As per the Income tax Act, Guidance notes thereto, Accounting Standard, and various decided cases, depreciation claim on fixed asset under Financial Lease is entitled to Lessee and not the Lessor even though the legal owner of the asset is the lessor on the grounds of substance over form that the lessee is the true real owner as rights to risks and rewards vest with the lessee.
Nevertheless. in SFM, under leasing decisions, benefit of tax shield on depreciation is provided to the lessor. In my view this is a serious contradiction. Can this issue be solved?
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