TMI Blog2015 (10) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... d-19. Precisely the “Book Profit” computed by the assessee in such case would be as per the provisions of the Companies Act and in compliance with the Accounting Standards which is mandatory. However, neither from the order of the Ld. Assessing Officer nor from the order of the Ld. CIT (A) these facts are revealed. Therefore with the above observations, we remit back both these cases to the file of Ld. Assessing Officer to verify whether the “Provision for lease equalization charges” debited in the P&L A/c of the assessee with the corresponding credit to “lease equalization reserves” are provided in the manner as stated hereinabove by the Ld. A.R and accordingly computed the profit of the assessee as per the normal provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years 2006-07 2007-08 on 30.11.2006 31.01.2007 declaring loss of approximately 10.87 crores and 9.69 crores respectively. Thereafter the case was selected for scrutiny and assessment was completed U/s.143(3) r.w.s Section 115WE of the Act, wherein the Ld. Assessing Officer added back the Provision for lease equalization charges that is debited in the P L A/c of the company to the Book Profits , for the purpose of tax computation U/s.115JB of the Act, thereby making an addition of 47,78,834 for A.Y 2006-07 and 1,09,58,683/- for A.Y. 2007-08. On appeal, the Ld. CIT (A) following the decision of the Hon ble Jurisdictional High Court in the appellant s own case reported in 318 ITR 435 held the issue in favour of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant assessment year which consists of lease rent and a portion of the principal amount , is credited in the books of accounts as the income of the assessee. The Ld. A.R. further explained that if Provision for lease equalization charges is not debited in the P L A/c of the assessee, then the profit of the assessee will be overstated in the P L A/c to that extent and therefore it will be in violation of the matching principles recognized by the Income Tax Act. It was therefore submitted that lease equalization charges should not be added back to the book profit of the assessee company for computing tax U/s.115JB of the Act. 5. We have heard both the parties and carefully perused the materials available on record. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized should be calculated on the basis set out in Accounting Standard (AS)-6. Depreciation Accounting. If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset should be fully depreciated over the lease term or its useful life, whichever is shorter. AS-19 : The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise the asset is depreciated o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account of the company. That being the case, the Provisions for lease equalization charges cannot be added back to the profit of the assessee company for computing tax under the provisions of section 115JB of the Act and also under the normal provisions of the Act, because the assessee has only rightly recognized its actual lease rental income in its profit and loss account for the relevant assessment year following th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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