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2010 (2) TMI 865 - AT - Income TaxAllowability of reduction in lease rental income by way of lease equalisation charges - held that:- In the present case also, the lease in question is a finance lease because the entire amount of cost of asset being the amount financed minus residual value is being recovered during the lease period in addition to the finance charges. Hence, in the present case, the lease in question is financial lease and hence the guidance notes issued by the ICAI is applicable and the assessee has followed the same in reporting in income for tax purposes. The idea or the basis of ICAI guideline is not that in all the years for the lease period, income should be same. - In the chart furnished by the assessee, it can be seen that in some years, the lease equalisation amount is minus which means that in those years, there will be increase of income on account of lease equalisation charges and in the remaining years, it is positive and in those years it will be decreased from the lease rental income but at the end of the lease period, the sum total of lease equalisation charges is only Rs. 22,799, i.e,, residual value. It means that neither any deduction is allowed to the assessee on account of lease equalisation charges in the form of any expenses nor there is any reduction in the lease rental income being included in the income of the assessee because the ultimate total of the lease equalisation charges is Rs. 22,799 only which is of residual value and hence for the lease period as a whole, there is no impact on the income shown by the assessee on account of lease equalisation. . Regarding depreciation, we have already noted that deduction claimed by the assessee on account of depreciation is equivalent to the cost of asset and even if the assessee is allowed depreciation as per Income-tax Rules, then also, it does not have any impact because the depreciation as per companies Act is added back and depreciation as per Income-tax Rules, is reduced from the income of the relevant year. Validity of the order passed under section 263 - Validity of the re-assessment proceedings – Held that:- technical issues regarding validity of section 263 proceedings in assessment year 1996-97 and the validity of reassessment proceedings in the remaining four years are of academic interest only. Hence, we decline to adjudicate upon these issues
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