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Depreciation on Leased Assets

Gagan Gupta (Chartered Accountant) (161 Points)

18 December 2007

Hi all

Can a company claim depreciation on leased assets in case of Financial Lease.

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3 Replies

CA hitesh bhadada (article) (36 Points)
Replied 18 December 2007

Hi, Income tax does not segregate lease as financial or operating. So as a leasee one can not claim depreciation on leased assets.

Anandb (CA Final Student) (54 Points)
Replied 19 December 2007

hitesh is absolutely right. Although as per Accounting Standards you can claim depreciation on assets classified as Finance Lease, Income Tax does not allow you to claim depreciation on leased assets. It goes on concept of ownership. The person who gives the assets on finance lease can claim depreciation as per Income Tax Act.

Kishan Shah (Intern I) (29 Points)
Replied 21 July 2012

Gagan, there would be no absolute answer to your query, as the answer would depend on the facts, terms and conditions of the finance lease agreement. I can list the below judgments, which you should refer to, and compare the facts of your case: