TaxTMI 
TaxTMI 
2014 (1) TMI 281
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....year under consideration, the assessee entered into a Metro Link Bus Service Lease Agreement dated 24-10-2007 with Delhi Metro Railway Corporation Ltd. (for short DMRC Ltd. ) for plying of feeder buses in Delhi to provide connectivity to Metro Stations. Alongwith Metro Link Bus Service Lease Agreement, a separate vehicle lease agreement for each vehicle was also entered into between the parties. Under the said agreement, the assessee acquired 87 buses from M/s. DMRC Ltd. for using and operating for a period of 05 years. The cost of each bus was Rs. 9,16,046/- and the total cost of these buses were amounting to Rs. 7,96,96002/- which was capitalized by the assessee in its books of account and the assessee claimed depreciation. The assessee was required to make upfront payment of 15% of the cost of each bus and balance in equal monthly instalment (for short EMI) for a period of 60 months calculated with yearly interest @ 12.5%. The assessee claimed interest charges in EMI and debited in the profit and loss account. The AO disallowed the claim of the assessee regarding depreciation on the cost of the buses on the ground that ownership of the buses will be transferred to the assessee o....
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....e vehicle insured and repaired. In case the repairs are done by the DMRC Ltd., the assessee shall repay the full cost of the repairs. Further the assessee was under the obligation to pay taxes in respect of the vehicle used. The ld. AR has also referred to clause 15(a) & 15(b) of the vehicle lease agreement and submitted that before purchase of the vehicle, the assessee was to choose the buses to be acquired and take the delivery. Thus the assessee was to enjoy the use of the buses and bear its wear and tear costs. All risks and rewards incidental to the ownership vest with the assessee and not with M/s. DMRC Ltd. He has also referred the preamble of Metro Link Bus Service Lease agreement and submitted that after successful completion of the agreement and full payment of the cost of the buses, the ownership of the buses will be transferred to the operator (assessee), however till that time the ownership of the buses is not transferred in favour of the operator (assessee), M/s. DMRC Ltd. shall be the sole and absolute owner of the buses. Thus there is a mandatory provision in the agreement that on successful completion of the agreement and on full payment of the cost of the buses, t....
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....he agreements entered into by the parties. As per terms of the agreement, the assessee was to operate 87 buses as feeder buses for providing connectivity to the Metro Stations in Delhi. These buses were though purchased by M/s. DMRC Ltd. but the entire cost of the buses was to be recovered from the assessee. Out of total cost, 15% was to be paid by the assessee as upfront payment and balance 85% of the cost of the buses was to be paid in 60 equal monthly instalments calculated with interest rate of 12.5% per annum. Thus it is clear from the terms of the contract that M/s. DMRC Ltd. has facilitated the finance of the buses and to secure repayment of the cost of the buses with interest, the buses would remain in the name of M/s. DMRC Ltd. till the entire repayment is made in 60 instalments. The period of repayment of the cost with interest in instalement and period of agreement is the same i.e. 05 years so that after successful completion of the agreement at the end of tenure of 5 years and full payment of the cost of the buses, the ownership of the buses will be transferred in the name of the assessee. It is well settled proposition of law of construction of documents what is materi....
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.... its wear and tear. It is the lessee who becomes the real owner of the asset. It is the lessee who pays taxes etc. in relation to such asset. The risks and rewards incidental to the ownership vest with the lessee. The features of bailment are absent in such a lease. The lessor simply holds the title of asset as his security till his investment and interest thereon is recouped. The lessor is only a symbolic owner during the period of lease and on the expiry of lease period, even such symbolic ownership comes to an end.'' 2.7 There is no dispute that in the case in hand, the so called lease in question is non- cancellable / irrevocable and there is a fixed obligation on the assessee for repayment of lease money. Further in the case of termination of premature lease, the lessor is entitled to recover his investment with accepted and agree interest. The lease period in the case has been settled which matches to the period of repayment of the cost of the buses in equal monthly instalment. Therefore, the lessor would fully recover the investment in buses with interest during the lease period itself. The primary object and interest of lessor is for recovery of his investment w....