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2022 (12) TMI 1285 - HC - Income TaxDisallowing lease equalization charge claimed as a deduction from gross lease rentals received by the assessee in respect of finance lease of assets - difference between cost of asset leased minus the depreciation claim and the lease deposit received - Tribunal held that the amount taken to the lease equalisation fund was not an allowable business expenditure as it was an appropriation of profit - HELD THAT:- This issue is no longer res integra as the same has been answered by the Supreme Court in Commissioner of Income Tax-VI v. Virtual Soft Systems Limited [2018 (4) TMI 1472 - SUPREME COURT] as examined the guidelines issued by the Institute of Chartered Accountants of India (briefly referred to hereinafter as ‘ICAI’) and also referred to Section 211 of the Companies Act, 1956 to emphasize that Accounting Standards prescribed by ICAI shall prevail until Accounting Standards are prescribed by the Central Government. Method of accounting followed as derived from ICAI Guidance Note is a valid method of capturing real income based on the substance of finance lease transaction. The rule of substance over form is a fundamental principle of accounting. No force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act. Bifurcation of lease rental as per the accounting standards prescribed by the ICAI allowed. Moreover, there is no express bar in the IT Act regarding the application of such accounting standards - Decided in favour of assessee.
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