Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (7) TMI 269 - AT - Income TaxAdditions u/s 30 - deduction of Lease Equalization Charges - type of lease undertaken- scope of accounting standards - AO noticed that, assessee has created Rent Equalization Reserve - HELD THAT:- The lease equalization charge is bifurcation of lease rentals in order to arrive at real income. The assessee has claimed the deduction of lease equalization charges as per Accounting Standard 19 issued by the ICAI, a recognized body vested with the authority to recommend accounting standards for ultimate prescription by the Central Government in consultation with the National Advisory Committee of Accounting Standards for the presentation of true and fair view of financial statements - the Accounting Standard expressly allows the claim of lease rent on straight line basis over the period of lease term. The deduction on the basis of average rent per year will not affect the tax revenue of the department because of the reason that when actual payment of lease rent is more than the average rent in subsequent years, then excess deduction claimed in the earlier years would net off the difference and consequently at the end, there would be no difference in actual payment and amount of deduction claimed. Besides, the deduction of lease equalization reserve has been allowed by the Hon'ble Supreme Court in its recent judgment in the case of CIT-VI Versus Virtual Soft Systems Ltd. [2018 (4) TMI 1472 - SUPREME COURT] allowed the claim of "lease equalization charges" relying on the Guidance Note issued by the ICAI "Accounting for leases". Hon'ble Court has held that the taxpayer can take recourse of Guidance note issued by the ICAI, particularly when there is no express bar in the Act. The ICAI publication i.e. Guidance Note reflects the best practices adopted by the accountants throughout the world. Hon'ble Delhi High Court in their recent decision in case of CIT vs. MGF India Ltd. [2018 (2) TMI 1535 - DELHI HIGH COURT] has also held that Lease equalization charges can be deducted while computing book profit. As per provisions of Companies Act, Accounting Standard and Income Tax Act, we hereby direct that the assessee is eligible for the claim of lease equalization charges. In the result, the appeal of the assessee on this ground is allowed. Nature of expenditure - Logo Development Expenses - AO made the disallowance on the ground that payment to the advertising agency was to create a new brand and thus creating an intangible asset for the assessee company which will have enduring benefit whose benefit will be derived over several periods - HELD THAT:- In the instant case, the contract for new logo for existing business has been awarded, certain amounts were spent and the project has been shelved midway and abandoned. There was no creation of any asset and there is no existence of new business. The amounts have been spent in connection with the ongoing business operations. Hence, keeping in view the facts of the case and the judgments of the Hon’ble High Courts in PRIYA VILLAGE ROADSHOWS LTD. [2009 (8) TMI 765 - DELHI HIGH COURT], INDO RAMA SYNTHETICS INDIA LTD. [2009 (9) TMI 635 - DELHI HIGH COURT], ACL WIRELESS LTD. [2013 (12) TMI 1160 - DELHI HIGH COURT] we hereby allow the appeal of the assessee on this ground.
|