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Unformatted text preview: IBFS(CA) L-15A: Legal and Tax aspects of Leasing A. Legal Aspects : In India, there is no Law/Legislation/Act/Direction, which exclusively applies to Equipment Leasing (EL). Such transactions are governed by the relevant positions of a number of Acts/Laws/Directions and so on. Some of these are quite intricate involving fine points of law. Since the features of EL transactions closely resemble the features of bailment, the provision of Contract Act in general and those relating to contracts of bailment in particular apply to EL transactions. The implied obligations of the bailor (Lessor) and bailee (Lessee) are defined by this enactment. However, one implied obligation of Lessor viz. fitness of the bailed goods is inapplicable. As in a typical EL transaction, the Lessor plays the role of a financier; the implied obligation of the Lessor (bailor) relating to fitness of the goods/assets is expressly negatived by the lease agreement. Some provisions of Motor Vehicles Act (Lessor is regarded as a dealer although the legal ownership vests with him and the Lessee is regarded as the owner for purpose of registration of the vehicle under the Act and in case a vehicle is financed under lease/HP/hypothecation agreement, Lessor is treated as financier) and stamp Act also apply to EL (The Act requires payment of stamp duty on all instruments/documents creating a right/liability in monetary terms. Stamp duty varies from state to state)...
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