Tax Audit clause 24 (a) rws 269 SS
This query is : Resolved
14 September 2009
Whether assets taken on finance lease will be covered under clause 24 (a) of tax audit r.w.s. 269 SS , assesse has shown the lease liability as an unsecured load and capitalised the leased assets
14 September 2009
IT IS NOT LOAN , IT IS AMOUNT PAYABLE AGAINST PURCHASE OF ASSETS
14 September 2009
will it a difference if it shown under the grouping of secured and unsecured loan in the audited accounts
26 July 2025
Regarding your query on **Tax Audit Clause 24(a)** and **Section 269SS** in context of **finance lease**:
---
### 1. **Finance Lease Liability Treatment:**
* Finance lease creates a **debt-like liability** because the lessee essentially finances the purchase of the asset over time.
* However, legally, it is **not a loan** but a contractual obligation to pay lease rentals.
* The leased asset is capitalized on the balance sheet, and the lease liability is shown as a liability.
---
### 2. **Clause 24(a) of Tax Audit (Form 3CD):**
* Clause 24(a) requires disclosure of **details of loans and advances taken from parties** covered under Section 269SS (prohibition on taking loans or deposits exceeding Rs 20,000 otherwise than by account payee cheque or draft).
* The key is whether the finance lease liability **qualifies as a loan** under the meaning of Section 269SS.
---
### 3. **Is Finance Lease Liability Covered under Section 269SS?**
* **No, it is generally not considered a loan under Section 269SS.**
* Finance lease is a form of credit for asset purchase but does not constitute a loan or deposit under the Income Tax Act.
* Hence, **finance lease liability is not subject to Section 269SS restrictions**.
---
### 4. **Presentation in Books:**
* If the lease liability is shown under **"secured loans" or "unsecured loans"**, it might create confusion.
* Ideally, lease liabilities should be shown under a **separate head like 'Lease Obligations' or 'Finance Lease Liability'** in the balance sheet.
* Showing it as a loan may not be accurate from an accounting and tax perspective.
---
### **Summary:**
| Aspect | Treatment |
| ----------------------------- | ----------------------------------------------- |
| Finance lease liability | Not a loan under Income Tax Act |
| Covered under Section 269SS? | No |
| Disclosure under Clause 24(a) | Not required for lease liability |
| Presentation in accounts | Should be shown separately, **not under loans** |
---
If your audit accounts show it as unsecured loan, it is **not technically correct** and may cause issues during scrutiny. Best practice is to **classify separately** and disclose clearly.
---
---
### 1. **Finance Lease Liability Treatment:**
* Finance lease creates a **debt-like liability** because the lessee essentially finances the purchase of the asset over time.
* However, legally, it is **not a loan** but a contractual obligation to pay lease rentals.
* The leased asset is capitalized on the balance sheet, and the lease liability is shown as a liability.
---
### 2. **Clause 24(a) of Tax Audit (Form 3CD):**
* Clause 24(a) requires disclosure of **details of loans and advances taken from parties** covered under Section 269SS (prohibition on taking loans or deposits exceeding Rs 20,000 otherwise than by account payee cheque or draft).
* The key is whether the finance lease liability **qualifies as a loan** under the meaning of Section 269SS.
---
### 3. **Is Finance Lease Liability Covered under Section 269SS?**
* **No, it is generally not considered a loan under Section 269SS.**
* Finance lease is a form of credit for asset purchase but does not constitute a loan or deposit under the Income Tax Act.
* Hence, **finance lease liability is not subject to Section 269SS restrictions**.
---
### 4. **Presentation in Books:**
* If the lease liability is shown under **"secured loans" or "unsecured loans"**, it might create confusion.
* Ideally, lease liabilities should be shown under a **separate head like 'Lease Obligations' or 'Finance Lease Liability'** in the balance sheet.
* Showing it as a loan may not be accurate from an accounting and tax perspective.
---
### **Summary:**
| Aspect | Treatment |
| ----------------------------- | ----------------------------------------------- |
| Finance lease liability | Not a loan under Income Tax Act |
| Covered under Section 269SS? | No |
| Disclosure under Clause 24(a) | Not required for lease liability |
| Presentation in accounts | Should be shown separately, **not under loans** |
---
If your audit accounts show it as unsecured loan, it is **not technically correct** and may cause issues during scrutiny. Best practice is to **classify separately** and disclose clearly.
---
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