TMI Blog2011 (1) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... nts Capital Recovery) debited to Profit and Loss Account as per the mandatory Guidance Note on Accounting for Leases, issued by the Institute of Chartered Accountants of India; 3. That the ld. CIT (Appeals) XIV has erred in upholding the disallowance of Bond issue Expenses of Rs.10,09,92,445/- instead of treating the same as Revenue Expenditure, as claimed by the assessee, ignoring the facts and circumstances that the assessee company is engaged in leasing rolling stock, assets to the Ministry of Railways on single client relationship basis and the money raised has been utilized for acquiring rolling stock assets and not for expansion of the undertaking. The ld. CIT (Appeals) XIV has erred in confirming the addition; 4. That the ld. CIT (Appeals) XIV has erred in upholding disallowance of depreciation on office building purchased from NBCC, ignoring the facts and circumstances that the assessee is in occupation of the premises and not recognizing the evidence thereof, on the basis of assumptions. 3. The first issue for consideration relates to confirming the addition of Rs.1,42,02,48,221/- to book profit on account of lease equalization charges. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of NHPC (supra) has been reversed by Hon ble Supreme Court in NHPC s case reported as 320 ITR 374 (SC) wherein it has been held that Advanced Against Depreciation as accounted for by the assessee therein, though in the nature of income received as advance, is not a reserve for the purpose of section 115-JB and, therefore, was an allowable deduction for the purpose of computing book profit. It has further been submitted that though the Revenue preferred appeals on this issue to ITAT in respect of assessment years 1998-99 to 2000-01 but the permission to pursue the issue was denied by the COD. Thus the orders of the ld. CIT (A) have attained finality and could not have been disturbed by the current incumbent. He further submitted that this issue is also covered in assessee s favour by the decision of Hon ble ITAT, Delhi Bench in the case of G.E. Capital Transportation Financial Services Ltd. Vs. ACIT 301 ITR (AT) 69 (Del). On the other hand, the ld. Sr. DR supported the order of the ld. CIT (Appeals). 6. We have heard both the parties. Explanation 1 to section 115-JB(2) defines the book profit and means the net profit as shown in the profit and loss account for the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the ld. CIT (A) was not justified in confirming the disallowance of lease equalization charges for the purpose of computation of book profits. The assessing officer is directed to delete the addition. 9. The next issue for consideration relates to disallowance of lease equalization charges debited to profit and loss account. The assessing officer while computing the total income under normal provisions of the Act added the amount of lease equalization charges at Rs.1,42,02,48,221/-. The ld. CIT (Appeals) following the decision for assessment years 1997-98 to 2000-01 upheld the disallowance. 10. Before us the ld. AR of the assessee submitted that ITAT, Delhi Bench B for assessment years 1997-98 to 2000-01 in ITA. No. 699, 359, 3357 and 2109 (Del) of 2004 dated 8/08/2008 has decided the issue in favour of the assessee. On the other hand, the ld. Sr. DR submitted that the issue has not been examined by the assessing officer on the lines of the decision of the ITAT and, therefore, the issue may be set aside to the assessing officer. He, therefore, requested that the issue may be set aside to the assessing officer as has been done by the ITAT for assessment year 1997-98 as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.97 per cent. The total for 30 years of depreciation is Rs.126, Rs.256.42 lakhs and finance income is Rs.157,820.46 lakhs. The total of capital recovery is Rs.126,256.37 lakhs and total of lease equalization is NIL. Since in the present case also, as per this chart, even after deduction of finance income at 14.97 per annum, the full value of the cost of assets i.e. Rs.162,256 lakhs is fully covered in lease period of 30 years and hence, it is a case of finance lease as per the guide-lines issued by ICAI. In the light of various judicial pronouncements cited by the ld. AR of the assessee, we find no reason for not accepting the basis as suggested by ICAI in these guide-lines for deciding the character of lease in the present case as finance lease. However, the assessee company has given this chart for opening value of leased assets in AY 1997-98, which is examined by us. Similar chart for assets given on lease during AY 1997-98 and in subsequent years is not furnished to us. Hence, the AO should verify those charts and if this condition is satisfied, all those transactions should also be accepted as finance lease transaction. 12.2 Since the Tribunal has directed to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the issue is squarely covered by the decision of the ITAT in the assessee s own case, respectfully following the precedent, it is held that bond issue expenses will be allowable as deduction as revenue expenditure. The assessing officer is directed to delete the addition. 17. The last issue for consideration relates to disallowance of depreciation on company s office premises at NBCC place, Lodhi Road, New Delhi. The assessee claimed depreciation on office building at the rate of 10 per cent at Rs.1,45,16,016/-. As per notes on account the auditors have noted that office building including parking area has been capitalized from the date of taking possession. However, the sale / transfer deed is pending for execution in favour of the assessee. The auditors have further commented that documentation / registration formalities were pending in respect of office building including parking area valuing Rs.15.17 crores. To a query raised by the assessing officer, it was submitted that the assessee was legal owner of the premises and was occupying the same for the purpose of business. The assessee submitted necessary proof of occupation of the building and agreement for sale evidenci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement it has been wrongly mentioned that the building was under construction and actually the possession had already been handed over to the appellant, no depreciation on part of the office space purchased from NBCC could be allowed. The ld. CIT (A), therefore, upheld the disallowance in respect of office space purchased from the NBCC. 19. Before us the ld. AR of the assessee submitted that the ITAT in the case of the assessee for assessment year 2002-03 has upheld the contention of the assessee. On the other hand, the ld. Sr. DR supported the order of the ld. CIT (Appeals). 20.1 We have heard both the parties. ITAT in order dated 28/08/2009 for assessment year 2002-03 in ITA. No. 1735 (Del) of 2006 has allowed depreciation on the office space taken from NBCC. ITAT while deciding the issue has observed as under:- 14. We have considered the rival submissions. When the possession was handed over by the NBCC to the assessee, the possession letter noted as under :- Possession of the following commercial space is handed over to Indian Railway Finance Corporation Ltd., New Delhi. (i) Commercial space measuring 625.0104 sq. m. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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