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Regarding depriciation on leasehold land

priyanka (consultant) (33 Points)

17 August 2013

Please suggest me can we claim depriciation on Leasehold land under income tax and companies act. if Yes under which sec.

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9 Replies

CA Rajnik Galani (prctice) (154 Points)
Replied 17 August 2013

As per Accounting Standard -19 Person who posed The property Is claim dep. (ex. lessee)

Pawan Sehrawat (Partner) (91 Points)
Replied 18 August 2013

There is no question of depreciation on Leasehold LAND (its a NON depreciable asset).

Tenant can claim depreciation on Lease Hold Improvements over the period of lease term.

shivam gupta (Student) (142 Points)
Replied 18 August 2013

Dear Rajnik Sir,

AS 19 does not deal with Lease on Lands however the proposed Ind AS will deal with this issue.

shivam gupta (Student) (142 Points)
Replied 18 August 2013

Lessee neither claim depreciation in TAx nor In companies Act.

Reasons:-

In companies Act - Since Land is a Non depreciable Asset so Depreciation will not be allowed.

In Income Tax Act.- In case of Lease, since ownership has not transferred , depreciation on Depreciable asset will be available to the lessor

since Land is not a depreciable asset Depreciaiton will not be available however since you purchase it on lease you can have deduction of payment of Lease amount as per Explanation 6 of Sec 32.

& the information provided by "Sunrise" is abosolutely Right.

CA Rajnik Galani (prctice) (154 Points)
Replied 19 August 2013

ya it's my mistake

Dep. can not claim on land

Prashanth (NA) (33 Points)
Replied 06 July 2016

Depreciation on lease hold land can be claimed.

As per Accounting Standard 6, depreciation on land is not allowed unless it has useful life.

Land owened (absolute title) shall have no depreciation since it has unlimited life. However, a leasehold land under a lease deed is acquired for a specific period of time. Hence, a lease hold land is certainly eligible for depreciation, since it has limited life in my hands .

A prudent way of depreciating will be over the period of lease, since after lease period the land's title and possession transfers to the ultimate owner.

To conclude, depreciation as per CA can b claimed for leasehold lands.

Income tax Act doesn't recognise the Leases and will not consider the asset Leased as a capital asset. As per IT, owner shall be eligible fr deprn claim and not holder (lessee).

Hope I've clarified the doubt. ATB.