A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset.

Features of Lease• Generally there are two parties to a lease

agreement• Leasing is used for financing the use of

fixed assets of high value. In India equipment leasing is very popular.• The term of the lease is called the lease

period. It is the period for which the lease agreement is in operation.• Lease rentals constitute the consideration

payable by the lessee as specified in the lease transaction.

Lease vis-à-vis Buy

Lease vis-à-vis Buy• Ownership• Up-front costs• Monthly payments• End of term

Lease Evaluation in practice• Basic tax treatment of lease• Rates of depreciation• Depreciation allowance on

lease transactions• Sale and leaseback

transactions

Legal Aspects of Leasing• As there is no separate statue for

equipment leasing in India, the provisions relating to bailment in the Indian Contract Act govern equipment leasing agreements• Since an equipment lease transaction

is regarded as a contract of bailment, the obligations of the lessor and the lessee are similar to those of the bailor and the bailee