Corporate guarantee fees at 1% upheld; bad debts actual write-off

Corporate guarantee fees at 1% upheld; bad debts actual write-off and lease rentals allowed as revenue expense.

Issue

Whether the TPO was justified in benchmarking a free corporate guarantee given to an overseas AE at an ALP of 1%, and whether the AO erred in disallowing an actual bad debt write-off and the principal component of lease rentals under the Income-tax Act for Assessment Year 2017-18?

Facts

Corporate Guarantee: The assessee provided a corporate guarantee to its Singapore Associated Enterprise (AE) without charging any fee, classifying it as a shareholder activity. The TPO and Commissioner (Appeals) treated it as an international transaction and benchmarked the fee at 1% of the guarantee value using the internal CUP method.
Bad Debts Write-off: The assessee claimed a tax deduction for bad debts actually written off in its books of account. The AO disallowed the claim because the assessee did not prove that these specific debts were previously offered to tax as income in earlier years.
Lease Rentals (EMI): Per Accounting Standard 19 (AS-19), the assessee capitalized leased assets in its books, debiting depreciation and interest to its P&L account. In its tax computation, it added back the book depreciation and interest, claiming the entire actual EMI (principal + interest) as a business revenue deduction. The AO disallowed the principal component, labeling it capital expenditure.

Decision

Corporate Guarantee: In favour of Revenue. The decision to uphold the transfer pricing adjustment by adopting 1% as the Arm’s Length Price (ALP) for the corporate guarantee extended to the Singapore AE was correct and free from legal infirmity.
Bad Debts Write-off: In favour of Assessee. The disallowance was deleted. Following settled law, post April 1, 1989, a taxpayer does not need to prove that a debt has factually become irrecoverable; a proper debit entry writing off the bad debt in the books of account is sufficient to claim the deduction.
Lease Rentals (EMI): In favour of Assessee. The disallowance of the principal component was deleted. Lease rentals paid for utilizing an asset without acquiring ownership rights are revenue expenditures under section 37(1), irrespective of their financial accounting treatment under AS-19.

KeyTakeaways

Corporate Guarantees are Benchmarkable: Free corporate guarantees provided to overseas subsidiaries are internationally reportable transactions, and a 1% fee can be imputed as an arm’s length standard depending on judicial precedence.
Accounting Entries Override Factual Proof for Bad Debts: For tax purposes, the active accounting write-off of a bad debt satisfies the statutory requirement under section 36(1)(vii), eliminating the historical burden of proving absolute insolvency or absolute irrecoverability to the AO.
Substance Over Book Entry for Leases: Even if a lease transaction is categorized as a finance lease requiring capitalization under accounting standards (AS-19), it continues to qualify as an operational hire in tax law. The full rental/EMI remains deductible as a revenue expense so long as ownership does not pass to the lessee.

IN THE ITAT CHENNAI BENCH ‘D’

TVS Supply Chain Solutions Ltd

Deputy Commissioner of Income-tax

ABY T. VARKEY, Judicial Member
and Ms. Padmavathy S., Accountant Member

IT(TP)Appeal No.9 (CHNY) OF 2026
IT APPEAL No. 380 (CHNY) OF 2026
[Assessment years and 2017-18]

MAY 11, 2026

Raghunathan, C.A for the Appellant. V. Justin, CIT for the Respondent.

ORDER

Ms. Padmavathy.S, Accountant Member.- These cross appeals by the assessee and the Revenue are against the order of the Commissioner of Income Tax (Appeals), Chennai-16 (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 25.11.2025 for Assessment Year (AY) 2017-18. The appeal of the assessee pertains to the issue of upward adjustment towards corporate guarantee. The appeal of the Revenue pertain to the CIT(A) in deleting disallowance of bad debts and disallowance of EMI paid on leased assets.

