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Lease Kinds & Recent Cases

Lease Kinds & Recent Cases. Section 105 of The Transfer of Property Act, 1882 defines Lease Essential elements The parties; The subject matter, or immovable property; The demise, or partial transfer; The term, or period; The consideration, or rent. Lease Asset. Lessor Rent&Premium Lessee.

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Lease Kinds & Recent Cases

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  1. LeaseKinds & Recent Cases

  2. Section 105 of The Transfer of Property Act, 1882 defines Lease Essential elements • The parties; • The subject matter, or immovable property; • The demise, or partial transfer; • The term, or period; • The consideration, or rent. Lease Asset • LessorRent&PremiumLessee Definition Of Lease

  3. method of raising finance to pay for assets, rather than a genuine rental. • Lessee select use/rent Asset • lease • Lessor purchase Different Types of LeasesFinancial Leasing (Capital Lease)

  4. Options Under Financial Lease

  5. the asset is not wholly amortized during the non-cancellable period, if any, of the lease and where the lessor does not rely for his profit on the rentals in the non- cancellable period. • Either party to the lease may termite the lease after giving due notice of the same since the asset may be leased out to other willing leases. • Some of the examples of operating lease are leasing of copying machines, certain computer hardware, world processors, automobiles, etc. Operating Lease

  6. It is a sub-part of finance lease. Asset is sold at the market value on the day. The same asset is then acquired for use under financial lease agreement from the lessor. The Person, thus, receives the sales price in cash, on the one hand, and economic use of the asset sold, on the other. This is a method of raising funds immediately required by lessee for working capital or other purposes. • Sale and leaseback arrangement is beneficial for both lessor and lessee. While the former gets tax benefits due to depreciation, the latter has immediate cash inflow which improves his liquidity position. Person Sells an asset leases it back Party Sale And Lease Back Leasing

  7. Lessor Arranges finance Lessee • Lender Buys and leases Asset Pays lease rentals Lends and recovers Single Investor Lease

  8. tax-oriented lease and is an operating lease. The Lessor owns the leased equipment for the life of the contract. • Lessor Asset • Lessee Owner Tax-oriented Lease (True Lease) lease

  9. Contract hire means agreeing to take control of a car for a fixed period – it’s yours to drive but it is never actually yours to own. • Instead one reaches an agreement with the leasing company to make fixed payments (usually monthly) for the duration of the contractual period. At the end of the contract one returns the car to the contract hire company. • Contract hire payments will be determined by a number of factors. • Firstly, there is the retail price of the car , Then, there is the residual value of the car – that is its estimated worth at the end of the contract taking into account depreciation, mileage, and condition. One then essentially pays the difference between the two figures in monthly instalments. So the higher the residual value of the car, the lower your payments will be. Contract Hire/ Car Leasing

  10. CIT vs. High Energy Batteries (India) Limited (Madras high Court) (May 25, 2012) The Assessee’s purchase of the asset (boiler) from its sister concern was held to be a genuine transaction and was granted the benefit of depreciation. A sale/hire purchase cannot be held void in case of constructive delivery of an asset • Go Airlines Private Limited vs. Union of India (Date of Decision: 10th July, 2012) The exemptions sought under TP Act shall be inapplicable if the asset for which the parties entered into an agreement is not in existence. • M/s ICDS vs. Commissioner of Income Tax, Mysore and Another The Assessee may claim depreciation on the leased assets even at a higher rate if the twin requirements of ownership & usage for business is proved. • IndusInd Bank Ltd vs. ACIT (ITAT Mumbai Special Bench) 135 ITD 165(Mum) (SB) The lessee shall be entitled to claim depreciation under the IT Act in cases of finance lease. In this case the court has explained the difference between finance and operating lease and has also said that the wrong person shall not be allowed a deduction, if the right person fails to claim it. • Association of Leasing and Financial Companies Vs. Union of India and Others (2010-VIL-17-SC-LB-ST) Service tax may be allowed to be charged on lease and hire purchase transactions even if the same transactions were charged under VAT and it wouldn’t amount to double taxation. Recent Case Laws

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