Depreciation on Leased Assets

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

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.

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:

• Mumbai Special Bench decision in the case of Indusind Bank
• Supreme Court - Asea Brown Boveri vs IFCI
• Association of leasing company
• Virtuous finance
• Circular 02 of 2001

These cases offer a very detailed analysis, and cover your question very properly.

Regards