Retrospective MAT amendment requires lease equalisation charges to be added back as provision for diminution in asset value.

Lease equalisation charges, treated as a provision for diminution in the value of assets, fall within the book-profit adjustment under section 115JA where clause (g) to the Explanation, inserted retrospectively from 1 April 1998, specifically covers amounts set aside as such provision. On that basis, the Assessing Officer was required to apply the amended MAT computation provision, and the contrary High Court decision cited by the assessee was held inapplicable on the facts. The charges were therefore addable back to book profits, the assessee's challenge failed, and the Revenue's appeals succeeded.

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Issues: Whether lease equalisation charges, being in the nature of provision for diminution in the value of assets, could be added back to book profits for computation of tax liability under section 115JA of the Income-tax Act, 1961.

Analysis: The matter turned on the effect of clause (g) to the Explanation to section 115JA(2), inserted retrospectively with effect from 1 April 1998, which specifically brings within the book-profit computation amounts set aside as provision for diminution in the value of any asset. The earlier High Court direction and the assessee's own stand that lease equalisation charges represented diminution in asset value meant that the Assessing Officer was required to apply the statutory provision as amended. On that footing, the cited contrary High Court decision was held inapplicable on the facts.

Conclusion: Lease equalisation charges were held to be addable back to book profits under section 115JA, and the assessee's challenge failed.

Final Conclusion: The Revenue's appeals succeeded and the orders of the first appellate authority were set aside.

Ratio Decidendi: Where a statutory amendment retrospectively includes provision for diminution in the value of assets within the MAT computation, such amount must be added back to book profits if the assessee's own case shows the charge to be of that nature.

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