Purchase of un-productive cow will be capital or revenue

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 July 2017 Dear sirs,

Someone can please clarify that purchase of un-productive cow (unable to give milk and new babies) will be considered as capital or revenue expenditure as livestock is considered under capital expenditure.

As per our understanding revenue expenditure mean that any purchase whose utility is less than one year will be booked under revenue.

Regards

Amol S Joglekar

Amol S Joglekar (Expert)
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12 July 2017 can you please specify the nature of business?
also specify the purpose for which the cow is purchased?/////

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2017 Sir, it is a training centre who provide training to dairy farmers, who are members of village co-operative society. Through these cows veteinary doctors explains to trainee famers about reproductive system for artificial insemination. As per guidelines issued by MO Agriculture, GOI these animals should be replaced after six months.

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Amol S Joglekar

Amol S Joglekar (Expert)
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13 July 2017 GOI has put the condition to replace these animals after 6 months. Is there any condition by GOI regarding these animals that these animals are required to be replaced after 6 months but before xxxx years?...(say 2 years, 3 years etc.?)

Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2017 No. Sir, this is maximum period of six months. Regards

Amol S Joglekar

Amol S Joglekar (Expert)
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14 July 2017 Since it is used for training purpose, the question of being productive or unproductive is immaterial.
As per GOI it is to be disposed off within a period of 6 months.
By nature / characteristic of expenditure it is capital.

(Let me add one more example in your support....... for a training centre, purchase of projector, projector screen, black board etc are capital expenditure. But what about the color pens or markers or chalks? Colour pens, markers,chalks are definitely revenue expenditure......This is because the cost of these items as compared to revenue earned out of training is very low, negligible.....)
Your views please