2017 (5) TMI 1767

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....of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act. It is engaged in non-banking business. Return of income for the assessment year 1998-99 was filed on 30/11/1998 declaring a total income of Rs. 73,78,590/-. The said return of income was revised at a loss of Rs. 15,86,75,345/-. Against said return of income, assessment was originally completed u/s 143(3) of the Income-tax Act, 1961 ['the Act' for short] vide order dated 30/03/2001 determining the total loss at Rs. 1,13,04,163/- and assessed the book profits u/s 115JA of the Act. The AO added back lease equalisation charges of Rs. 11,09,04,763/- to the book profits for the purpose of determining tax liability u/s 115JA of the Act....

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.... the revenue is in appeal before us in the present appeal. The revenue raised the following identical grounds of appeal for assessment years 1998-99 to 2000-01: 7. During the course of hearing of the appeals, learned DR vehemently contended that the Hon'ble High Court of Karnataka has set aside the matter to the assessing authority accepting the contention of the learned counsel for assessee that lease equalization charges is nothing but diminution in the value of assets. Therefore, nature of the issue is not open for inquiry or consideration before the assessing authority. The assessing authority is bound to examine whether diminution in the value of assets can be added back to book profits for the purpose of computing tax liability u/s....

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....15JA of the Act. The Hon'ble High Court has framed the following question of law as regards lease equalization charges: "1. Whether the Appellate Authorities were correct in holding that the provision for non-performing assets and lease equalization fund cannot be added back to the book profits as per explanation to section 115JA(2) of the Act. The said question was answered by the Hon'ble High Court as follows: "8. Insofar as the second substantial question of law is concerned, that was also a subject matter of the appeal in the case of The Commissioner of Income Tax Vs. Weizmann Homes reported in (2013) 357 ITR 74 (Karn) wherein, it was held that by Finance Act No.2 of 2009 with effect from 01.04.1998, the Clause (g) ....

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....n'ble Delhi High Court in the case of Indian railway Finance Corporation Ltd. (supra) is not applicable to the facts of the present case as in that decision, it is not admitted that provision for lease equalisation charges is nothing but diminution in the value of assets. Therefore, the CIT(A) ought not to have allowed the claim of the assessee without examining the order of the Hon'ble High Court of Karnataka in detail. Therefore, the orders of the CIT(A) are reversed. 10. In the result, the appeals filed by the revenue are allowed. Order pronounced in the open court on 2nd May, 2017 ============= Document 1 1. The order of the Ld. CIT(A) is against law & facts of the case. 2. The Ld. CIT(A) has erred in allowing assessee's c....