The Income Tax Appellate Tribunal ( ITAT ) held that lease charges paid for the use of the asset, without acquiring any ownership rights in the same, are allowable as revenue expenditure under Section 37 of the Income Tax Act,1961.
The assessee claimed deduction of the principal component of lease payment in the computation of income. It was noted that the assessee took on lease equipment from M/s Sundaram Finance Ltd. (SFL) and debited the interest portion in the Profit & Loss Account. The owner of the equipment claimed depreciation and the assessee claimed the principal portion also as a deduction in the computation of income.
The AO disallowed the same and the addition of Rs.12.11 Lacs was made to the income of the assessee. The CIT(A) upheld the stand of AO on the ground that the principal portion was capital expenditure and allowing the same to the assessee would amount to a double deduction. Aggrieved, the assessee is in further appeal before us.
The Tribunal observed that ownership of the leased assets remains with the lessor and the lease rentals paid by the assessee are allowable as revenue expenditure for the reasons stated in our adjudication as above.
Shri Mahavir Singh, Vice President and Shri Manoj Kumar Aggarwal, AM that the principal portion of lease rentals would be an allowable deduction as revenue expenditure. The depreciation, if any, as separately claimed by the assessee on lease assets shall stand disallowed and the AO was directed to re-compute the income. The appeal was allowed.
Shri. R. Vijayaraghavan appeared for the appellant and Shri G. Johnson appeared for the respondent.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
