2026 (3) TMI 1289 - SCH - Income Tax

Colourable lease transactions and incomplete transfer of ownership can justify disallowance of lease rentals.

Lease rentals on computers and accessories may be disallowed where the arrangement is found to be a colourable device rather than a genuine lease. The ... Disallowance of lease rentals on the computers and accessories - Genuine lease versus colourable device - constructive sale / paper transaction - transfer of ownership as contemplated by Section 54 of the Transfer of Property Act - deductibility of lease rentals - Assessing Officer's power to disallow sham transactions As held by HC [2011 (4) TMI 108 - MADRAS HIGH COURT] nowhere it is brought to our notice that the computers were transferred from the assessee to the purchaser, but, on the other hand, the assessee brought the computers to his premises by virtue of the lease entered into between the assessee and the purchaser. The computers are intact in the premises of the assessee, who is a seller. Therefore, the sale is not complete as defined under Section 54 of the Transfer of Property Act. HELD THAT:- The appeal was dismissed, the Court holding that no case for interference with the judgment of the High Court was made out. Outcome: Appeal dismissed [No detailed order].