9911796707
TMI Blog2015 (10) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 Rs. 17,43,80,163/- being profit u/s. 115JA and loss of Rs. 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 Rs. 49,66,03,405/- on account of lease equalization reserve. The AO disallowed the claim of deduction on lease equalization reserve on the basis of finding in assessment order of earlier years. 4. The assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) found that identical is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties 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 gone through the guidance note issued by ICAI explaining the concept of lease equalization with the illustration. The said guidance note is basically issued for the purpose of accounting and the concept of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llified. 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 equalization thus is basically an accounting concept and the same is followed for the purpose of revenue recognition of leasing income as per the guidance note issued by ICAI. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on the said leased asset under the Income Tax Act should be taken into consideration and not the difference between the annual lease ..... X X X X Extracts X X X X X X X X Extracts X X X X
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