The High Court held that the question, whether an agreement is finance lease or operating lease, cannot be decided by merely looking at the title of the agreement itself or the nomenclature given to the said agreement. The terms and conditions mentioned in the agreement may be relevant but the surrounding circumstances as well as the type and nature of the asset has to be taken into account.
Therefore, the categorization of finance lease or operating lease is to be decided by taking into account not only terms of the agreement but also surrounding circumstances as well as the type and nature of the asset - CIT v. INSTALMENT SUPPLY LTD. [2012] 20
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