sale of leases assets

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Ankit Agarwal (Querist)
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05 September 2009 Hi,
My query is as follows. There were certain assets taken on lease in one of the companies premises. However, the company decided to wind operations in that premise. Subsequently, the company purchases those assets on lease and sold it. There are proper invoices for purchase and sell.
Can the company expense the loss on purchase and subsquent sale of these leased assets without capitalising the assets. The whole transaction was completed within 15 days and the amount involved is about 5 lacs. PLz suggest

M Prabhakar Menon

M Prabhakar Menon (Expert)
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05 September 2009 The difference between the purchase and sale prices is the loss/profit on this transaction.If u do not write it off in the current year the debit balance in this account will be carried forward to the next year when u cannot justify the expense as it relates to an earlier year. As far as income tax is concerned the block of assets concept applies and any profit/loss on sale of assets does not affect the total income/loss.

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Ankit Agarwal

Ankit Agarwal (Querist)
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06 September 2009 Thanks for the reply. But I dont want to capitalise the assets. Can i not expense this out without capitalising not showing this as an asset in books and income tax.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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22 July 2025 Thanks for sharing your question!

Here’s the key point regarding **sale of leased assets and accounting treatment** in your case:

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### Can you expense the loss without capitalising the leased assets?

* **Generally, leased assets should be capitalised** in the books if the company **owns or controls them**, especially if purchased.
* However, since you purchased and sold the assets **within 15 days**, and it’s more like a **trading transaction** rather than holding the asset for use, you may treat this as a **revenue transaction** (i.e., expense the loss directly).

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### What about tax implications?

* For **income tax**, the **block of assets concept** applies only if the assets are capitalised.
* If you do **not capitalise**, and treat it as a revenue transaction, then the loss would be allowed as a **business expense** in that year.
* But this treatment should be **consistent and justifiable** based on the nature and frequency of such transactions.

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### Summary:

| Treatment Option | Effect |
| ----------------------------- | ------------------------------------------------------------------------------------ |
| Capitalise then sell | Profit/loss treated under block of assets; deferred impact |
| Do not capitalise, expense it | Loss booked immediately as business expense; simpler for short turnover transactions |

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### Important:

* Make sure to document your accounting policy clearly.
* Consult your auditor for concurrence, especially to avoid any scrutiny.
* Frequent such transactions may require capitalisation as per accounting standards.

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Would you like help drafting a brief accounting policy note for this scenario?

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