By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Whether operating lease was covered under the category of “Banking & Financial Services”, prior to 01-06-2007 and chargeable to service tax? Held, No.
Facts:
The assessee engaged in providing aircraft parts/ equipments to various airlines on lease for a fixed period against monthly lease charges entered into agreements which did not provide any option to own or entitlement to own the aircraft parts at the end of leasing period. The department, considering it as financial lease demanded tax under “Banking & Financial Services” and contended that prior to 01-06-2007 there was no provision that financial lease must have a clause giving option to the lessee to own the asset at the end of lease period and that the amendment made w.e.f. 01/06/2007 was retrospective in nature.
The assessee contended that there was no service tax on operating lease for the period prior to 01- 06-2007 as after 01-06-2007, an explanation was inserted in the definition of “Banking & Financial service” whereby an operating lease was included along with financial lease in the purview of the definition of B & F services.
Held:
Observing that the leasing agreements did not contain any provision entitling the customer to own the goods leased or an option to own the goods leased, the Hon. Tribunal relying on Association of Leasing and Financial Services Companies vs. UOI 2010-TIOL-87-SC-ST-CB held that when the lease agreements were not financial lease agreements, the same would not be exigible to service tax under the Finance Act prior to 01-06-2007.
