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2023 (11) TMI 1050 - AT - Income TaxNature of expenses - Taking computers and vehicles taken on lease - deduction of payment of principal amount as revenue expenditure - disallowing the principal portion of lease rentals paid towards vehicles and computers while computing the business income and treating the same as capital expenditure - registered ownership, insurance and usage of the leased assets are with whom? - HELD THAT:- We find the assessee in the instant case has paid lease rentals for certain assets i.e. vehicles and computers which were taken on lease and claimed the same as a revenue expenditure while computing the income under the head profit and gains from business or profession. AO held that the registered ownership, insurance and usage of the leased assets are with the assessee. Further, the assessee itself has reclassified the computers and vehicles from leased assets to owned assets as per the audited financial statement. He therefore, disallowed the lease rent claimed by the assessee and treated the same as capital expenditure. We find in appeal, CIT (A) NFAC held that the assessee is the owner of the leased vehicles and computers for the year under consideration. According to him, the registered ownership, insurance and usage of leased assets are with assessee. Therefore, the transaction was in nature of finance lease and not operating lease since the assessee has reclassified the leased assets to owned assets in its financial statement as well and is the real owner of the assets. CIT (A) NFAC however, directed the AO to allow interest portion of such lease rentals and allow depreciation on the leased assets after due verification. It is the submission of assessee that merely because the assessee is registered as owner under the Motor Vehicles Act cannot be treated as the legal owner as per the provisions of u/s 2(30) of Motor Vehicle Act 1988 and the same is a deeming provision that creates a legal fiction of ownership in favour of lessee only for the purpose of Motor Vehicles Act. It is also his submission that a perusal of the lease agreement, shows that the lessor is Orix and the assessee is merely the registered owner of the vehicle. We had directed the assessee to file the complete set of lease agreement along with the schedules there to so that the correct facts can be ascertained. Although the assessee has filed the lease agreements, however, the schedules are not enclosed. Since the assessee has not filed the schedules to the lease agreement despite the direction of the Bench and also has not filed the relevant documents pertaining to the purchase of leased assets in subsequent A.Ys, therefore, we are left with no option but to remand back the matter to the file of the AO with a direction to the assessee to file all the lease agreements along with the schedules before the AO. AO is directed to examine the lease agreements afresh and find out as to whether the leased assets are financial lease or operational lease. After ascertaining the above, AO is directed to apply the judgment of ICDS Ltd vs. CIT [2013 (1) TMI 344 - SUPREME COURT]and decide the issue as per fact and law after affording reasonable opportunity of being heard to the assessee. We hold and direct accordingly. The appeal filed by the assessee is accordingly allowed for statistical purposes.
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