Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Income Tax Act 1961 |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Act(s) Referred | Companies Act, 1956 (1 of 1956) Income Tax Act, 1961 (43 of 1961) Chartered Accountants Act, 1949 (38 of 1949) |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Disposed Off |
Headnote | Income Tax Act, 1961 – Deduction on account of lease equalization charges from lease rental income – Entitlement for – Held: The bifurcation of the lease rental is, by no stretch of imagination, an artificial calculation and, therefore, 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 – Moreover, there is no express bar in the IT Act which bars the bifurcation of the lease rental – This bifurcation is analogous to the manner in which a bank would treat an EMI payment made by the debtor on a loan advanced by the bank – The repayment of principal would be a balance sheet item and not a revenue item – Only the interest earned would be a revenue receipt chargeable to income tax – Hence, whole revenue from lease would not be subjected to tax under the IT Act – Respondent is entitled for bifurcation of lease rental as per the accounting standards prescribed by the ICAI – Chartered Accountants Act, 1949. Chartered Accountants Act, 1949 – Guidance note issued by the Institute of Chartered Accountants of India (ICAI) – Reliability of – Held: ICAI is a recognized expert body vested with the authority to recommend accounting standards – The method of accounting followed, as derived from the ICAI’s Guidance Note, is a valid method of capturing real income based on the substance of finance lease transaction. Companies Act, 1956 – s.211 – Accounting standards as prescribed by ICAI to prevail until the accounting standards are prescribed by the Central Government. |
Judge | Hon'ble Mr. Justice R.K. Agrawal |
Neutral Citation | 2018 INSC 399 |
Petitioner | Commissioner Of Income Tax-vi |
Respondent | Virtual Soft Systems Ltd. |
SCR | [2018] 5 S.C.R. 595 |
Judgement Date | 2018-04-24 |
Case Number | 4358 |
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