what is sale and lease back transaction??

Some Companies in order to meet their cash requirement,  sell  their particular fixed asset, say machinary, to  a leasing finance company and get the cash.

Subsequently the seller company enters into a lease contract with the lease fin. company andf takes the same machine on lease.

In this way its requirements regarding the machinary and the cash are met, only it looses its ownership control over that fixed asset.

Are such transactions recognised under IT Act, 1961?

Hi anand,

In opinion,

See once you sell your fixed asset, then IT act will apply and it will be treated as per the laws of IT act.  and capital gains or loss will come in picture as applicable.

Now taking the asset on lease back, then you can deduct the lease rental directly from your P&L account.  and while making payment  section 194(I) will also apply.

 

a sale n lease back transaction is genrally entered into by the organisation fisrtly for tax planning in away to sale their asset which have very low wdv but have good life so the org sale their asset say machinery and again take that asset on lease from the purchaser in that way they can claim lease rent as an expense under it act the second reason may be lquidity crunch they sale their asset and use that fund in the bussiness n get ba