Depriciation

[SWATANTRA GOEL]

1. Is a Lessee entitled to claim depreciation on the cost of building constructed by him for business-use in the space taken on long lease say on 9 years lease?

2. A Pvt Ltd company got land allotted for say 20 lacs, constructed a building costing 35 lacs, will it be entitled to claim depreciation on 55 lacs. I think yes because the total asset is now one.

[DR.MARIAPPAN GOVINDARAJAN]

1. You can claim depreciation;

2. For land there is no depreciation in my view. You can claim only on the cost of construction.

AI Summary

Depreciation on leasehold improvements: lessees may claim depreciation on constructed buildings, but not on land.
A lessee who constructs a building for business use on leased premises may claim depreciation on the constructed building as a capital asset; depreciation applies to the building and not to the land. When land is acquired and a building constructed, only the construction cost attributable to the building is depreciable; the land cost is non-depreciable and must be excluded from depreciation claims.