TaxTMI 
TaxTMI 
2012 (10) TMI 59
X X X X Extracts X X X X
X X X X Extracts X X X X
....se, was justified in allowing the claim of expenses on lease-rent as revenue expenditure when lease agreement seen in proper perspective pointed to an agreement of hire-purchase rather than an agreement of lease which necessiated the expenditure to be treated as capital expenditure? B. Whether on the facts and in the circumstances of the case the lease agreement was not hire purchase deal in disguise made by the Assessee for the purpose of avoidance of tax? 3. Learned counsel for the appellant submitted that the lease agreement is a camouflage and in fact it is a hire-purchase agreement. The Assessing Officer has given cogent reason for holding the agreement to be hire-purchase agreement and, therefore, was justified in rejecting the clai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is not completed. It is also submitted that sale is not certain and it cannot be presumed that the assessee shall buy the Air Conditioner upon expiry of the term of lease and it will choose to buy in future then sale will complete in any future year and not in current year.. 5. Learned counsel for the respondent-assessee for education subsidy relied upon the judgement of the Bombay High Court delivered in the case of Mahindra & Mahindra Ltd. Vs. Commissioner of Income Tax reported in (2003) 128 ITR TAXMAN 394 (BOM.) wherein the same issue was involved and the Bombay High Court has held that in a case where the assessee company has paid certain amount to a educational society which runs the school in which children of the employees of the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ur, India, there is reference of Halsbury's Laws of England which is quoted hereunder :- "The test is whether there is or there is not, a binding obligation on the part of the hirer, to buy. If the agreement does not amount to a binding obligation on the hirer to complete the transaction as a purchase but is merely an agreement to hire with an option on the part of the hirer to purchase, it is not an agreement to buy within the Factors Act, 1889, or the Sale of Goods Act, 1893 and a purchaser or pledgee from the hirer can in such case obtain no better title than the hirer had, except in the case of a sale in market overt." "If there is reserved to the hirer power to return the goods, either during the hiring thereby determining the bailme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal that upon the true construction of the agreement Brewster had "agreed to buy". It was held that there was no obligation on Brewster to buy it." 8. The said passage and the commentary also indicate that there is a lot of difference between the purchase, hire-purchase and lease agreement. In this case, we are of the considered opinion that the terms indicate that the provider of the machines was required to maintain the machines and, therefore, he was entitled to take the rent also as per the terms of the agreement, and the petitioner, in the any relevant year could not have exercised his right to purchase the Air Conditioner, his right to purchase the Air Conditioner could have been exercised after expiry of certain period of time. Ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al fee in respect of abandoned project Rs. 2,57,335/- 2. Old capital work in progress abandoned Rs. 46,379/- 3. Cost of damaged cabinets Rs. 12,776/- 13. The company's contention was that the company had entrusted the study and design, detail working and drawings of a multi-storied (12 storied) building to a party names Acme Compartments Pvt. Ltd., Calcutta. After the preliminary work was undertaken, the project was to be abandoned due to adverse soil and other adverse conditions at the proposed site. The assessee company had to incur some expenditure on preliminary work. It was said that all designs, drawings etc. became useless and that was why the expenditure was written off. After narrating the detail facts in respect of the abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed and we have narrated the facts of the case including the break-up of the expenditure which includes the fee of Rs. 2,57,335/- paid to the Architect and some expenses of Rs. 46,379/- incurred on old capital work in progress which was abandoned and cost of damaged cabinets and that too, amounting to Rs. 12,776/-, total expenditure including all three of the heads is Rs. 3,16,490/-. It is not in dispute that the project could not be accomplished because of the reason that the place where it was to be undertaken had a poor quality of soil and all the construction already damaged. The other articles bought by the assessee also got damaged and, therefore, in that fact situation, the Tribunal was fully justified in holding that such expenditure....