2. The assessee is a company engaged in the business of supply chain and logistic services. The assessee filed a return of income for AY 2017-18 on 30.11.2017 declaring a total income of Rs.3,63,20,900/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had international transactions, the A.O made a reference to the Transfer Pricing Officer (TPO) to complete the Arm’s Length Price (ALP) of the international transactions. The TPO proposed a TP adjustment of Rs.1,28,00,168/- towards corporate guarantee given by the assessee to its subsidiary. The A.O passed the draft assessment order incorporating the TP adjustment. The A.O further made disallowance towards bad debts written off by the assessee amounting to Rs.31,92,760/- and also disallowed the principle portion of the EMI on leased assets to the tune of Rs.3,97,49,968/-. Since the preferred further remedy through CIT(A) route the A.O passed the final assessment order. On further appeal, the CIT(A) sustained the TP adjustment and deleted the corporate disallowances made by the A.O. The assessee and the Revenue are in appeal before the Tribunal against the order of the CIT(A).

Assessee’ appeal in IT(TP)A No.9/Chny/2026:

CORPORATE GUARANTEE

3. The TPO noticed that the assessee has provided corporate guarantee to its AE M/s. TVS Asiannics Supply Change Solutions Pte. Ltd. and that the assessee has not charged any fees towards same. The assessee submitted before the TPO that providing the corporate guarantee is shareholder activity and hence, no TP adjustment can be made. The TPO after considering the submissions of the assessee held that providing corporate guarantee results in implicit benefits to the recipient entity i.e., the AE and therefore, the assessee needs to be compensated by way of a fee. The TPO further held that providing the corporate guarantee is a separate international transaction and accordingly needs to be benchmarked. The TPO considering the circumstances in assessee’s case made an upward adjustment by applying 1% of the quantum amounting to Rs.1,28,00,168/-. On further appeal, the CIT(A) held that:

“5.4.1 These grounds are against the upward adjustment of Rs.1.28.00.168/- by adopting 1% of the guarantee value towards fee for corporate guarantee. The appellant stated that it provided corporate guarantee to its Associated Enterprise (“AE”) viz., M/s TVS Asiannics Supply Chain Solutions Pte Ltd., Singapore and that this constituted a shareholder activity inextricably linked with the Appellant’s capacity and obligations as a promoter and significant shareholder. It was submitted that no guarantee fee was charged, as the impugned guarantee is not in the nature of a service but an incidence of shareholder functionality, in line with current international guidelines and established legal precedent.

5.4.2 I have considered the appellant’s arguments as well as the discussions of the TPO in order dated 19.01.2021. By virtue of the amendment brought in by the Finance Act, 2012, corporate guarantees” were brought under the scope of the term international transaction with retrospective effect from 01.04.2002. It is seen that the appellant has not carried out a comparative TP study to benchmark the international transaction in respect of issuance of corporate guarantee. In the case of Redington India Ltd, the Hon’ble High Court of Madras in [2020] (Madras) held as under.

75. The concept of Bank Guarantees and Corporate Guarantees was explained in the decision of the Hyderabad Tribunal in the case of Prolifics Corpn. Ltd. (supra). In the said case, the Revenue contended that the transaction of providing Corporate Guarantee is covered by the definition of international transaction after retrospective amendment made by Finance Act. 2012. The assessee argued that the Corporate Guarantee is an additional guarantee, provided by the Parent company. It does not involve any cost of risk to the shareholders. Further, the retrospective amendment of section 928 does not enlarge the scope of the term “international transaction” to include the Corporate Guarantee in the nature provided by the assessee therein. The Tribunal held that in case of default, Guarantor has to fulfill the liability and therefore, there is always an inherent risk in providing guarantees and that may be a reason that Finance provider insist on non-charging any commission from Associated Enterprise as a commercial principle. Further, it has been observed that this position indicates that provision of guarantee always involves risk and there is a service provided to the Associate Enterprise in increasing its creditworthiness in obtaining loans in the market, be from Financial institutions or from others. There may not be immediate charge on P & L account, but inherent risk cannot be ruled out in providing guarantees. Ultimately, the Tribunal upheld the adjustments made on guarantee commissions both on the guarantees provided by the Bank directly and also on the guarantee provided to the erstwhile shareholders for assuring the payment of Associate Enterprise.

76. In the light of the above decisions, we hold that the Tribunal committed an error in deleting the additions made against Corporate and Bank Guarantee and restore the order passed by the DRP”

Thus, the jurisdictional High Court has upheld the adjustments made on account of corporate guarantee as the provision of guarantee involves risk which has to be suitably compensated by the AE.

