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TMI Blog2022 (12) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Department is present for the respondent. 2. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (briefly referred to hereinafter as the 'Act') against the order dated 24.06.2005 passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad (briefly referred to hereinafter as the 'Tribunal') in I.T.A.No.29/Hyd/2004 for the assessment year 2000-01. 3. From the docket proceedings, we find that on 06.07.2006, the appeal was admitted for hearing though no substantial question of law was framed. 4. Appellant has proposed the following questions as substantial questions of law: "(A) Whether the Appellate Tribunal is correct in law in disallowing the lease equalization charge cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e materials on record, Assessing Officer disallowed the aforesaid claim of the appellant. 8. The aforesaid decision of the assessing officer was challenged by the appellant before the Commissioner of Income Tax (Appeals)-IV, Hyderabad (briefly referred to hereinafter as the 'CIT(A)'). By the order dated 19.09.2003, CIT(A) upheld the disallowance made by the Assessing Officer. Thereafter appellant filed further appeal before the Tribunal which also came to be rejected. 9. On this issue, we find that CIT(A) held that the amount claimed by the assessee and disallowed by the Assessing Officer represented the difference between cost of asset leased minus the depreciation claim and the lease deposit received. This amount did not represent actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther actually paid or, provided for towards the liability actually existing at the time, but putting aside of money which may become expenditure on the happening of an event is not expenditure. The Hon'ble Supreme Court in the case of CIT Vs. Malayalam Plantations Ltd. (53 ITR 140) held that the expenditure is not allowable unless it is laid out or expended wholly and exclusively for the purposes of business or profession. In view of these decisions of the Supreme Court, the expenditure claimed by the appellant, not being a real expenditure, cannot be said to have been laid out and expended wholly and exclusively for the purposes of business. The AO is correct as per law in disallowing the claim for deduction. The AO's action is upheld. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to recommend accounting standards for ultimate prescription by the Central Government in consultation with the National Advisory Committee of Accounting Standards for the presentation of true and fair financial statements. 12. Section 211 of the Companies Act, 1956 as it stood before the amendment dealt with "the Form and contents of balance sheet and profit and loss account". Sub-section (3-C) of Section 211 was added vide the 1999 Amendment with retrospective effect. The relevant portion of Section 211 of the Companies Act is reproduced herein as under: "211. (3-C) For the purposes of this section, the expression "accounting standards" means the standards of accounting recommended by the Institute of Chartered Accountants of India c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imagination, an artificial calculation and, therefore, lease equalisation is an essential step in the accounting process to ensure that real income from the transaction in the form of revenue receipts only is captured for the purposes of income tax. Moreover, we do not find any express bar in the IT Act which bars the bifurcation of the lease rental. This bifurcation is analogous to the manner in which a bank would treat an EMI payment made by the debtor on a loan advanced by the bank. The repayment of principal would be a balance sheet item and not a revenue item. Only the interest earned would be a revenue receipt chargeable to income tax. Hence, we do not find any force in the contentions of the Revenue that whole revenue from lease shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no illegality in such bifurcation as it is according to the principles of law. Moreover, the rule of interpretation says that when internal aid is not available then for the proper interpretation of the statute, the court may take the help of external aid. If a term is not defined in a statute then its meaning can be taken as is prevalent in ordinary or commercial parlance. Hence, we do not find any force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act. 20. To sum up, we are of the view that the respondent is entitled for bifurcation of lease rental as per the accounting stan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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