27 April 2009
Tax Treatment - The lessor has the right to capitalse the assets in it’s books and gets the depreciation as per Income tax act. The lessees pays the lease rent and gets the deduction of entire amount of lease rent so paid. The difference between the IT and AS is that the IT does not differentiate between a finance lease and operating lease. See circular no 2/ 2001
27 April 2009
[Explanation 1 to Sec 32(1) - Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee.. so the leasee gets to claim depn. only on the amount spent by him for such renovation or repair, etc... but not on whole leased building.
Posted On 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
CAclubindia