5.4.3 The TPO adopted 1% as the length price of the transaction and imputed commission @1% of the corporate guarantee. The appellant had charged corporate guarantee fees @1% on guarantee extended to TVS Supply Chain Solutions North America Inc, USA and Rico Logistics Ltd UK. Hence for the assessment year, there is an internal CUP available. Thus I uphold the action of the TPO in adopting 1% as the ALP of the transaction with the Singapore AE. With these directions, ground nos 3.1 and 3.2 are dismissed.”

4. We have heard the parties, and perused the material available on record. It is a settled position that providing corporate guarantee to an associated enterprise is a separate international transaction and cannot be considered shareholder activity. We further notice that the CIT(A) has upheld the TP adjustment by placing reliance on the Jurisdictional high Court in the case of Pr. CIT v. Redington India Ltd. [2021] 430 ITR 298 (Madras) . We also noted that the CIT(A) has recorded a finding that the assessee has charged a corporate fee @ 1% on the guarantee extended to its AE in USA and UK. Considering the facts in the present case and the judicial precedence, we are of the view that there is no infirmity in the decision of Ld. CIT(A) to uphold the TP adjustment by adopting 1% as ALP of the fees towards corporate guarantee given by the assessee to its AE in Singapore. The grounds raised by the assessee in this regard are dismissed.

Revenue’s appeal in ITA No.380/Chny/2026:

DISALLOWANCE OF CLAIM OF BAD DEBTS:

5. The assessee during the year under consideration has made a claim of Rs. 31,92,760/- towards bad debts written off during the year. The assessee submitted before the AO that the write off represents the detention charges not recoverable from M/s. Voltas Ltd. which has been written off as bad debts. The A.O however disallowed the claim of the assessee stating that the assessee failed to prove that the bad debts written off during the year were credited to the P & L account as the income in earlier years and offered to tax. On further appeal, the CIT(A) deleted the disallowance by placing reliance on the decision of Hon’ble Supreme Court in the case of TRF Ltd. v. CIT 323 ITR 397 (SC) and the decision of the Jurisdictional High Court in the case of Citadel Fine Pharmaceuticals Ltd. v. Dy. CIT 476 ITR 193 (Madras)).

6. We have heard the parties, and perused the material available on record. The allowability of claim of bad debts based on actual write off is settled by the Hon’ble Supreme Court in the case of TRF Ltd. (supra) where it has been held that –

2. In these appeals, we are concerned with assessment year 1990-91 and assessment year 1993-94. Prior to 1-4-1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word “established”, which earlier existed in section 36(1)(vii) of the Income-tax Act, 1961 (‘Act’).

3. For the sake of clarity, we reproduce hereinbelow provisions of section 36(1)(vii) of the Act, both prior to 1-4-1989 and post-1-4-1989 :

“Pre-14-1989

36. Other deductions.—(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28—

(i) to (vi)**

(vii) subject to the provisions of sub-section (2), the amount of any debt, or part thereof, which is established to have become a bad debt in the previous year.

Fost-lst April, 1989:

36. Other deductions.—(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28—

(i) to (vi)**

(vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year.”

4. This position in law is well-settled. After 1-4-1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from sundry debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off.

7. The Hon’ble Madras High Court in the case of Citadel Fine Pharmaceuticals Ltd. (supra) has held a similar view by following the above decision of the Hon’ble Supreme Court. Accordingly in our view the issue is no longer res-integra, and therefore we see no reason to interference with the decision of the CIT(A) deleting the disallowance towards bad debts.

