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2019 (7) TMI 1532 - AT - Income TaxLease rentals - disallowance of principal portion of the financial lease expenses and treating the same as capital expenditure - HELD THAT:- The intangibles were taken on lease under the master operating lease agreement the same was decided by the lessor and lessee through rental schedule. M/s. SREI Equipment Finance Ltd. was not having any assets for the purpose of giving on lease to the assessee at the time of agreement, this observation of the CIT(A) is contrary to the records available before us. The master operating lease agreement was executed on 22.12.2009 which covers all future leases of equipments with M/s. SREI Equipments and the assets which were taken under the master agreement and the same were sold by the assessee to the lessor vide agreement dated 29.12.2009. The assets were developed by the assessee and the same are customize to the peculiar requirements of the assessee which enabled it to operate its business across the country. Thus any modification in the assets could have hampered the entire business of the assessee and resulting into huge losses is correct. The CIT(A) should have looked into the total installment amount which should have been allowed to the assessee during the first appellate proceedings which was not done by the Assessing Officer as well as by the CIT(A). The reliance of the Hon’ble Supreme Court decision in case of Virtual Soft Systems [2018 (4) TMI 1472 - SUPREME COURT] will not be applicable in the present case as in the said case it is an admitted case of finance lease transaction and the department was disputing the accounting treatment. But the facts are different in the present case. In the present case the lease rentals constitutes the real business income which was not disputed by the Revenue. Therefore, the CIT(A) as well as the Assessing Officer were not correct in making addition on account of disallowance of principal portion of the financial lease expenses and treating the same as capital expenditure. Thus, the assessee be granted the benefit of the financial lease expenses
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