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TMI Blog2015 (11) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... vided. Lease rent equalisation is only an entry made in the balance sheet. But the question is whether it is an amount 'payable' for it to constitute 'consideration' for the services rendered by the appellant. For this purpose, the appellants have relied upon Accounting Standards. The appellants justify that there is a specific Accounting Standard for operating leases, which is AS19. In order to understand the meaning of the lease rent accounting recourse can be had to AS19. Such an approach has also been followed by the Hon'ble Supreme Court in Dai-Ichi Karkaria (1999 (8) TMI 920 - SUPREME COURT OF INDIA) and Association of Leasing and Financial Service Co vs Union of India (2010 (10) TMI 4 - SUPREME COURT OF INDIA ). The department has not been able to show us any contrary decision or furnish any reasons why we should not follow AS19. The audit report relied upon by the Ld. Sp. Counsel and the Commissioner concludes that the lease rent equalisation is an 'income', and chargeable to service tax as the gross amount received by the appellants. - The amount shown in the balance sheet is not an 'income' for the purposes of computing Tax under the Income Tax Act. In the result it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 12 2013-14 2222 2014-15 2223 2015-16 2223 2016-17 2223 2017-18 2223 Total 11,172 2.3 The total consideration payable over a period of 10 years worked out to ₹ 11,172 Crores, but payable in instalments of the actual amounts mentioned yearwise in Schedule I above. 2.4 As is evident from Schedule-I, the actual amount payable by RCOM in the first 5 years is comparatively meagre as compared to the amount payable towards the annual rent in the last 5 years of the MOU. 2.5 It is claimed by the appellant that, however, in the books of account maintained as per the Accounting Standards AS-19 relevant to operating leases, what has been recorded as income, is the amount actually received in each of the first 5 years which is the period relevant to the present appeal. The appellant claims that this actual income has been offered for tax and accepted as their income for the purposes of the Income Tax Act, 1961. At th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present an asset given under operating lease in its balance sheet under fixed assets. 40. Lease income from operating leases should be recognized in the statement of profit and loss on a straight line basis over the lease term, unless another systematic basis is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished. 41. Costs, including depreciation, incurred in earning the lease income are recognized as an expense. Lease income (excluding receipts for services provided such as insurance and maintenance) is recognized in the statement of profit and loss on a straight line basis over the lease term even if the receipts are not on such a basis, unless another systematic basis is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished. 4. Our attention was also drawn to the opinion of the Institute of Chartered Accountant in response to a query wherein it was clarified that lease rent equalisation cannot be treated as income. It was submitted that such lease rent equalisation amount is not 'income' for the purposes of the Income Tax Act, 1961. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service in such case, shall include any amount debited or credit to any account, whether called 'suspense account' or by any other name, in the books of accounts of the person liable to pay Service Tax. He relied on the audit objection to support the findings of the impugned Order. The Ld. Sp. Counsel sought to distinguish the judgments relied upon by the appellants. He relied on the judgement of the Hon'ble Supreme Court in Oswal Agro mills Ltd vs Collector, 1993 (66) ELT 37 to show that the words which are not defined must be given a meaning based on commercial parlance or the common understanding and there is no room for intendment. He also relies on the decision of the Hon'ble Tribunal in CCE vs Steel Industries Kerala Ltd., 2005 (188) ELT 33, to support his submission that disclosure in the balance sheet cannot impute knowledge to the department, therefore extended period of limitation can be invoked. 7. We have carefully considered the submissions made by both sides and perused the records. It is admitted that in this case, the appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rjuna Investment Trust Ltd. (supra), in which it is held that such a notional amount which is actually a balancing factor since expenses or cost are spread over the tenure of the lease, is not an 'income'. The amount shown in the balance sheet is not an 'income' for the purposes of computing Tax under the Income Tax Act. In the result it is also not a 'payment' actually received or receivable, and therefore neither 'consideration' nor the 'gross amount charged' in terms of clauses (a) and (c) respectfully of the explanation to Section 67 of the Act. Hence the appellant is not liable to pay Service Tax on the amount of lease rent equalisation shown in the balance sheet. 9. Ordinarily having decided on merits we would not have gone into the question of limitation. However, since the same has also been argued extensively, we would deal with the same. We find that there is no dispute that the records of the appellant were audited by the department. The disclosure in the balance sheet also shows that there was no concealment on the part of the appellant. We also accept that the appellant was under a bonafide belief that the service tax was paya ..... 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