DISALLOWANCE OF EMI PAID ON LEASED ASSETS:

8. The assessee in the return of income has claimed a deduction of Rs.4,42,53,869/- towards EMI paid on leased assets. The said amount consisted of Rs. 3,97,49,968/- towards principal and Rs. 45,03,901/- towards interest. The assessee in the books of accounts capitalized the leased assets following accounting standard-19 and charged depreciation and interest to the P&L account. The assessee while computing the taxable income added back to the deprecation and interest charged in the books and claimed the entire amount of EMI as deduction. The A.O held that the principal amount of EMI is capital in nature and cannot be allowed as a deduction and disallowed the said amount. On further appeal, the CIT(A) deleted the disallowance by holding that –

“5.7.2 I have perused the material placed on record. In the instant case, it is submitted that the appellant has capitalised lease assets in its books as per AS 19 and then disallowed interest component and depreciation for the computation of income under the Income tax Act. It was submitted that since the appellant was not the owner of the leased assets, it was not entitled to depreciation on such assets. It has been held in a plethora of decisions that in case of assets acquired through financial lease, ownership remains with the lessor and therefore depreciation u/s 32 is allowable in the hands of the lessor. In M/s Tristar Container Services (Asia) Private Ltd., ITA Nos. 937/Chny/2016 & ors. order dated 15.06.2022, it was held by the Hon’ble ITAT that lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure under Section 37 of the Act. On similar sets of facts and circumstances, the Delhi ITAT in (Delhi – Trib.) in Rio Tinto India (P.) Ltd. v. ACIT held that where assessee made payment of lease rental in respect of motor vehicle taken on lease, said payment was allowable as revenue expenditure. Respectfully following the above decisions, I am of the considered view that the principal amount of lease rental payments is allowable as a revenue expenditure. The AO is directed to delete the addition made for A.Y 2017-18. Accordingly, groundNO.5.1, 5.2 and 5.3 are allowed.”

9. We have heard the parties, and perused the material available on record. From the perusal of the findings of the CIT(A), we notice that the CIT(A) has given relief to the assessee by applying the ratio laid down in the decisions of the coordinate bench. In this regard we further notice that the coordinate bench in the case of Sundaram Infotech Solutions Ltd v. ITO [ITA Nos.2515 to 2517/Chny/2019 dated 06-07-2022] has considered an identical issue where it has been held that –

3. We find that the issue of deduction of lease rental in case of lessee as been adjudicated by us in the case of M/s Tristar Container Services (Asia) Private Ltd., ITA Nos. 937/Chny/2016 & ors. order dated 15.06.2022 as under: –

Our findings and Adjudication 6. Upon careful consideration of material facts, we find that the basic facts are not in dispute. The assessee as a lessee takes on lease marine containers and subleases the same to its customers. The income thus earned by the assessee is offered to tax. The leased contained are taken under operating lease as well as under finance lease. There is no dispute with respect to tax treatment of asset taken under operating lease. The dispute is only with respect to assets taken under finance lease. The same stem from the fact the assets under finance lease are capitalized in the Balance Sheet as Fixed Asset and depreciation is claimed on the same under the Companies Act. The lease rental payable by the assessee is shown as liabilities. The lease payment would have two components i.e., principal and finance charges. The finance charges have been debited to the Profit & Loss Account and the same has been allowed by Ld. AO. However, in the computation of income, the assessee reverses the depreciation and claim gross lease rental as deduction on the plea that Income Tax Act do not differentiate between finance lease as well as operating lease. We are of the considered opinion that whatever is the nature of lease, only the lessor is entitled for depreciation as per the decision of Hon’ble Supreme Court in ICDS Limited v. CIT (350 ITR 527). The decision of Delhi Tribunal in Minda Corporation Ltd. V/s DCIT ( ) has also support the same view. The case of the revenue is that in case of finance lease, substantial risks and rewards of ownership are transferred to the lessee and therefore, the lessee would be entitled to claim depreciation and not the principal component of lease payment.

