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i. As per the terms of lease agreement asset was to be transferred to the assessee. Hence, alleged lease rents are in fact installments for acquiring a capital asset.

ii. Since, two trustees of CARE are the Directors of Quality Care India Ltd., the company having substantial interest in the assessee company, the provisions of section 40A(2)(b) are attracted.

iii. The value of the asset is glaringly disproportionate to the written down value calculated as per Act.

4.2 The ld. AR further submitted that two trustees of CARE i.e. Dr. B. Soma Raju and Dr. N. Krishna Reddy are also the Directors of Quality Care India Ltd. The said company holds 76% shares in the assessee company. One of the reasons for rejecting assessee‟s claim is that the trustees of CARE are the Directors of holding company of assessee and hence, the provisions of section 40A(2)(b) get attracted. The ld. AR controverting the findings of authorities below submitted that section 40A(2)(b) does not apply on the trust and that to a public charitable trust registered u/s. 12A of the Act. In support of his submissions the ld. AR placed reliance on the decision of Hon‟ble Delhi High Court in the case of Shanker Trading (P) Ltd. Vs. Commissioner of Income Tax reported as 208 Taxman 526. 4.3 The ld. AR further submitted that merely for the reasons lease agreement provides for transfer of asset at the end of lease period does not mean that the lease rent partake the character of payment of installment towards the cost of asset. To support of his contentions the ld. AR placed reliance on the decision of Hon‟ble Jharkhand High Court in the case of Commissioner of Income Tax Vs. Tata Robins Fraser Limited reported as 253 ITR 227 and the decision of Delhi Bench Tribunal in the case of Sahara Airlines Ltd. Vs. Deputy Commissioner of Income Tax reported as 83 ITD 11.

 The CIT(A) has not at all adjudicated on the issue of interest claim.‖

5. On the other hand Shri Sanjeev Ghei representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal of assessee.

6. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee acquired Da Vinci Surgical System from CARE on lease. The assessment year under appeal is the first year of assessee‟s claim of deduction of lease rentals for the equipment. The authorities below disallowed assessee‟s claim of lease payment as revenue expenditure primarily on the ground that at the end of lease period, the asset would be transferred to the assessee and the value of asset at which it is transferred to the assessee is disproportionate to the written down value computed under the provisions of the Act. Another objection that has been raised by the Revenue for disallowing assessee‟s claim is that the two trustees of CARE are the Directors of holding company of assessee company. Thus, provisions of section 40A(2)(b) are attracted.