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Tax Publishers NXP India (P) Ltd. v. Pr. CIT [ITA No. 1343/Bang/2019, dt. 9-10-2020] : 2020 TaxPub(DT) 4148 (Bang-Trib) Divergence in treatment of Leases by lessee under AS-19 -- Invocation of section 263 Assessee had taken certain vehicles on lease which were capitalized in the books of accounts and depreciation and interest was claimed on the same as per AS-19 applying it as a finance lease where in substantial risks and rewards stood transferred to the Assessee. In the tax computation the said depreciation was reversed and the entire lease rent including the principal portion was claimed as an expense applying it as an operating lease. This was re-opened by the PCIT invoking section 263 who alleged that the assessing officer did not make sufficient enquiry of the aspect of the claim of the entire lease payment as an allowable expenditure thus the order was erroneous and prejudicial to the interests of the revenue. Aggrieved by this order the assessee went in appeal to ITAT claiming that the invocation of section 263 was incorrect and deserves to be quashed. Held against the assessee that the assessing officer had not applied his mind on this point and thus the invocation of section 263 by PCIT was correct. Assessee pressed application of ICDS Ltd. v. CIT, Mysore (2013) 29 taxmann.com 129 (SC) : 2013 TaxPub(DT) 0414 (SC) where in it was held that only the lessor was entitled to the depreciation. The ITAT agreed on this principle but in the computation the assessee could not point out the addition of the depreciation and the capitalized assets being reversed so as to enable full claim of operating lease payment, thus to that extent the assessing officer's order lacked sufficient enquiry and was found to be worthy of invocation of section 263 by PCIT. *Editorial Note:* The decision points the golden rule that to invoke section 263 it is sufficient to prove that the order is erroneous and prejudicial to the interests of the revenue. To what degree and why is always a matter of adjudication. It was in this realm that the request of the assessee to quash the revision powers stood dismissed by the ITAT.

Tax Publishers

NXP India (P) Ltd. v. Pr. CIT [ITA No. 1343/Bang/2019, dt. 9-10-2020] : 2020 TaxPub(DT) 4148 (Bang-Trib)

Divergence in treatment of Leases by lessee under AS-19 -- Invocation of section 263

Assessee had taken certain vehicles on lease which were capitalized in the books of accounts and depreciation and interest was claimed on the same as per AS-19 applying it as a finance lease where in substantial risks and rewards stood transferred to the Assessee. In the tax computation the said depreciation was reversed and the entire lease rent including the principal portion was claimed as an expense applying it as an operating lease. This was re-opened by the PCIT invoking section 263 who alleged that the assessing officer did not make sufficient enquiry of the aspect of the claim of the entire lease payment as an allowable expenditure thus the order was erroneous and prejudicial to the interests of the revenue. Aggrieved by this order the assessee went in appeal to ITAT claiming that the invocation of section 263 was incorrect and deserves to be quashed.

Held against the assessee that the assessing officer had not applied his mind on this point and thus the invocation of section 263 by PCIT was correct.

Assessee pressed application of ICDS Ltd. v. CIT, Mysore (2013) 29 taxmann.com 129 (SC) : 2013 TaxPub(DT) 0414 (SC) where in it was held that only the lessor was entitled to the depreciation. The ITAT agreed on this principle but in the computation the assessee could not point out the addition of the depreciation and the capitalized assets being reversed so as to enable full claim of operating lease payment, thus to that extent the assessing officer's order lacked sufficient enquiry and was found to be worthy of invocation of section 263 by PCIT.

Editorial Note: The decision points the golden rule that to invoke section 263 it is sufficient to prove that the order is erroneous and prejudicial to the interests of the revenue. To what degree and why is always a matter of adjudication. It was in this realm that the request of the assessee to quash the revision powers stood dismissed by the ITAT.