The lease of land between developing authority and the builders cannot be considered or treated as a financial lease – New Okhla Industrial Development Authority Vs. Mr. Anand Sonbhadra (RP)- NCLAT New Delhi
NCLAT held that keeping in view the Indian Accounting Standards, what appears broadly is that when lease involves real estate (like land in present matter) with a fair value different from its carrying amount, the lease can be classified as a finance lease if the lease transfers ownership of the property to the lessee by the end of the lease term or there is bargain purchase option. The lease must transfer substantially all the risks and also rewards incidental to ownership of the asset.
