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MNC Ltd is taking a high precision FANUC CNC lathe on a lease for a period of three years, w.e.f. 1 st April 2021, as

MNC Ltd is taking a high precision FANUC CNC lathe on a lease for a period of three years, w.e.f. 1st April 2021, as per the following details: Cost of the machine is Rs 8.90 lakhs. MNCs cost of funds is 12% p.a.

Though the machine can work for many years, it is estimated that high precision jobs can only be produced for four years. Lease rentals of Rs 3 lakhs p.a. payable in advance i.e. on 1st April 2021, 2022 & 2022. How is this lease to be classified as per the accounting regulations?

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