COMMERICAL LEASING CORPORATION P. LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 6570/MUM/2010

• Counselvise Citation: 657019914 RSA 2010
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-09-2013
• Assessment Year: 1997-1998
• Appeal Filed On: 08-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C TRIPURA SUNDARI
• Assessee Lawyers: DR P DANIEL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH , MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI R AJENDRA SINGH , A M TA NO. 6570 / MUM / 20 1 0 ( ASSESSMENT YEAR : 1997 - 98 ) COMMERCIAL LEASING CORPORATION PVT. LTD. 1, JUHU LANDMARK CHS PLOT NO.37, GULMOHAR ROAD, JVPD SCHEME, VILE - PARLE (W), MUMBAI - 400 049 VS. DCIT 8(1), MUMBAI - 400 020 PAN/ GIR NO. : A A ACC 4613 J ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : DR. P. DANIEL /REVENUE BY : MS . C. TRIPURA SUNDARI DATE OF HEARING : 4 TH S E PTEMBER , 201 3 DATE OF PRONOUNCEMENT : 11 TH SEPTEMBER , 2013 O R D E R P ER SHRI R.K.G UPTA, JM : THE ASSESSEE HAS PREFERRED THIS APPEAL AGAINST THE ORDER OF LEARNED CIT(A) , MUMBAI FOR ASSESSMENT YEAR 1997 - 98 . 2 . GROUNDS NO. 2 & 3 HAVE NOT BEEN PRESSED DURING THE APPELLATE PROCEEDING BY THE COUNSEL OF THE ASSESSEE. THEREFORE, THEY ARE DISMISSED AS NOT PRESSED. 3 . GROUND NO.1 IS AGAINST UPHOLDING THE ACTION OF THE AO IN DISALLOWING THE LEASE EQUALIZATION AMOUNT CLAIMED OF RS. 78,41,051/ - W HILE COMPUTING THE BOOK PROFIT U/S 115JA OF THE ACT. 4 . THE AO MADE AN ADDITION OF RS. 78,41,051/ - BEING AMOUNT TRANSFERRED TO LEASE EQUALIZATION RESERVE TO THE COMPUTATION OF BOOK PROFIT U/S.115JA OF THE ACT BY OBSERVING THAT THE PROVISIONS OF SECTION I TA NO. 6570 /1 0 2 115J A(2) , WHICH PROVIDES FOR MAINTENANCE OF P & L A/C IN TERMS OF THE PROVISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT. FURTHER THE PROVISO TO THE SAID SECTION STIPULATE THAT IN THE PREPARATION OF THE P & L, THE DEPRECIATION CAN BE CALCULATED O N THE SAME METHOD AND BASIS PROVIDED IN THE COMPANIES ACT. THE ACCOUNTING PROCEDURE ADOPTED BY THE ASSESSEE WAS EXAMINED BY THE AO AND IN ORDER TO MEET THE CONDITIONS PRESCRIBED IN SCHEDULE VI AS ALSO IN SECTION 115JA(2), THE ASSESSEE HAD CHARGED TO THE P & L ACCOUNT, THE DEPRECIATION WORKED OUT IN TERM OF THE PROVISIONS OF THE COMPANIES ACT. THE PROVISIONS FOR LEASE EQUALIZATION HAS BEEN CREATED AND CHARGED TO THE P & L ACCOUNT. THE AO OBSERVED THAT THIS IS NOT IN TERMS OF THE PROVISIONS OF COMPANIES ACT IN SO FAR AS THE DEPRECIATION IS CONCERNED AND SUCH CHARGES TO THE PROFIT AND LOSS ACCOUNT IN TERMS OF THE PROVISION OF SECTION 115JA(2) READ WITH THE PROVISO. ACCORDINGLY, THE AO REJECTED THE CLAIM OF THE ASSESSEE AND AN AMOUNT OF RS. 78,41,051/ - BEING LEA SE EQUALIZATION RESERVE WAS DISALLOWED AND ADDED BACK TO THE BOOK PROFIT COMPUTED U/S.115JA OF THE ACT. 5 . ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) . RELIANCE WAS PLACED ON VARIOUS DECISIONS. HOWEVER, LEARNED CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. ACCORDINGLY, HE DISMISSED THE GROUND OF THE ASSESSEE. NOW, THE COUNSEL OF THE ASSESSEE, WHO APPEARED BEFORE THE TRIBUNAL, STATED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S BOMBAY DYEING & MFG. CO. LTD. VS. DCIT, DECIDED IN ITA NO.5059/M/2003, VIDE ORDER DATED 14 - I TA NO. 6570 /1 0 3 9 - 2011 . COPY OF THIS DECISION HAS ALSO BEEN FILED. IT WAS ALSO SUBMITTED THAT THE PRIMARILY THE ISSUE HAS BEEN DECIDED IN THE CASE OF PAL CREDIT & CAPITAL LTD., DECIDED IN ITA NO. 7526/M/2007, VID E ORDER DATED 20 - 7 - 2007 , COPY OF WHICH IS ALSO PLACED ON RECORD. A COPY OF THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF TVS FINANCE AND SERVICES LTD. VS. JCIT, REPORTED IN (2009) 318 ITR 435 (MAD) HAS ALSO BEEN FILED, WHERE ALSO THE SIMILA R ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. 6. ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDER OF CIT(A). 7. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNA L IN THE CASE OF M/S BOMBAY DYEING & MFG. CO. LTD (SUPRA) , IN WHICH ONE OF US (I.E. ACCOUNTANT MEMBER) WAS PARTY TO THE ORDER. IN PARA 27 ONWARDS, THIS ISSUE HAS BEEN DECIDED. THE FINAL FINDINGS HAVE BEEN RECORDED AT PAGE 20 OF THE ORDER OF THE TRIBUNAL, WHEREIN THE TRIBUNAL HAS RECORDED THAT RESPECTFULLY FOLLOWING THE CONSISTENT VIEW, IT IS HELD THAT THE LEASE EQUALIZATION AMOUNT IS NOT TO BE ADDED TO THE PROFIT OF THE BUSINESS AS IT FALLS OUTSIDE THE SCOPE OF EXPLANATION TO SECTION 115JA OF THE ACT. AC CORDINGLY, THE APPEAL OF THE DEPARTMENT WAS DISMISSED ON THE ISSUE INVOLVED. SIMILAR ISSUE HAS BEEN DECIDED IN THE CASE OF PAL CREDIT & CAPITAL LTD., (SUPRA) IN FAVOUR OF THE ASSESSEE. THE HON BLE MADRAS HIGH COURT IN THE CASE OF TVS FINANCE AND SERVICES L TD. (SUPRA) HAS ALSO HELD THAT THE AMOUNT ON LEASE I TA NO. 6570 /1 0 4 EQUALIZATION CHARGES OVER THE PERIOD OF LEASE IS EQUAL TO THE DIFFERENCE BETWEEN THE QUANTUM OF PRINCIPAL RECOVERED AND THE RESIDUAL VALUE. BUT HYPOTHETICALLY JUSTIFIES ITS TREATMENT AS A RESERVE ON THE GR OUND THAT THERE WILL BE SOME YEARS WHEN THE QUANTUM OF THE PROVISION IS MORE THAN NECESSARY. SINCE THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL AND THE DECISION OF THE MADRAS HIGH COURT, THEREFORE, WE FIND THAT THE ASSESSEE DESERVE TO SU CCEED ON THE ISSUE INVOLVED. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A) AND HOLD THAT THE AMOUNT OF LEASE EQUALIZATION CHARGES CANNOT BE ADDED TO THE PROFIT FOR THE PURPOSE OF SECTION 115JA. THIS GROUND OF THE ASSESSEE IS ALLOWED. 8 . RESULTANTLY , AP PEAL OF THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPT . 201 3 . SD/ - ( ) ( R AJENDRA SINGH ) SD/ - ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 11 / 09 / 2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE C I T(A) , MUMBAI . 4. / C I T 5. / DR, ITAT, MUMBAI . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( /ASSTT. REGISTRAR) / ITAT, MUMBAI