Law:

Section:

Tax Management is permissible, if the Law authorises so Section 4 of the Income-tax Act, 1961 - Tax plannings - Assessment years 1988-89 to 1991-92 - Assessee-companies claimed deduction of lease rent paid in respect of plant and machinery which had earlier been sold by them and were taken back immediately on lease for use in business - Assessing authority disallowed deduction on ground that transactions of sale and lease were not bona fide and were adopted by company solely for reduction of taxable profit - First appellate authority and Tribunal held that transactions were genuine and that assets were sold and leased back purely on business considerations - Whether assessees entered into transactions with parties to sell and lease back assets, on sale price which was determined by an independent valuer, and that had been done to minimise tax liability, which is permissible under law - Held, yes - Whether, therefore, there was no infirmity in orders passed by appellate authorities - Held, yes FACTS The assessee-companies filed their returns and claimed deduction of lease rent paid in respect of plant and machinery taken on lease, which had earlier been shown as sold in the previous years. After the sale of the plant and machinery, the assessee-companies took them back immediately on lease from their respective buyers, for use in business run by the companies as they were used before. The assessing authority disallowed the deduction of lease rent on the ground that the sale of plant and machinery and taking them back immediately were not bona fide transactions and the same was a device adopted by the companies solely for reduction of taxable profit and tax thereon. On appeal, the Commissioner (Appeals) allowed the deduction of the lease rent paid by the companies. The appellate authority held that delivery of goods to the buyer was proved by documents on record and that the sale price of the plant and machinery was determined on the basis of valuation by an independent valuer. The Commissioner (Appeals) observed that the entire sale price was invested for capital gains in units of the Unit Trust of India and could be used later on by the companies. The…

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