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Deferred Tax in the context of Finance Lease

4747 views 3 replies

Rohit Khare

student

111 Points Posted on 13 November 2008

Dear All,

Suppose Mr. X gives an asset on finance lease basis to Mr. Y. As per AS 19, Y will claim depreciation. But as per Income Tax ACt Y is not entitled to depreciation but it is X the kegal owner who will claim depreciation. In this situation there is difference between accounting income and taxable income of X to the extent of depreciation. So should this result in deferred tax asset or liability for X & Y also????

Waiting for reply.....

Replies (3)

S.Srinivasaraghavan

Chief Financial Officer and Co

11318 Points Posted on 13 November 2008

Naturally . Yes.

Geetha

Student

0 Points Posted on 14 November 2008

Dear Sri Rohit,

I got the same doubt. I got it clarified through a faculty member based at chennai. He says that there will be permanent difference and will not result in either DL or DTA. This srini gentleman seeming to answer in brief, says yes or no without explanation, y should he resort to answering questions like this. He has no job it seems in his office. simply spoiling the club student members

When X L'sor claims depreciation as per IT act, Y lessee cannot claim under IT act but as per AS 19. In both X as well as Y accounting income will be different on account of this differential claim of depreciation. So it will result in Permanent difference and only timing, temporary difference will result in DTL/DTA

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