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TMI Blog2012 (7) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... This will not satisfy the need and requirements of Section 10(15A). The use of the word “lease” is significant and signifies transfer of rights by the lessor to the lessee in praesenti, i.e., on or before 1st April, 2007, which is not possible unless the aircraft is in existence - A contract for a lease is to be distinguished from a lease because lease is actually a conveyance of interest in the goods/property, whereas a contract for lease is merely an agreement that such conveyance shall be entered into or begin/operationalize on a future date - writ petition dismissed - against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... (15A) of the Income Tax Act, 1961 is hereby rejected." 6. The contention of the writ-petitioners is that rejection/impugned orders are bad as Section 10 (15A) of the Act does not postulate and mandate an existing aircraft. The Section operates when an agreement to acquire an aircraft on lease is entered into or executed. The aircraft need not be in existence on the date when the agreement is entered into and the lease period can begin from a future date. It is the date of the agreement which is material and determinative, on whether an assessee is entitled to benefit of Section 10 (15A) of the Act. 7. In order to appreciate the contention, we have to examine and interpret Section 10(15A) of the Act, which reads:- "10. Incomes not included in total income.-In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- xxxx (15-A) any payment made, by an Indian company engaged in the business of operation of aircraft, to acquire an aircraft or an aircraft engine (other than a payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease from the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctober, 2005 and then 1st April, 2006 and lastly to 1st April, 2007. The last amendment was made by Finance Act, 2006, which was passed by the Parliament on 18th April, 2006. The petitioners, therefore, were fully cautious and aware of the sunset clause in the form of the date in the proviso and when the agreements in question were entered into and that after the particular date, the benefit/advantage would not be available. 10. It is now important to refer to the factual matrix of each writ petition. W.P.(C) 8761/2010 (filed by Go Airlines (India) Pvt. Ltd.) 11. The petitioner claims that it had entered into an agreement dated 17th July, 2006 with Airbus S.A.S., a French company for purchase of 10 aircrafts, which were to be manufactured and then sold in future, between the period August, 2007 to June, 2009. Delivery schedule was subject to clauses relating to delay and alteration of the date of supply. The clauses for postponement of supply were invoked. The petitioner states that on 28th March, 2007 it had entered into two aircrafts lease agreements with Osprey Aircraft Leasing Limited (Fifteen), Cayman Islands and Osprey Aircraft Leasing Limited (Sixteen), Cayman Islands in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010, the application of the petitioner was rejected. W.P.(C) 6438/2011 (filed by Kingfisher Airlines Ltd.) 15. The petitioner had entered into an agreement dated 18th July, 2006 with International Lease Finance Corporation, a USA based company for taking a new Airbus on rent with a schedule date of delivery in October, 2007. The said aircraft was to be manufactured. On 13th October, 2006, an application for exemption was filed by the petitioner under Section 10 (15A) of the Act. Subsequently, documents and clarifications were furnished by the petitioner on 17th December, 2007 and 7th March, 2008. On 23rd September, 2009, the application was rejected. The petitioner got 'No Objection Certificate' for import of the aircraft from the Director General of Civil Aviation on 4th October, 2007 and the bill of entry of the aircraft is dated 17th October, 2007. 16. Section 10 (15A) has been quoted above. Section 10 (15A) stipulates that while computing total income of a non- resident, payments made by an Indian company engaged in the business of operation of aircrafts to acquire an aircraft or an aircraft engine on lease from the non-resident shall be excluded from his total income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified, it cannot be transferred or conveyed. Once a property comes into existence and can be identified, it can be made subject matter of conveyance, which is operative from a future date. When property is not in existence, the contract operates as an agreement to be performed in future. It can be enforced as soon as the property comes into existence. 20. Sections 4 and 6 of the Sales of Goods Act, 1930 are as under:- "4. Sale and agreement to sell.- (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods in transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale, is a contract plus a conveyance. Thus, by an agreement to sell a mere jus in personam is created, by a sale a jus in rem is transferred. Where goods have been sold, and the buyer makes default in payment, the seller may sue for the contract price, but where an agreement to buy is broken, usually the seller's only remedy in an action for unliquidated damages. Similarly, if an agreement to sell be broken by the seller, the buyer has only a personal remedy against the seller. The goods are the property of the seller and he can dispose of them. They may be taken in execution for his debts, and if he becomes bankrupt they pass to his trustee in bankruptcy. But if there has been a sale, and the seller breaks his engagement to deliver the goods, the buyer has not only a personal remedy against the seller, but also the usual proprietary remedies in respect of the goods themselves, such as the actions for conversion and detinue. Again, if there be an agreement for sale and the goods perish, the loss as a rule fall on the seller, while if there has been a sale the loss, as a rule, falls upon the buyer." 24. Similarly, in Benjamin's Sale of Goods, 8th Edition it has been elucidated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erationalize on a future date (see observations of the Supreme Court in State of Maharashtra Vs. Atur India (P) Ltd. (1994) 2 SCC 497) wherein Woodfall on Landlord and Tenant has been quoted). 27. On reading of Section 10 (15A) of the Act it is apparent to us that for this Section, an Indian company engaged in the business of operation of aircrafts should have acquired aircraft(s) on lease under an agreement. It is only when an Indian company acquires aircraft on lease under an agreement, which was entered into on or before the 1st day of April, 2007, benefit under the said Section is available. Thus, the twin conditions; that the agreement should have been entered into on or before 1st April, 2007 and there should be acquisition of aircraft under the lease before the said date, have to be satisfied. If the two conditions are not satisfied, benefit under the said Section cannot be granted. To acquire an aircraft on lease in future after 1st April, 2007, will not meet the requirement of acquiring an aircraft on lease. A lease, which is to operate and begin after 1st April, 2007 would not qualify for advantage and benefit under the said section. The intention behind the said proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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