9911796707
TMI Blog2014 (4) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... income accrued to assessee should be taxed and not the entire lease rental as assessed by him and consequentially withdraw the claim of depreciation on leased assets?" 2. The assessment order herein arises out of the common order of the Income Tax Appellate Tribunal relating to the assessment years 2002-03;2003-04;2004-05;2005-06;2006-07;2007-08 and 2008-09. 3. The assessee is stated to be in the business of bill discounting, hire purchase and leasing, mutual funds and insurance agency. In the returns filed for the respective assessment years, the assessee offered interest portion alone in the leasing transaction as its income. It is stated that as per the amended Accounting Standard 19 dated 01.04.2001, only the income portion of the lease rental shall be offered as income and the lessor cannot claim depreciation. Accordingly, the assessee treated the lease transaction as financial lease transaction. However, in the returns filed, the assessee claimed depreciation on the leased assets stated to be based on the CBDT Circular dated 9th February 2001, wherein it was stated that even in financial leases, the lessor could claim depreciation. The Assessing Officer, however, viewed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lease agreement came to the conclusion and that the said order of assessment did not call for any interference and held that the entire lease rent received by the assessee is taxable at its hands. Consequently, the appeal was dismissed. 5. Aggrieved by this, the assessee went on appeal before the Income Tax Appellate Tribunal. The Tribunal pointed out that once the depreciation was claimed by the assessee on the leased assets, it was imperative that the whole of the lease rental was liable to be shown as income. Whatever be the Accounting Standard followed by the assessee, it was not open to the assessee to contend that lease rentals were not to be considered as income; but at the same time, claimed depreciation on the leased assets. Thus, the Tribunal held that the treatment given by the Assessing Officer confirmed by the Commissioner of Income Tax (Appeals) could not be faulted. Thus, the Tribunal confirmed the order of assessment. Aggrieved by this, the present appeals have been filed. 6. Learned counsel appearing for the assessee submitted that the assessee company was engaged in providing finance by way of hire purchase lease. The transactions entered into by them wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall insure the subject of lease and protect it from any risk. Clause 10 of the agreement states that without the prior written consent of the lessor, the lessee shall not make any alterations, additions or improvements to the equipment and all additions, replacements, attachments and improvements of whatever kind or nature made to the equipment shall be deemed to be parts of the property of the lessor and shall be subject to all the terms and conditions of the agreement. Clause 13 speaks about the surrender of the lease equipment upon the expiration of earlier termination of the lease agreement. It also gives the option for renewal on year to year basis on mutually agreed terms and conditions. Clause 15 deals with payment by lessor and Clause 20 is to the effect of the expiration of the lease, which stipulates that on expiration of the lease term, if the lessee fails to deliver the equipment to the lessor in accordance with any direction given by the Lessor, the lessee shall be deemed to be the monthly tenant of the equipment and upon the same terms expressed in the agreement and the tenancy should be terminated by the lessor immediately upon default committed by the lessee by ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the supplier to the location of the assessee thus by itself, will not make the agreement, the Finance Agreement and the terms thus seen are matters of arrangement between the parties, which in effect clearly points out that it is only a simple lease agreement and not a finance agreement. As has been contended by the Revenue, even in the calculation of the lease rental, the monthly repayment of the rent and the number of months of the lease rent payment is also clearly stated in the agreement. 11. In the circumstances, we do not think any justifiable ground to accept the case of the assessee that based on Accounting Standard 19 only that the agreement in question was entered into by the assessee and it has to be treated as the finance agreement. 12. As far as the reliance placed on the decision of the Delhi High Court [cited supra] is concerned, we do not find that the assessee could draw any strength from the said decision. The Delhi High Court discussed about the distinction between the "finance agreement" and the "operational lease" with reference to the decisions of the Apex Court and ultimately remitted the case for fresh consideration. As had been pointed out in the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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