NIIT Ltd. Vs DCIT (LTU) (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi Bench, has delivered a split verdict on appeals filed by NIIT Ltd. concerning its assessment for the Assessment Year 2009-10. In a significant decision regarding the treatment of finance lease payments, the Tribunal ruled in favor of the taxpayer, deleting the disallowance of over Rs. 50 lakh. However, in a separate but related appeal, the ITAT sent the matter of levied penalties back to the tax authorities for fresh consideration, citing a lack of detailed reasoning in the initial appellate order.
The primary dispute in the first appeal (ITA No. 376/Del./2014) revolved around the disallowance of Rs. 50,09,835 claimed by NIIT Ltd. as revenue expenditure. This amount represented the principal component of payments made by the company towards finance leases for infrastructure and movable assets utilized in its business of Information Technology education and knowledge solutions.
During the original assessment for AY 2009-10, the Assessing Officer (AO) noted that NIIT Ltd. had claimed this deduction despite accounting for the present value of future lease rents as capital assets and a corresponding liability in its books, in accordance with Accounting Standard AS-19 on “Leases” issued by the Institute of Chartered Accountants of India (ICAI). While the interest portion of the lease payments was allowed as revenue expenditure, the AO treated the principal amount as capital expenditure, consequently disallowing the deduction. The AO’s decision reportedly followed an earlier order of the ITAT Delhi Bench in the case of Rio Tinto India Pvt. Ltd., vs. ACIT.
