- (1.) The assessee seeks a decision of this Court on the following questions of law: "1. Whether on the facts and circumstances of the case the Tribunal was right in law in holding that in the case of "Finance Lease" transaction the entire lease rental should be offered as income contrary to the Accounting Standard-19 dealing with accounting of leases issued by the Institute of Chartered Accountants of India? 2. Whether on the facts and circumstances of the case the Tribunal was justified in not directing the assessing officer to consider that in the case of financial lease only the interest income accrued to assessee should be taxed and not the entire lease rental as assessed by him and consequentially withdraw the claim of depreciation on leased assets?"
(2.) The assessment order herein arises out of the common order of the Income Tax Appellate Tribunal relating to the assessment years 2002-03;2003-04;2004-05;2005-06;2006-07;2007-08 and 2008-09.
(3.) The assessee is stated to be in the business of bill discounting, hire purchase and leasing, mutual funds and insurance agency. In the returns filed for the respective assessment years, the assessee offered interest portion alone in the leasing transaction as its income. It is stated that as per the amended Accounting Standard 19 dated 01.04.2001, only the income portion of the lease rental shall be offered as income and the lessor cannot claim depreciation. Accordingly, the assessee treated the lease transaction as financial lease transaction. However, in the returns filed, the assessee claimed depreciation on the leased assets stated to be based on the CBDT Circular dated 9th February 2001, wherein it was stated that even in financial leases, the lessor could claim depreciation. The Assessing Officer, however, viewed that offering the interest portion of the lease rent alone for income tax purposes but at the same time claiming depreciation on the leased assets, the assessee had attempted on a double benefit. When this was put to the assessee, the assessee explained through a written submission that upto financial year 2001-02, the cost of the asset was capitalised in the books of accounts under the head fixed assets and necessary depreciation was provided thereon. However after the introduction of Accounting Standard 19, the Company had accordingly followed the standard as mandatory under Section 211(3C) of the Companies Act,1956 and the lease was treated as current asset and not the fixed asset, hence, no depreciation was charged in the books of accounts for the financial year 2001-02. While agreeing with the assessee, that as per Accounting Standard 19 in the case of financial lease, the asset was treated as receivable amount equal to net investment in the lease, for income tax purpose in respect of lease rent also, the entire lease rent was taxed as income of the lessor. The Officer reasoned out that the computation of taxable income has to be done after taking into account the various additions and deductions in accordance with Accounting Standard 19. He further pointed out that total lease rent received and the depreciation claimed clearly tantamounted to double deduction to the assessee and the method of accounting followed by the assessee in respect of lease transaction was not giving a true and correct picture of the income of the assessee. The Assessing Officer thus ultimately came to the conclusion on scrutiny of the accounts, that the entire least rent was taxable as income of the lessor and the lessor was entitled to depreciation on the equipments.;