DEPUTY COMMISSIONER OF INCOME TAX Vs. CITI FINANCIAL RETAIL SERVICES INDIA LTD.
LAWS(IT)-2014-7-19
INCOME TAX APPELLATE TRIBUNAL
Decided on July 02,2014

DEPUTY COMMISSIONER OF INCOME TAX Appellant
VERSUS
Citi Financial Retail Services India Ltd. Respondents

JUDGEMENT

S.S.Godara, Member (J) - (1.) THESE Revenue's appeals for the assessment years 1999 -2000 and 2000 -2001, emanate from a common order dated January 24, 2014 passed by the Commissioner of Income -tax (Appeals) -II, Chennai in I.T.A. Nos. 380 and 381/2013 -14 respectively, in proceedings under section 143(3) read with section 147 of the Income -tax Act 1961 (in short the "Act") deleting additions of Rs. 97,19,760 and Rs. 1,69,31,685 towards lease equalisation charges for the purposes of computing book profits under section 115JA of the Act. Since the issue involved in both cases is identical, we take up ITA No. 1102/Mds/2014 as the "lead" case. ITA No. 1102/Mds/2014
(2.) THE assessee is a private limited company. It is engaged in the business of leasing, hire purchase and finance of vehicles. On December 16, 1999, the assessee had filed its "return" admitting income of Rs. 90,22,970 under "normal" computation and Rs. 3,00,76,566 under "MAT" provisions under section 115JA of the Act. The same was "summarily" processed. In scrutiny, the Assessing Officer noticed lease equalisation charges of Rs. 97,19,760 added back to the assessee's profits in normal computation only and not for minimum alternate tax's computation. He was of the view that these charges had arisen in books from collection of lease money more or less than the statutory depreciation allowable on leased assets. As per the Assessing Officer, these lease equalisation charges were a provision to adjust the cost of assets recovered from the concerned lessees with the actual depreciation claimed. So, he formed an opinion that this was only an unascertained liability to be added back to the book profits under section 115JA.
(3.) ONLY on being put up to notice, the assessee pleaded to have computed these lease equalisation charges as per the relevant accounting standards and guidance notes issued by the Institute of Chartered Accountants of India for preparing financial statements which could not be added to its book profits. In assessment order dated November 30, 2006 the Assessing Officer observed that since the impugned lease equalisation charges were not as per the Companies Act, they had to be added to book profits. He also held that these charges were a notional figure in the nature of an unascertained liability not payable to anybody in the shape of a provision only. Proceeding on this reasoning, he made the impugned addition in the assessee's book profits under section 115JA.;


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