Operating Lease Upheld Under Section 2, Lease Rentals Treated as Rent, Not Interest Income

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....The ITAT upheld that the lease agreement between the assessee (lessor) and the lessee constitutes an operating lease, as ownership of the aircraft remains with the lessor throughout the lease term. The tribunal rejected the Revenue's contention to re-characterize the lease as a finance lease, noting no transfer of ownership and that the economic life of the aircraft extends beyond the lease period. The principle of estoppel was applied, preventing the Revenue from adopting inconsistent positions regarding ownership in similar agreements. Furthermore, following the Special Bench ruling, lease rentals were held to be rent and not interest, negating the applicability of Article 11 of the India-Ireland DTAA. Consequently, the assessee's appeal was allowed, affirming the operating lease characterization and denying the Revenue's claim to treat lease payments as interest income.....