“depreciation on leased assets”
The decision most relied on for depreciation on leased assets is ICDS Ltd. v. CIT (350 ITR 527), cited in 280 judgments on BharatTax.
Leading authorities on depreciation on leased assets
An assessee engaged in the business of hire purchase or leasing, being the lessor, is entitled to claim depreciation on assets leased out, even if the assets are registered in the name of the lessee and used by the lessee.
Expenditure providing an enduring advantage, such as upfront lease rent for land, is revenue expenditure if no capital asset is acquired or generated, allowing for deduction under Section 37, even when capitalized in the books of account.
Lease rent paid by a lessee for assets they do not own and cannot alienate is considered revenue expenditure. The owner (lessor) is entitled to claim depreciation on such leased assets.
The case is cited for the principle that income from leasing of assets, if the lease is a finance lease, the depreciation allowance should be computed on the leased asset, not on the lease income.
The leasing company is considered the owner of an asset in a lease agreement and is therefore entitled to claim depreciation, including at a higher rate if the asset is hired out.
The leasing company is considered the owner of an asset under a lease agreement and is therefore entitled to claim depreciation, including at a higher rate for assets hired out. The court does not consider it necessary to delve into disputes about invoice issuance names when the lease agreement and related factors satisfy the ownership criteria.
Depreciation is allowable for assets if the assessee is the owner and uses the assets for business purposes, irrespective of whether the transaction is hire purchase or leasing.
This case discusses the allowability of depreciation on leased assets in finance leases, a matter that has been addressed by the Supreme Court in ICDS Ltd vs CIT.
