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The Commissioner of Income Tax-3 Versus M/s. Reliance Industrial Infrastructure Ltd

2015 (8) TMI 1215 - BOMBAY HIGH COURT

Higher rate of depreciation @ 40% - assessee was engaged in the business of letting out assets on hire - Held that:- Decided against revenue and in favour of the respondent-assessee as decided in assessee own case [2011 (6) TMI 737 - BOMBAY HIGH COURT] - Decided against revenue.

Lease equalization credited to P&L Account over and above the lease rental - Tribunal held it cannot be considered as income and thereby upholding reducing of assessee's total income by lease equalization - He .....

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t the amount credited as a lease equalization fund to Profit and Loss Account has to be ignored as it is not real income. It is an amount which is completely notional and brought into the books only for complying with accounting standards and has no relevance to determine the amount of net income chargeable to tax. In that view of the matter, the respondent-assessee was completely justified in reducing the amount of ₹ 2.06 crores credited to the Profit and Loss Account as lease equalizatio .....

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has been paid on the lease deed for the purposes of carrying on assessee's business. Once the aforesaid position is accepted then the amount of stamp duty paid for has to be allowed as revenue nature. - Decided against revenue. - Income Tax Appeal No. 3611 of 2010 - Dated:- 17-8-2015 - M. S. Sanklecha And N. M. Jamdar, JJ. For the Appellant : Mr A R Malhotra, Adv For the Respondent : Mr J D Mistri, Sr Adv. a/w P C Tripathi, Adv. i/b Raj Darak ORDER P. C. This appeal challenges the impugned orde .....

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circumstances of the case and in law the Tribunal was right in dismissing Revenue's ground of appeal no.2 holding that the lease equalization credited to P&L Account over and above the lease rental cannot be considered as income and thereby upholding reducing of assessee's total income by lease equalization of ₹ 2,06,21,580/-, credited to P&L Account? (C) Whether in the facts and circumstances of the case and in law, the Tribunal was right in allowing entire expenditure of .....

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assessee. In view of the above, Question (A) does not give rise to any substantial question of law and hence not entertained. 4. Regarding Question B: (a) The respondent-assessee had in the subject assessment year, in its computation of income reduced lease equalization amount of ₹ 2.6 crores after having credited the same to it's Profit and Loss Account. The respondent-assessee carried out the above exercise to be in accord with the Guidance Note issued by the Chartered Accountants of .....

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essing Officer could not be allowed to be deducted while computing the income subject to tax. (b) In appeal, the CIT(A) after considering the submissions interalia records that the Assessing Officer has misunderstood the claim of the respondent with regard to the lease equalization fund. It records that the lease equalization fund is merely a book adjustment entry. It also reiterate that lease rent received by the respondent-assessee has been credited to the Profit and Loss Account and offered t .....

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he revenue, the Tribunal in the impugned order upheld the order of the CIT(A). It held that in the earlier years the debit claim for lease equalization fund was not allowed as an expenditure while computing the income chargeable to tax. Therefore on the principle of consistency the Tribunal took a view that when debits on account of lease equalization fund was not allowed as expenditure to arrive at the taxable profits the same cannot be included in determining the taxable income. (d) The grieva .....

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the subject assessment year. Further it is contended that Guidance Note of the Institute of Chartered Accountants of India being relied upon by the respondent-assessee has not been notified by the Central Government under Section 145(2) of the Act. According to the revenue, this is a question which requires consideration. (e) So far as the submission on behalf of the revenue is concerned, nothing has been shown to us to indicate that the finding of fact recorded by the Tribunal about the practic .....

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ued by the Institute of Chartered Accountants of India so as to meet the Accounting Standards. Further even if one accepts the submission on behalf of the revenue that these guidelines have not been notified by the Central Government for under Section 145(2) of the Act and thus cannot be accepted yet what follows is that the amount credited as a lease equalization fund to Profit and Loss Account has to be ignored as it is not real income. It is an amount which is completely notional and brought .....

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r consideration. Hence no admitted. 5. Regarding Question (C): (a) The respondent-assessee has taken a land on lease for a period of 30 years. An amount of ₹ 23.31 lacs was paid as stamp duty in respect of the deed of lease executed by the respondent with its lessor viz. JNPT. The respondent-assessee treated the same as revenue expenditure as according to it this expenditure was incurred for the purpose of carrying on business. The Assessing Officer did not in principle dispute that it is .....

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, the stamp duty had been paid on the lease deed was to acquire a capital asset. Therefore the stamp duty paid on the document to acquire the leasehold right of land/asset should be disallowed in its entirety being on capital account. (c) Being aggrieved, the respondent-assessee carried the issue further in appeal to the Tribunal. The Tribunal by the impugned order held that the payment of stamp duty towards the leasehold land is allowable as revenue expenditure in view of binding decision of th .....

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e in the subject assessment year It supports the order of the Assessing Officer. (e) We find that the CIT(A) had categorically given a finding that the Assessing Officer was not correct in holding that the expenses on account of stamp duty should be allowed as differed revenue expenditure. The revenue did not file any appeal against the aforesaid finding not it made any claim of the stamp duty expenditure being allowed as differed revenue expenditure before the Tribunal. In fact during the heari .....

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the nature of the expenditure. In any case, it is not disputed before us that the stamp duty amount has been paid on the lease deed for the purposes of carrying on assessee's business. Once the aforesaid position is accepted then the amount of stamp duty paid for has to be allowed as revenue nature. (f) Before closing, we may point out that Mr. Malhotra, the learned Counsel appearing for revenue emphatically urged that the amount of ₹ 23.42 lacs incurred on stamp duty for acquisition .....

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re. The revenue did not challenge the above finding in appeal. Before the Tribunal, the only contention urged was that the amount cannot be allowed as revenue expenditure and the revenue supported the order of CIT(A) that amount of ₹ 23.42 lacs paid as stamp duty is in fact a capital expenditure. Therefore the revenue having once accepted the CIT(A)'s finding that the expenditure on stamp duty cannot be considered to be differed revenue expenditure, it is not open to the revenue to now .....

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