Dismissing the appeal of the revenue , the Court held that ; an assessee can only be taxed on “real income”. The bifurcation of lease rental is not an artificial calculation. Lease equalization is an essential step in the accounting process to ensure that real income from the transaction in the form of revenue receipts only is captured for the purposes of income tax. The Guidance Note issued by the ICAI carries great weight. The method of accounting prescribed in such a Guidance Note, in order to compute real income and offering the same for taxation, cannot be disregarded by the AO unless such action falls within the scope and ambit of S. 145(3) of the IT Act .Lease rental is allowable ( C A No. 4358 of 2018, dt. 24.04-2018) ( AY. 1999-00 to 2000-01 )
CIT v. Virtual Soft Systems Ltd (2018)404 ITR 409/ 165 DTR 121 /302 CTR 65 / 255 Taxman 352 (SC) , www.itatonline.orgEditorial: Refer CIT v. CIT v. Virtual Soft Systems Ltd ( 2012)341 ITR 593 / 67 DTR 410 ( Delhi) (HC) is affirmed
S. 143(3): Assessment – Real income- lease rental- Interest and loan recovery – Guidance Note issued by the ICAI carries great weight – An assessee can only be taxed on “real income” -Lease rental is allowable [ S. 37(1),145(3), CA 1956, S.211 ]