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2019 (3) TMI 1100 - AT - Service TaxLevy of service tax on leasing/hire purchase transactions - Operating lease or Finance Lease? - Banking and other Financial Services - vires the provisions of Articles 14, 19(1)(g), 265, 366, (29A), Entry 54, List-II, Schedule VII of the Constitution of India - Scope of legislative competence of Parliament - Held that:- After determination of the lease in an Operating Lease, the lessee has to return the equipment/vehicle to the lessor. The lessee is not entitled to own or does not have an option to own the asset at the end of the lease period, which is the distinguishing feature between an Operating Lease and a Financial Lease - Ld. Counsel for the appellant has also produced the financial statements of the appellant-company during the period 2010-11. As per Accounting Standards (AS-19), the Financial Lease is shown as current assets. Further, the Operating Lease is shown under the category of fixed assets. This is because, the equipment which are given on lease under the category of Operating Lease always remain in the ownership of the lessor (appellant-company). As per the documents, the transactions fall under the category of Operating Lease only. The allegation of the Department that the agreements are actually Financial Lease and that Operating Lease is only a misnomer, is factually wrong. The issue as to whether Operating Lease is subject to levy of service tax has been analyzed by the Tribunal in the case of M/s. Lease Plan India Ltd. [2018 (1) TMI 717 - CESTAT NEW DELHI], where it was held that the lease arrangements on which the respondent–assessee discharged VAT are operating leases and are not liable to service tax - Following the said decision, it can be held that the lease agreements are in the nature of Financial Leasing, is incorrect and hence, the demand cannot sustain - impugned Order is set aside - appeal allowed - decided in favor of appellant.
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