depreciation

This query is : Resolved

Samir (Querist)
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22 April 2008 I have taken office on rental basis in which I will be conducting the renovation and expenses incurrent are as under. Please let me know which should be considered as revenue expenditure and which to be capital expenditure.

· New flooring expenses 50000/-
· Furniture expenses 100000/-
· Color expenses 25000/-

If they are considered as capital expenditure the under which head the from which date depreciation (As per companies act) should be calculated as expenses are incurred at various date till the office is finalized

MANAS ROUT

MANAS ROUT (Expert)
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22 April 2008 you have to capitalize the expenditure from the date when the assets ready to use or you have used for business purpose or acquired. Furniture you have to debited to furniture account and flooring and coloring expenditure if related to building you have to debited to building account and .

CA Shailesh +91 9393926464

CA Shailesh +91 9393926464 (Expert)
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23 April 2008 Flooring exp and coloring exp u can dr to Buildings and Furniture of course to Furniture A/c

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Samir

Samir (Querist)
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23 April 2008 I think we can treat as revenue expenditure as the office in on rent and no assets as created?

Hari Venkata Ramana

Hari Venkata Ramana (Expert)
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23 April 2008 I cannot agree with Biswabhusan and Shailesh views. For Capitalisation of expenditure and claiming of depreciation you should have ownership of the property otherwise You cannot. Since this is a lease property You may have to treat the same as revenue expediture only. If I am worng can u correct me.

prakash

prakash (Expert)
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23 April 2008 Mr.Hari as per act, Lease property also applicable for claiming depreciation in certain cases. the over all expenditure should be capitalised.

Samir

Samir (Querist)
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24 April 2008 As per the below judgement it is revenue expenditure

[2002] 258 ITR 380 (BOM.)

HIGH COURT OF BOMBAY

Commissioner of Income-tax

v.

Hede Consultancy (P.) Ltd.

V.C. DAGA AND P.V. HARDAS, JJ.

TAX APPEAL NO. 3 OF 2002

JUNE 10, 2002

prakash

prakash (Expert)
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26 April 2008 section 32 , Explanation 1 : Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee.

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