In its balance sheet for the fiscal 1997-98, the company said in the fiscal 1995-96, it has accounted for a financial arrangement relating to a boiler costing Rs 48.67 lakh as a lease transaction and had considered 100 per cent depreciation in providing tax liability of the company.

"During the year, the company has reviewed the nature of this financial arrangement in light of the disclosures made by other parties before the IT department and was of the view that there had been a misrepresentation of facts by the borrower. This arrangement was in the nature of a loan since inception," it said.

Accordingly, the company said, it has decapitalised the `boiler' and reversed the lease, the lease rentalincome, depreciation and leases adjustment relating thereto accounted for in earlier years amounting to Rs 16.72 lakh, Rs 3.8 lakh and Rs 7.04 lakh respectively and has accrued interest income amounting to Rs 5.79 lakh for earlier years.

Therefore, the company has offered the depreciation allowance claimed in respect of this arrangement for tax under the VDIS 1997, as per the company's balance sheet.