Banks Cannot Enter Into Operational Leases: ITAT Mumbai

Banks undertaking equipment leasing departmentally should follow prudential accounting system and only the interest charge component should be recognized as income and the recovery of cost of asset should be carried to balance sheet on the form of provision of depreciation. Therefore under the circular the transaction of equipment lease is treated at par with the loan transaction and accordingly only the interest component of the receipt is recognized as income. Since it is not permitted to recognize the entire receipt being lease rentals as income the assessee

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