2004 (10) TMI 74 - HC - Income Tax

Lease agreement of aircraft - Petitioner prayed that a direction be issued directing the Central Board of Direct Taxes to reconsider the application under section 10(15A) seeking approval to the lease agreements in respect of the two aircrafts leased to respondent No. 3 company. - It is clear that for getting the benefit of the aforesaid provision, the approval of the agreement by the Central Government is a must. In the instant case, admittedly, there is no approval by the Central Government. - It is contended by the Revenue that petitioner No. 3 was not a party to the agreement. However, it is not for this court to consider all this. It will be for the Central Government to examine these aspects. It is under these circumstances, as no cogent reasons have been given, we quash the impugned orders - We direct the Central Government to consider the application of the petitioners

Summary

Issues:
1. Quashing of orders by the Chairman, Central Board of Direct Taxes
2. Approval for lease agreements under section 10(15A) of the Income-tax Act, 1961
3. Refund of withheld amount under section 195 of the Act
4. Examination of provisions of section 10(15A) of the Act

Quashing of Orders:
The petitioners sought to quash orders dated November 15, 2000, and March 4, 2002, by the Chairman, Central Board of Direct Taxes. The court declined to grant the requested reliefs (i) to (iii) but considered relief (iv) regarding the provisions of section 10(15A) of the Act.

Approval for Lease Agreements:
Section 10(15A) of the Income-tax Act, 1961, was examined, which requires approval by the Central Government for certain payments made by an Indian company for acquiring aircraft on lease from a foreign entity. In this case, as there was no approval from the Central Government for the lease agreements, the court directed the Central Government to reconsider the application submitted by the petitioners within a specified timeframe.

Refund of Withheld Amount:
The petitioners sought a refund of the amount withheld and paid under section 195 of the Act in relation to lease rents paid to the owner of the aircraft. The court did not grant this relief directly but emphasized the importance of Central Government approval for the lease agreements to prevent tax implications.

Examination of Section 10(15A) Provisions:
The judgment highlighted the significance of Central Government approval for agreements falling under section 10(15A) to avoid tax implications for the parties involved. The court directed the Central Government to consider the petitioners' application within a specific timeline and instructed the petitioners to submit a fresh application for approval.

In conclusion, the court disposed of the petition with directions for the Central Government to review the application for approval of the lease agreements, emphasizing the necessity of compliance with section 10(15A) provisions to avoid adverse tax consequences.