Both Learned Counsel Concur On The Position Thatsubstantial Question Of Law v. Virtualsoftware Systems Limited ((2018) 404 Itr 409), Wherein Thesupreme Court Considered The Following Substantial Question Oflaw

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 02.01.2019 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE DR.JUSTICE ANITA SUMANTH Tax Case Appeal Nos.776 to 778 of 2009 Commissioner of Income Tax -IChennai. .... Appellant in the above T.C.AsVs. Apollo Hospitals Enterprises Ltd.,(Amalgamated Company of IndianHospitals Corporation Ltd)All Towers, IV Floor22 Greams Road, Chennai – 600 006. .... Respondent in the above T.C.As Tax Case Appeals filed under Section 260A of the Income TaxAct, 1961 against the order of the Income Tax AppellateTribunal, Madras 'A' Bench, Chennai, dated 19.12.2008 made inITA Nos.1282, 1283 and 1516/Mds/2006 for the Assessment Years1999-2000, 2002-03 and 1999-2000, against the order passed bythe Commissioner of Income Tax, (Appeals)-III dated 8/3/2006 inITA No.316/2005-06/A-III and in ITA No.147/2005-06-A III,against the Assessment Order for the Assessment Year 1999-2000and for the Assessment Year 2002-03 passed by the AssistantCommissioner of Income Tax, Company Circle I(1), Chennai dated31.3.2005 and 18.3.2005 in PA/GIR/No.AX1-015. (Delivered by DR.ANITA SUMANTH,J) These Tax Case (Appeals) are filed by the Revenuechallenging an order of the Income Tax Appellate Tribunal dated19.12.2008 made in ITA Nos.1282, 1283 and 1516/Mds/2006 inrespect of Assessment Years 1999-2000, 2002-03 and 1999-2000. https://hcservices.ecourts.gov.in/hcservices/ 2. This Court vide order dated 25.08.2009 admitted thefollowing substantial questions of law for consideration:Assessment Year: 1999-2000: 1. Whether on the facts and circumstances ofthe case, the Tribunal was right in holding that theassessee is entitled to deduction of leaseequalisation charge, which is nothing but an amountequal to the diminution in the value of depreciableleased assets, over and above the depreciationallowed under the Income Tax Act?Assessment Years: 1999-2000 & 2002-03: 2. Whether on the facts and circumstances ofthe case, the Tribunal was right in holding thatinterest under section 234D cannot be charged inrespect of the assessment years prior to theinsertion of the section 234D, when the regularassessment was completed only subsequent to theinsertion of section 234D? 3. Whether on the facts and circumstances ofthe case, no interest can be charged even for theperiod subsequent to the introduction of sec.234D,merely on the ground that the refund was grantedprior to its introduction? 3. We have heard Mr.T.Ravikumar, learned Senior StandingCounsel appearing for the appellant/Revenue and Mr.N.V.Balaji,learned counsel appearing for the respondent/assessee. 4. Both learned counsel concur on the position thatsubstantial question of law No.1 relating to deduction of leaseequalisation charges is covered by a judgment of the SupremeCourt in the case of Commissioner of Income Tax VI V. VirtualSoftware Systems Limited ((2018) 404 ITR 409), wherein theSupreme Court considered the following substantial question oflaw: '5. The short question that arises forconsideration before this Court is whether thededuction on account of lease equalisation chargesfrom lease rental income can be allowed under theIncome Tax Act, 1961, on the basis of Guidance Noteissued by the Institute of Chartered Accountants ofIndia (ICAI)?' 5. The conclusion of the Supreme Court at paragraph nos.16 and 17 of the said judgment is as follows:16) In the present case, the relevant AssessmentYear is 1999-2000. The main contention of the Revenueis that the Respondent cannot be allowed to claimdeduction regarding lease equalization charges sinceas such there is no express provision regarding such https://hcservices.ecourts.gov.in/hcservices/ '5. The short question that arises forconsideration before this Court is whether thededuction on account of lease equalisation chargesfrom lease rental income can be allowed under theIncome Tax Act, 1961, on the basis of Guidance Noteissued by the Institute of Chartered Accountants ofIndia (ICAI)?' 