One company purchased Land from Farmers for the Business. They have given jobs to Farmers on Selection/Skill basis. The Other farmers whet to Arbitrator for providing job or compension on not providing job. Now the company paying the compension to farmers who are not willing to do job.
How to account the lump sum compension paid. What will be the treatment in income tax.
The point to be noted here is that whether this cost can qualify as a directly attributable cost of bringing the asset to working condition for its intended use. Then this can be capitalised in the books. If not, then this has to be expensed off as administrative costs or general overhead.
Now I guess this is difficult to establish a nexus between the cost incurred for compensation and the usability of the land for the business purpose.
So may be we have to end up in booking this as an expense.
There should be divergent views on this. Other Experts' opinion are highly solicited here.
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