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2022 (6) TMI 793 - AT - Income TaxRevision u/s 263 - Depreciation on lease payment - HELD THAT:- Under the provisions of the Act, depreciation is admissible under section 32 of the Act only to the 'owner' of the asset. Lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure u/s 37 - Thus, what AS-19 provides is the accounting treatment to be given to the two types of leases. It is not determinative of the tax treatment of the lease which has to be computed in accordance with the provisions of the Act. It is trite law that book entries are not determinative of tax liability as per the ratio laid down in Sutlej Cotton Mills Ltd. [1978 (9) TMI 1 - SUPREME COURT] as well as in Kedarnath Jute Mfg. Co. Ltd. [1971 (8) TMI 10 - SUPREME COURT] - The said proposition has also been reiterated in CBDT Circular No.2 of 2001 dated 09.02.2001 which state that accounting standard issued by ICAI creating distinction between finance lease and operating lease will have no implications under the provisions of the Act. The assessee as a lessee would be entitled for deduction of gross lease rental payments. The assessee’s methodology is to be accepted. The lease payments made by the assessee would be revenue expenditure for the assessee. We order so. The alternative claims as allowed by Ld. AO shall stand reversed. The claim of foreign exchange loss on these transactions shall be re-considered / re-adjudicated by Ld. AO in the light of our above adjudication. The appeal stand partly allowed in terms of our above order. Disallowance u/s 40(a)(i) for want of TDS on lease rental payments - HELD THAT:- CIT(A) held the principal component of lease rental would be capital expenditure and the same is not allowable u/s 37. Therefore, the issue of disallowance u/s 40(a)(i) was held to be academic in nature. Facts being pari-materia the same as in AY 2012-13, our adjudication as contained therein shall mutatis mutandis apply to this year also. The directions of Ld. CIT(A), with respect to foreign exchange loss, stand reversed. Having said so, the issue of disallowance u/s 40(a)(i) shall be restored back to the file of Ld. AO for fresh adjudication since the expenditure has been held by us to be revenue in nature. The assessee is directed to substantiate its case in terms of the provisions of Sec.40(a)(i). The appeal stands partly allowed. Disallowance of forex losses, lease rentals - HELD THAT:- Facts being pari-materia the same as in other years, the principal component of lease rental shall be allowed as revenue expenditure. The depreciation on capitalized principal portion shall stand reversed. The issue of forex loss shall stand remitted back to the file of Ld. AO for re-adjudication. The profit on sale of containers would be brought to tax. No interference is required on club expenses. The appeal stands partly allowed.
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