Income tax

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If any capital expenditure is incurred on leased asset, it is capitalized under income tax act. Suppose an assessee incurred capital exp. on a building taken on lease, capitalized it and claimed depreciation. The lease expires in 5 years (2010-2015) and depreciation rate is 10%. What should be done after the lease period expires? Can assessee claim depreciation after 2015 also even if he is not using the asset? If not, What should be the correct treatment?

Replies (4)

If leased asset aggrement is renewed then continue the same til depreciation is allowed and assessee is eligible as per act .

iF NOT, then till the time assessee is not using asset for his business then it isnot allowed  for depreciation as he will not be the legal/ beneficial owner of  such asset and even sec 32will not be satisfied so depreciation and any other exp is not allowed in reation tosaid assetin dat period till the agrement is renewed.

I agree. Now How it will be deducted from the block? whether we should calculate WDV as if it was the only asset in the block and deduct WDV from block? "No realisation is given by lessor for that capital exp."

Its becomes fix asset in Balance sheet without changeing Its value till date it will not in use. However, We can Written Off this aseet as It's market Value down OR as time going Nominal depriciation charge even it not in use.

Originally posted by : CA Abhilasha Bhagat

I agree. Now How it will be deducted from the block? whether we should calculate WDV as if it was the only asset in the block and deduct WDV from block? "No realisation is given by lessor for that capital exp."

Yes it will be deducted from the block not as if it was only asset....but because the lease term expires the assessee is now not the legal/ beneficial owner of the leased asset and it shall be deducted  as if it was sold witout any consideration recived from any1 and sale consideration will be 0 and it shall also be removed from balance sheet as it will also not fulfill the eligible criteria for being asset...


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