5. The conclusion of the Supreme Court at paragraph nos.16 and 17 of the said judgment is as follows:16) In the present case, the relevant AssessmentYear is 1999-2000. The main contention of the Revenueis that the Respondent cannot be allowed to claimdeduction regarding lease equalization charges sinceas such there is no express provision regarding such https://hcservices.ecourts.gov.in/hcservices/ deduction in the IT Act. However, it is apt to notehere that the Respondent can be charged only on realincome which can be calculated only after applying theprescribed method. The IT Actis silent on suchdeduction. For such calculation, it is obvious thatthe Respondent has to take course of Guidance Noteprescribed by the ICAI if it is available. Only afterapplying such method which is prescribed in theGuidance Note, the Respondent can show fair and realincome which is liable to tax under the IT Act.Therefore, it is wrong to say that the Respondentclaimed deduction by virtue of Guidance Note rather itonly applied the method of bifurcation as prescribedby the expert team of ICAI. Further, a conjointreading of Section 145 of the IT Act read with Section211 (un-amended) of the Companies Actmake it clearthat the Respondent is entitled to do such bifurcationand in our view there is no illegality in suchbifurcation as it is according to the principles oflaw. Moreover, the rule of interpretation says thatwhen internal aid is not available then for the properinterpretation of the Statute, the court may take thehelp of external aid. If a term is not defined in aStatute then its meaning can be taken as is prevalentin ordinary or commercial parlance. Hence, we do notfind any force in the contentions of the Revenue thatthe accounting standards prescribed by the GuidanceNote cannot be used to bifurcate the lease rental toreach the real income for the purpose of tax under theIT Act.17) To sum up, we are of the view that theRespondent is entitled for bifurcation of lease rentalas per the accounting standards prescribed by theICAI. Moreover, there is no express bar in the IT Actregarding the application of such accountingstandards. 6. Accordingly, we answer substantial question of law No.1in favour of the assessee and against the Revenue. 7. In so far as substantial questions of law 2 and 3,relating to levy of interest under section 234D are concerned,both learned counsel concur that the issue is settled by thejudgment of the Supreme Court in the case of Commissioner ofIncome Tax -I V. Reliance Energy Ltd. ((2013) 358 ITR 371)wherein the Supreme Court holds that the provisions of section234D would be attracted in the case of assessments made afterthe date of its insertion, being 01.06.2003. 8. In the instant case, the orders of assessment forAssessment Years 1999-2000 and 2002-03 are 18.03.2005 and31.03.2005, both being subsequent to 01.06.2003. Accordingly,the provisions of section 234D would stand attracted in bothcases. 9. We answer the 2[nd] and 3[rd] substantial questions of law in favour of the Revenue and against the assessee. 10. In the upshot, all the above Tax Case (Appeals) aredisposed of as above. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarTo1)The Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai.2)The Commissioner of Income Tax (Appeals)-III, Chennai-34.3.The Assistant Commissioner of Income Tax, Company Circle I(1), Chennai-34. +1cc to Mr.N.V.Balaji, Advocate Sr.559+2cc to Mr.T.Ravikumar, Advocate Sr.401 TCA Nos.776 to 778 of 2009 ss[co]srg 06/03/2019 9. We answer the 2[nd] and 3[rd] substantial questions of law in favour of the Revenue and against the assessee. 10. In the upshot, all the above Tax Case (Appeals) aredisposed of as above. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarTo1)The Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai.2)The Commissioner of Income Tax (Appeals)-III, Chennai-34.3.The Assistant Commissioner of Income Tax, Company Circle I(1), Chennai-34. +1cc to Mr.N.V.Balaji, Advocate Sr.559+2cc to Mr.T.Ravikumar, Advocate Sr.401 TCA Nos.776 to 778 of 2009 ss[co]srg 06/03/2019 https://hcservices.ecourts.gov.in/hcservices/