2013 (3) TMI 244 - HC - Income Tax

Disallowance on lease rent - ITAT affirmed the order of CIT(A) in deleting the addition - Held that - Referring to the decision of CIT Vs. Shaan Finance (P.) Ltd (1998 (3) TMI 8 - SUPREME COURT) and Rajshree Roadways Vs. Union of India & Ors (2003 (3) TMI 50 - RAJASTHAN HIGH COURT) the findings of the CIT (A) and the Tribunal, allowing lease rental as business expenditure, not calling for any interference - in favour of assessee.

Summary

Issues:
- Appeals arising from common order of Income Tax Appellate Tribunal regarding assessment years 1996-1997 and 2001-2002.
- Substantial questions of law regarding deletion of addition of lease rent by the AO.
- Nature of lease agreement and allowance of lease rentals as business expenditure.

Analysis:
The High Court dealt with two appeals arising from a common order of the Income Tax Appellate Tribunal concerning assessment years 1996-1997 and 2001-2002. The appeals raised substantial questions of law related to the deletion of addition of lease rent made by the Assessing Officer (AO). The court admitted both appeals based on identical substantial questions of law, differing only in the amount involved. The court framed a substantial question of law for each appeal, questioning the Tribunal's decision to dismiss the appeal of the revenue and confirm the order of the Commissioner of Income Tax (Appeals) regarding the deletion of the lease rent addition. The court considered the nature of the lease agreement, specifically whether it was a financing or operational lease, treating the costs of leased assets as a loan amount and lease rental as interest.

In one of the appeals concerning the assessment year 2001-2002, the court noted a similar question as in the other appeal, with a different amount involved. The court referenced a previous order, Appeal No.54/2007, which addressed the same questions about the nature of the lease and the allowability of lease rentals as business expenditure. The court mentioned that a separate judgment was delivered on Appeal No.54/2007, citing decisions of the Hon'ble Supreme Court and the High Court. The court held that the findings of the Commissioner of Income Tax (Appeals) and the Tribunal, allowing lease rental as business expenditure, did not require any interference.

The court stated that the considerations, reasonings, and observations in the judgment delivered in Appeal No.54/2007 were equally applicable to the present cases. The court ultimately concluded that no interference was necessary in the findings on the mixed question of law and facts as rendered by the Appellate Authority and the Tribunal. The court emphasized that the lease rentals paid on the hired machinery were allowable as business expenditure for the relevant years. Consequently, following the decision in Appeal No.54/2007, the court dismissed both appeals in the same terms, without imposing any costs.