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Regarding taxt treatment lease rent equalisation

S.Srikanth (Cost Accountant ) (346 Points)

19 May 2014

Hi friends

Can anyone explain me the Tax impact on of lease rent equalisation..
As per AS-19 the lease rent is apportioned on straight line basis over lease term

Suppose Actual Rent paid is Rs.50000 p.m ..Leasr rent as per as 19 is Rs.55000 p.m the difference of 5000 is to be transferred to Rent Equalisation Reserve...Rent a/c dr To R.E reserve A/c

My query is whether TDS to be deducted for the excess 5000 or not???

What is the treatment on computation of Income tax in normal as well as MAT ..???

Whether to be added back or allowable expenses...

Pls tell me if there any relevant case laws..

Regards,

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3 Replies

S.Srikanth (Cost Accountant ) (346 Points)
Replied 20 May 2014

Is there any alternative treaments????

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Richa Bareja (CA MBA(Finance) CS Final) (33 Points)
Replied 17 July 2014

Hello Srikanth,

As per TDS provisions, where any income is credited to any account whether called Suspense or any other account, then person liable to pay such income is required to deduct the Tax.

Creation of Lease Equalization Reserve does not result in any outflow, it is just a provision as per AS 19 to consider the rent laibility on SLM basis & which gets reversed over the lease Period.

There will no impact in the P & L since the same will get disallowed for the purpose of DTA/ DTL and hence Tax will get affected accordingly.

So, in my opinion TDS provisions will not get attracted.

Kindly rectify me if you experts find any flaw in understanding.

Best Regards,

asiyah (intern) (21 Points)
Replied 13 February 2015

what if revenue share is given to mall developers over and above rent, then in that case also lease equalisation reseve is required to be maintained? kindly clarify?i m waiting forur reply?