7. We find that as per Accounting Standard-19 as introduced by The Institute of Chartered Accountants of India (ICAI) in the year 2001, the lease transactions are bifurcated into two types of lease i.e., finance lease and operating lease. As noted by Coordinate bench of Delhi Tribunal in Minda Corporation Ltd. V/s DCIT as per AS-19, finance lease is described as a lease that transfers substantially all the risks and rewards in respect of ownership of an asset and title may or may not be transferred under such lease. An operating lease, on the other hand, is described as a lease other than a finance lease. The aforesaid Accounting Standard provides that under the finance lease, the lessee should recognize the asset in its books and should charge depreciation on the same. In the case of operating lease, the Accounting Standard provides that the lessee should recognize the lease payments as an expense in the profit and loss account and the lessor should recognize the asset given on lease and charge depreciation in respect of the same. The aforesaid distinction between finance lease and operating lease is not recognized under the Act. Under the provisions of the Act, depreciation is admissible under section 32 of the Act only to the ‘owner’ of the asset. Lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure under Section 37 of the Act. Thus, what AS-19 provides is the accounting treatment to be given to the two types of leases. It is not determinative of the tax treatment of the lease which has to be computed in accordance with the provisions of the Act. It is trite law that book entries are not determinative of tax liability as per the ratio laid down in Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC) as well as in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC). The said proposition has also been reiterated in CBDT Circular No.2 of 2001 dated 09.02.2001 which state that accounting standard issued by ICAI creating distinction between finance lease and operating lease will have no implications under the provisions of the Act. The relevant excerpt read as under: –

“Under the Income-tax Act, in all leasing transactions, the owner of the asset is entitled to the depreciation if the same is used in the business, under section 32 of the Income-tax. The ownership of the asset is determined by the terms of the contract between the lessor and the lessee..

It has come to the notice of the Board that the New Accounting Standard on ‘Leases’ issued by the Institute of Chartered Accountants of India require capitalization of the asset by the lessees in financial lease transaction. By itself, the accounting standard will have no implication on the allowance of depreciation on assets under the Act.”

As observed by Delhi Tribunal, the CBDT’s view on the treatment of finance lease is not aligned to the accountant’s perspective of a finance lease. For accounting purposes, although the lessee shows the asset in his balance sheet, charges depreciation in accounts and even makes impairment provision, yet the assessee is not eligible to claim depreciation under the Act, which is to be allowed to the legal owner of the asset. Furthermore, not only the interest/ finance/ other charges component in the lease payments, but the entire lease payments are treated as a deductible expense and no deduction is allowed for the impairment provision. In the hands of the lessor, the entire ‘lease rentals’ and not merely the finance charges component thereof is taxed as income. The lessor, who is the legal owner of the asset, is entitled to claim depreciation under the provisions of the Act.

8. The Hon’ble Supreme Court in the case of ICDS Limited v. CIT (350 ITR 527), held that as long as the assessee is entitled to retain the legal title of the asset against the rest of the world then it would be the owner of the asset in the eyes of law. In such a case, the assessee as owner lessor would alone be entitled to claim depreciation notwithstanding the fact that vehicles were registered in the name of the lessee under The Motor Vehicles Act. In this decision, Hon’ble Court referred to its earlier decision in CIT V/s Shann Finance Pvt. Ltd. . The Hon’ble Court also took note of similar decision rendered in CIT v. A.M. Constructions [1999] 238 ITR 775 (AP); CIT v. Bansal Credits Ltd. [2003] 259 ITR 69 (Delhi); CIT v. M.G.F. (India) Ltd. [2006] 285 ITR 142/[2007] 335(Delhi); CIT v. Annamalai Finance Ltd. [2005] 275 ITR (Mad.) and agreed with the ratio contained therein. In each of these cases, the leasing company was held to be the owner of the asset and accordingly held entitled to claim depreciation and also at the higher rate applicable on the asset hired out.

9. Similar is the decision of Hon’ble Rajasthan High Court in the case of Rajshree Roadways v. Union of India [2003] 263 ITR 206 wherein Hon’ble Court upheld the assessee’s claim of allowability of lease rentals paid as lessee of the vehicles as a revenue expenditure u/s 37(1) of the Act, even though the lease was categorized as finance lease.

10. In the present case, rule of consistency also favors the case of the assessee. It is undisputed position that the aforesaid accounting / tax treatment has been accepted by the revenue in regular assessment proceedings right from AYs 1998-99 to 2010-11. Therefore, facts being pari-materia the same, the revenue is debarred from changing its stand after having accepted this position for so many years.

