We have a case where the equipment is purchased or taken on lease by the applicant. It is proposed to be granted on a lease for a short term (in fact, on behalf of the petitioner it is submitted that it was proposed to grant a lease for two years only). The lease amount or rent is to bear only a small proportion to the cost of the equipment.
The term of the lease has no correlation with the life of the equipment which on the expiry of the short term, would revert to the control of the applicant. The subject matter of the lease was to be in the possession and effective control of the lessee during the term of the lease. There was no intention to convey the title to the equipment to the lessee on the expiry of the term or to confer on the lessee an option to purchase the equipment. It appears to be a simple case of hiring of locomotives, coaches/wagons for a short duration on a rent to be paid by the lessee who was entitled to have the equipment under its control and risk during the term of the lease. Such a transaction cannot come within the purview of ‘financial leasing services’ contained in Section 65(12) of the Act.
Since exclusive possession and effective control of the equipment is to be transferred to the lessee during the term of the lease, Section 65(105)(zzzzj) cannot also be attracted.
