Legal fee paid ?

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CA Sahil Singla.. (Querist)
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29 October 2012 Sir

Whether legal fees paid to protect the title of property be capitalised or expensed ?
Also, is there any Income Tax case law regarding the same ?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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29 October 2012 As per AS-10 "An item of fixed asset comprises its purchase price, including
import duties and other non-refundable taxes or levies and any directly
attributable cost of bringing the asset to itsworking condition for its intended
use".
So accordingly, if it is paid before acquring the property then will be attributed to the cost of the fixed assets and if not, then will be expensed out.
It is the accounting standard which is to be seen and income tax has nothing to do with the capitalisation of the item.

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CA Sahil Singla..

CA Sahil Singla.. (Querist)
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29 October 2012 Sir

The property in question was subject to dispute after it was purchased. So, the company paid legal fee after aquiring the same in order to protect the title.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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29 October 2012 Dear Mr. Sahil,
The property was in dispute before the aquring the assets then you have paid the legal fees to clear the dispute and to acquire the asset legally.
it will be capitalised to the cost of the assets.

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