Sale & Lease Back transactions are not “sham” transactions

CIT vs. High Energy Batteries (India) Ltd (Madras High Court)

The assessee purchased igni-fluid boiler from its sister concern and on the same day leased it back. The AO & CIT(A) relied on McDowell 154 ITR 148 and held the sale and lease back arrangement to be a sham & camouflage for a loan by the assessee to the sister concern and rejected the assessee’s claim for depreciation. However, the Tribunal allowed the claim on the ground that the transaction was not a “sham”. On appeal by the department, HELD dismissing the appeal: