TMI Blog2015 (10) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... year itself under the income Tax Act whereas in the books of account, it might have claimed depreciation on the said leased assets under the companies Act @ 10%. In such a case, if the annual leasing charge is equivalent to 30% of the value of leased assets, the assessee would debit its P&L account by lease equalization charges to the extent of 20% of the value of asset as per the guidance note issued by ICAI. If the lease equalization charges so debited are allowed as deduction while computing the total income of the assessee under the Income tax Act in addition to 100% depreciation already allowed, the assessee will get deduction of 120% of the value of asset in the first year itself and the very purpose of adopting the concept of lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99. 2. The sole grievance of the assessee relates to the upholding of the disallowance of ₹ 49,66,03,405/- being the claim of the assessee regarding the lease equalization. 3. The assessee is in the business of leasing and investment banking. The return for the year was filed on 27.11.1998 declaring Nil income. The said return was revised on 22.3.2000 declaring income of ₹ 17,43,80,163/- being profit u/s. 115JA and loss of ₹ 44,21,05,703/-. The return was selected for scrutiny assessment and statutory notices were issued and served upon the assessee. 3.1. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of ₹ 49,66,03,405/- on account of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Note issued by the ICAI and the Accounting Standards of ICAI cannot be brushed aside lightly. 7. Per contra, the Ld. Departmental Representative strongly supported the findings of the lower authorities. 8. We have carefully perused the orders of the authorities below. As observed by the Ld. CIT(A), identical issues were therein earlier assessment years also. We have the benefit of going through the order of the Tribunal in assessee's own case for A.Yrs 1994-95 to 1997-98 in ITA No. 2308, 2307, 2309 2310/Mum/2011 wherein the Tribunal has considered the facts and the submissions held as under: We have considered the rival submissions and also perused the relevant material available on record. We have also go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the corresponding expenses claimed in the form of depreciation and the effect of higher or lower claim of depreciation, than the corresponding recovery of investment made in the leased assets is nullified. In the books of account, the leasing companies are entitled to claim the depreciation by following one of the various methods prescribed in the Companies Act and if such depreciation claimed is more or less than the corresponding annual lease charge representing recovery of investment in the leased asset over the lease term, the difference is adjusted in the form of lease equalization based on the rationale of matching cost with the revenue so that the resultant income from the leasing is true and fair. The concept of lease equali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease equalization charges so debited are allowed as deduction while computing the total income of the assessee under the Income tax Act in addition to 100% depreciation already allowed, the assessee will get deduction of 120% of the value of asset in the first year itself and the very purpose of adopting the concept of lease equalization based on the rationale of matching cost with the revenue would be defeated. This will result in absurdity and give misleading results. In our opinion, it is therefore necessary that while allowing deduction on account of lease equalization charges for the purpose of computing total income under the Income Tax Act, the difference between the annual lease charge of the leased assets and depreciation allowed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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