
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.... (44) Attention is drawn to the Entry 49 of the List II of Seventh Schedule of the Constitution of India, which empowers only the state government to levy any tax on land which is produced hereunder: "49. Taxes on Land and Buildings" (45) Applicant is of the view that a long term lease for a period exceeding 30 years tantamount to Sale of the immovable property since the lessor is deprived of the right to use, enjoy and possess the property once the said lease has been granted. (46) The applicant submits that if the monthly/ annual fees are considered to be consideration for transfer of business over and above the initial/ one time payments then the exemption shall be available and thus Navi Mumbai Builder's Association v. Union of India is distinguishable. (47) The applicant submits that it receives reimbursement of property tax, water tax, electricity etc payable from the concessionaire. The applicant submits that the said reimbursements are in nature of pure agents and thus cannot be treated as supply under section 7 of the CGST Act. (48) The applicant also raises invoice for emoluments of various employees of AAI engaged by the concessionaire i.e. "Ad....
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.... (6) concession fee paid by M/s Adani Lucknow International Airport Limited to AAI may be considered as transfer of business. (7) Explained as above in point no. 3 (8) Explained as above in point no. 6 (9) Explained as above in point no. 6 7. The applicant was granted a personal hearing on 09.05.2022 which was attended by Shri Hem Chhajed, CA/Authorized representative. During Personal hearing, he reiterated the submissions made in the application of advance ruling. DISCUSSION AND FINDINGS- 8. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST t would also mean a reference to the same provision under the UPGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the 'CGST Act'. 9. We have gone through the Form GST ARA-01 filed by the applicant and observed that the applicant has ticked following issues ....
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....viable on the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Lucknow International Airport Limited ? If yes at what rate? (9) Whether GST is applicable on the reimbursement claimed of Municipal tax, Property Tax and Water Charges by the Applicant from M/s. Adani Lucknow International Airport Limited? If yes at what rate? (10) Whether any reversal is required in accordance with section 17 (2) / (3) of CGST Act viz-a-viz UPGST Act? 11.1 Now we proceed to examine as to whether the transfer of business by the Airport Authority of India to the M/s. Adani Lucknow International Airport Limited be treated as Supply u/s. 7 of the Central Goods and Service Tax Act, 2017 ("CGST") viz-a-viz Uttar Pradesh State Goods and Service Tax Act, 2017 ("UPGST")? 11.2 As per Sec. 7(1) of CGST Act, 2017, "supply" includes- (a) 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; ................ As the definition of supply covers transfer, the acti....
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....such, for transfer of business to be classified as 'transfer of going concern'- (a) business should be continued for a foreseeable period. (b) there is no intention to liquidate the business and there should be continuity of the same business by the transferee as was being carried on by the transferor. (c) assets and liabilities being transferred constitute a business activity capable of being run independently. 12.5 Therefore, for answering the question no. 2, it is necessary to examine as to whether business arrangement entered vide Concession Agreement dated 14.02.2020 is transfer of Going concern or otherwise 12.6 As per submissions made by the applicant, it has been observed that- 12.6.1 the Airports Authority of India has decided to invite bids for undertaking the operations, management and development of certain airports on a public private partnership basis under Section 12A of AAI Act, 1994. 12.6.2 Applicant while prescribing technical and commercial terms and conditions for operations, management and development of the Chaudhary Charan Singh International Airport (herein after referred as "Airport") invited proposals by Reque....
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....ls, restaurants and restrooms at or near the airports as per Section 12(3)(f) AM Act has also been transferred to SPV. (d) the statutory function of the AAI that it may undertake any other activity at the airports and the civil enclaves in the best commercial interests of the Authority including cargo handling, setting up of joint ventures for the discharge of any function assigned to the Authority as per Section 12(3)(r) AAI Act has also been transferred to SPV. (e) The city side development activities are statutory functions assigned to AAI vide the AAI Act which has also been transferred to SPV. (f) the scope of the project includes operations, management and development of the Airport. 12.9 We find that as per Article 16.2 and 16.3 of the agreement, the SPV shall assume control of all Aeronautical Assets, Non Aeronautical assets and Terminal Building on the commercial operation date (hereinafter referred as 'COD'). Further, we find that as per Article 16.1.1 of the agreement, all revenues, receipts, expenditure and other financial transactions for and in respect of the Airport shall be deemed to be transferred from the AAI to SPV on COD and all....
