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of <h1>New Guidelines Clarify Depreciation Allowance for Finance Leases Under Income-tax Act; Lessee Capitalization Not Affected.</h1> The circular addresses the impact of new accounting standards on the allowability of depreciation in finance lease agreements under the Income-tax Act. It clarifies that the asset's owner, as determined by the lease contract, is entitled to depreciation if used in business. The Central Board of Direct Taxes has provided guidelines for investigating cases where assets might be non-existent or involved in sale and lease-back transactions. The new accounting standards requiring asset capitalization by lessees do not affect the depreciation allowance under the Income-tax Act. The circular instructs tax authorities to inform relevant parties of these guidelines.
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