TMI Blog2011 (8) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 The brief facts of the case are that the assessee is partnership firm. It filed its return of income for the relevant assessment year on 21-10-1997 showing a total income of ₹ 1,50,630/-. During the assessment proceedings u/s 143(3), the AO observed that the assessee has paid lease rentals to the extent of ₹ 11,74,800/- to its sister concern towards leased machineries. And the assessee was asked to file the lease agreement and also the reasons for the payment of lease rentals. The assessee has stated in its reply that all the leased machinerieswere used in executing the contract work at sites and therefore, the payments of lease rentals are to be allowed in full. Copies of lease agreements were also filed. From the said l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s grounds of appeal that the Commissioner has not considered the assessee s grounds ofappeal Nos.5,6 7 before him and also having observed that if it is a fact that the amount paid towards rent has been shown in the hands of the sister concern in income-tax proceedings, then the same has to be allowed to the assessee, and since the grounds 5,6 7 have not been considered by the learned CIT(A), the entire issue raised in the appeal was remanded to the learned CIT(A) with a direction to reconsider the same afresh after giving reasonable opportunity to the assessee. In compliance to the order of the Tribunal, the CIT(A) passed a fresh order confirming the order of the Assessing Officer. 3.2 Aggrieved, the assessee is in appeal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re undisputedly used for the contract business of the assessee. She submitted that the machinery does not become the property of the lessee at any time, but remains the property of the lessor and therefore, it cannot be deemed as hire purchase deal. She submitted that many times businessmen may not be able to make down payment towards purchase of the machinery and therefore, they are taken on lease for which lease rentals over a period of time may exceed the cost of machinery, but that is not a ground for doubting the genuineness of the transaction. 5. As regards the reliance of the AO on the ruling of Apex Court in the case of M/s McDowell Co., cited supra, she placed reliance on the decisions of the Apex Court in the case of Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he drew our attention to the order of the Tribunal, where it is mentioned that the appeal is remanded to the file of the CIT(A) to be decided in accordance with law. Thus, according to her, the Tribunal has directed the CIT(A) to go into the merits of the case and decide the issue in accordance with law. 7.1 Having gone through the order of the Tribunal, we find that in the first round of litigation, the assessee had taken certain grounds of appeal before the CIT(A) which had not been considered by him. The Tribunal in its order has reproduced the groundnos.5,6 7 out of which the ground no.7 reads as under; 7. It should have been appreciated that the lease rentals have been brought to tax in the hands of the lessor as rent and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been considered in detail and minutely and the AO made the disallowance, because the machinery has been purchased by the sister concern of the assessee only for leasing it out to the assessee and the lease rentals exceeded the cost of acquisition of the machinery. The assessee has not produced any evidence to show that it was not in a position to make the down payment necessary for acquiring the machinery. In view of the same, we agree with the finding of the authorities below that the lease rentals cannot be allowed during the relevant assessment year as revenue expenditure. However, if these agreements are considered as a hire purchase agreements, then when the assessee makes the payment of all the instalments, then it shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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