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.... Allahabad Bank Case (supra) also, the Supreme Court acknowledged the need to sell a company as a going concern on the basis to preserve the interests of the workforce of the company. 12.15 We find that the Authority of Advance Ruling of Gujrat also vide Advance Ruling No. GUJ/GAAR/R/46/2021 dated 27.08.2021 passed ruling that the business arrangement between AAI and SPV merits to be covered under transfer of going concern. 12.16 As such, we are of the view that the business arrangement between AAI and SPV vide Concession Agreement dated 14.02.2020 is squarely covered under transfer of going concern. 12.17 The applicant has also sought also as to whether transfer of business by Airports Authority of India to M/s. Adani Lucknow International Airport Limited is covered in clause 4 of schedule II of CGST Act viz-a-viz UPGST. The said para 4 of Schedule II are reproduced below: Para 4. Transfer of business assets: (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, such transfer or disposal is a supply of goods by....
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....06-2017 issued u/s Section 11 of CGST Act 2017. 13.2 The Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 reads as under- In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intrastate supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under subsection (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:- Table Sl.No. Chapter, Section, (per Heading, cent.) Group or Service Code (Tariff) Description of Services, Rate Condition (1) (2) (3) (4) (5) 2 Chapter 99 Services by way of transfer of a going concern, as a whole or an independent part thereof Nil Nil ....
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....hority of India to the M/s. Adani Lucknow International Airport Limited?' As the answer of previous question is not negative, there is no need to answer the said question. 15. The next question of the applicant whether the aforesaid transfer of asset be treated as services and the classification for the same? As already discussed in question no. 2 &3, the transfer of asset is part of transfer of going concern as such ruling is not required on the said question. 16. The next question of the applicant is as to whether the concession fees paid by M/s. Adani Lucknow International Airport Limited to M/s. Airports Authority of India be treated as consideration for transfer of business? Consideration for transfer of business may be as per the terms and conditions of the Contract and there is no restriction on consideration being upfront/ one time/ in instalments. Concession fees is payable by SPV to AAI during the concession period, calculated on a formula based on passenger footfall. The same is part of consideration for transfer of business assets. 17. The next question of the applicant is as to whether GST is applicable on Monthly/Annual concession fees charged by the Appl....
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.... (v)- It is clarified that the liability of the Concessionaire under this Clause 6.5.5 shall stand reduced to the extent of the Accepting Employees. 18.3 A Simple purview of the points of agreement clearly establishes that payment of salary to the staff (in this case Select Employees) is not the responsibility of the recipient of this service, rather it is the sole responsibility of the AAI to pay emoluments to their Staff. Para 6.5.5 (ii) absolves the Adani Lucknow International Airport Limited (SPV) from paying emoluments to the manpower which is engaged in providing their services in operation of the airport and this manpower can demand or and will receive their emoluments from the AAI only. And para 6.5.5 (iii) makes it imperative upon the recipient of service to pay interest to the Authority at a rate equal to 2% (two percent) above the Bank Rate in case of delay in payment of reimbursement to AAI. Hence this is not case where payment of emoluments to AAI is a part of transfer of business as a going concern, rather it is the supply of manpower services by AAI to SPV. 18.4 This situation is further elaborated in following Paras of the agreement:- 6.5.6- At a....
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....n Period, all Select Employees opting to continue employment with the Authority or those who have not received Employment Offers, shall continue their employment with the Authority and shall be transferred out of the Airport and redeployed by the Authority. 18.8 Consequent upon the above deliberation and declaration, it is crystal clear that the deemed deputation period is not a one way road to transfer of business as a going concern, because the employees of AAI may opt or may not opt for employment under the SPV and there may be circumstances in which they do not receive employment offers or they continue their services with the AAI and in this condition they will be redeployed by the AAI and removed from the airport which will be managed and operated by the SPV. Thus there is no case for exemption on the reimbursement of emolument of employees to the AAI as services of manpower supply is provided by one distinct entity to another distinct entity where transfer of business as a going concern is not a precondition nor this supply of manpower services is a corollary to the agreement for transfer of business for the operations management and development of the airport. 18.9 In....
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....ng Concern Service' and the same is not covered in clause 4 of schedule II of CGST Act viz-a-viz UPGST. Question 3- Whether the transfer of business by M/s. Airports Authority of India to M/s. Adani Lucknow International Airport Limited is covered under the Entry No. 2 of the exemption notification No 12/2017 - Central Tax (Rate) dated 28-06-2017 issued u/s Section 11 of CGST Act 2017? Answer 3- The subject Supply is covered vide Entry No. 2 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017. Question 4- If the answer is negative, then whether GST is leviable on the transfer of Existing assets ("RAB"), Aeronautical Assets, non-aeronautical assets and Capital work in progress by M/s. Airport Authority of India to the M/s. Adani Lucknow International Airport Limited? Answer 4- Ruling not required, in pursuance to Ruling at serial no 3. Question 5- Whether the aforesaid transfer of asset be treated as services and the classification for the same? Answer 5- Ruling not required, in pursuance to Rulings at serial no 2 & 3. Question 6- Whether the concession fees paid by M/s. Adani Lucknow International Airport Limited to M/s. Airports Authority of India ....