A Lessee of Financial Lease can claim deprecation

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Amit Kumar (Querist)
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28 April 2009 author : Amit Kumar

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27 April 2009
Dear Sir
A Lessee of Financial Lease can claim deprecation (as Expenses) under income tax ACT (Plz refer circular no/Section of IT ACT)

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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28 April 2009 EXPL. 1 TO SEC 32:- Capital expenditure of any structure in a building taken on lease - if an assessee carries on business or profession in a building not owned by him but in respect of which he hold a lease or other right of occupancy, he is entitled to dep. in respect of any capital expenditure incurred by him after March 31, 1970 on construction of any structure or any work in relation to the building by way of improvement, renovation or extension.

CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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28 April 2009 Circular No. 2/2001 - Except the case noted above, if the asset is owned by the lessor, depreciation is available to the lessor (not to lessee). Accounnting Standard 19 on LEASES requires capitalisation of the asset by the lessee in a finance lease but for tax purpose only the "OWNER" is entitled to depreciation.

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CA Tilak Raj Sharma

CA Tilak Raj Sharma (Expert)
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28 April 2009 I think now it is very clear that for Accounting purpose you need to capitalise the amount but for tax purpose you cannot claim the depreciation.