Lakshmi Vilas Bank Ltd. v. Asstt. CIT

INCOME TAX ACT, 1961

--Business expenditure--Lease equalization chargesDepreciation of ten years amortized in six years----Allowable lease equalization charges would be the difference of the annual lease charge and depreciation allowed on the leased asset under the IT Act and not the difference of annual lease charge and depreciation claimed by the assessee in the books as per the Companies Act.--Assessee had given its asset on lease to a party for a period of six years after which ownership of asset would be transferred to the lessee. Actual life of the asset was approximately ten years but assessee amortized the total depreciation available for the asset for ten years over a period of six years itself under the head lease equalization charges. AO disallowed the same, as it did not fall under any provisions of sections 32 to 43C. Held: While allowing deduction on account of lease equalization charges for the purpose of computing total income, the difference between the annual lease charges and depreciation allowed on the leased asset under the IT Act should be taken into consideration and not the difference between the annual lease charge and depreciation claimed by the assessee in the books as per the Companies Act. Therefore, matter was remitted back to the file of AO for determining the allowable lease equalization charges.