11. So far as the terms of lease agreement is concerned, upon perusal of sample lease agreement as placed on page nos. 55 to 64 of paper-book of this year, we find that the lease is in the nature of lease purchase. The assessee is required to pay lease rate on per day basis @USD .82 per day which includes reimbursement of domestication costs paid by the lessor. The term of lease is 5 years. On the last day of term, the assessee is required to pay further final payment of USD 1 also. The lessee, at its own expanses, is required to obtain insurance coverage and all responsibility in this regard shall rest with the lessee. The Lessee shall not be entitled for any abatement of rent or reduction thereof. The rents shall continue to be payable in all event unless expressly agreed. If any container is lost, damaged, stolen, destroyed etc., lessee’s obligations to pay rental for that container would terminate and the lessor receives an amount equal to the balance of the rent owed for the remainder of the term.

12. As per business conditions, the lessee was required to return all the containers to lessor’s depot at the designated locations. The lessee was liable to lessor for all damages to or loss or destruction of the container subsequent to delivery and prior to return to lessor except that what is caused by normal wear and deterioration. It was the responsibility of the lessee to maintain the containers in good repair and safe operating conditions. Further, the lessee would not have the right to assign this Agreement to any other party without the prior written consent of the Lessor. However, lessee shall have the right to sublet or rent the container on lease under this Agreement, except that any such subletting or rental shall not relieve Lessee of its obligation under the agreement.

13. Upon perusal of terms and conditions of lease agreement, it could be concluded that the ownership of the containers has never been parted with by the lessor and lessee merely pays lease rental to the lessor. In such a case, it would only be the lessor which is entitled to claim depreciation as per the cited decision of Hon’ble Supreme Court in ICDS Limited v. CIT (supra).

14. The Ld. CIT-DR, in the written submissions and by drawing attention to assessee’s financial statements, have emphasized the fact that the aforesaid lease transactions are finance lease transactions and therefore, the action of Ld. AO was to be held. We find that there is no quarrel on the proposition since the only dispute under the appeal is tax treatment under finance lease. The operating lease transactions have not been disturbed by Ld. AO and the only dispute is qua deduction of principal component under finance lease transactions. This fact is nowhere in dispute.

15. In further support, Ld. CIT-DR has emphasized the fact that it was the lessee who was responsible to obtain insurance coverage at its own expense and therefore, the assessee was to be considered as owner of the asset. However, we find that this conclusion run contrary to the terms of the agreement as noted by us in preceding paragraphs. It has also been emphasized that in case of casualty to containers while on lease, the lease obligation terminate and the lessor would receive an equal amount to the balance of rent owed for the remainder term which would establish that the assessee was the owner of the assets. Similar plea has been raised to submit the lessee was obligated to pay customs duty, as well as bear cost of maintenance / repairs of the containers. However, there are merely the terms of the agreement and do not culminate into transfer of ownership from lessor to lessee. The terms clearly provide that the assessee was obligated to return the containers to the lessor at the end of lease term.

16. The Ld. CIT-DR has referred to various judicial decisions in support of revenue’s case. The decision of Mumbai Tribunal (SB) in Indusind Bank Ltd. V/s ADIT ; 14.03.2012) is a decision which has been rendered prior to the decision of Hon’ble Supreme Court in ICDS Limited v. CIT (supra) which has been rendered on 14.01.2013. Undisputedly, the decision of Hon’ble Supreme Court would have precedence over the decision of Special Bench of Tribunal.

The decision in Asea Brown Boveri Ltd. V/s IFCI ) is not relevant to the facts of the present case.

Similarly, the case law in Association of Leasing & Financial Services Company v. UOI (29 STT 316) is in the context of Service Tax and has no application to the facts of the present case.

17. Finally, considering the facts and circumstances of the case, the assessee as a lessee would be entitled for deduction of gross lease rental payments. The assessee’s methodology is to be accepted. The lease payments made by the assessee would be revenue expenditure for the assessee. We order so. The alternative claims as allowed by Ld. AO shall stand reversed. The claim of foreign exchange loss on these transactions shall be re-considered / readjudicated by Ld. AO in the light of our above adjudication. The appeal stand partly allowed in terms of our above order.”

10. During the course of hearing, the Revenue did not bring any new material on to say that the facts in assessee’s case are different. Accordingly, we see no reason to interfere with the decision of the CIT(A) who has deleted the disallowance made towards EMI of leased assets by the AO.

11. In the result, both the appeals of the assessee and Revenue are dismissed.