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Finance Lease

This query is : Resolved 
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(Querist)
07 January 2011 Hi All,
I have a query that in case of finance lease if both parties agrees that the lease rentals + applicable taxes (VAT or Service Tax) shall be born by the lessee, then how we should calculate the amount to be capitalized initially, assuming there is no VAT or Service Tax credit is available to the concerned.
1. PV of lease rentals + applicable taxes (VAT or Service Tax), but this will lead to additional interest cost on VAT or Service tax portion also
2. PV of only lease rental and capitalizing VAT or Service Tax as and when they are charged by lessor to be depreciated in remaining useful life of the asset because this is not financed by lessor.
Please give reference of relevant rule.

regards
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CA Shailesh Kumar Bhagat

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CA Shailesh Kumar Bhagat (Expert)
09 January 2011 Add the VAT or service tax with lease rental and calculate the PV.
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