DOES FACTORY RENOVATION INCREASE VALUE OF ASSET(FACTORY)?

This query is : Resolved 

25 December 2010 Sir,

we made some major renovation work (No New Construction) including flooring work around Rs.10L.(It includes Labour charges)

My Question is,

do we book factory renovation charges in Factory Building(Asset) to increase its value or
book it in expense under factory renovation charges.

Thanks

manoj

26 December 2010 renovation without addition of new building only amounts to repair and hence can be booked under building maintenance ac

27 December 2010 If you construct more space(Building) it will treated as New Building Construction and increse the value of Assets(Factory), you can charge Depriciation on it, but if you renovate only old building book it as repair and maintenance A/c.


27 December 2010 Thank you to all of you,

Thanks

manoj

17 April 2011 This is a Thumb rule in case of Capitalising any Expense i.e. If Your Capacity is Increasing (Production of Goods or Services) / Increase in Shop Floor Squarefeet Area etc. to Produce Extra (i.e. In Addition to Old Capacity) only in these Cases you can Capitalise the Expenditure. Otherwise Book it in PnL A/c as Revenue Expense as Repair and Maintenance Cost.

-- CA Manish J. Agrawal

18 April 2011 Thank you Sir,

one more question arises:

We had Renovated our factory(not in use before) to Rent it for business purpose to someone; now we are collecting rent, as our income source.

now what will you suggest?

25 June 2011 Obviously, You are Recreating an Assets which is going to USe to Generate Income out of it You Should Capitalize the same.
It will Not be regarded as your business Income Beecause running that factory is your usual course of Business, while giving an building asset on rent Attracts Income from House Property.
CA SAP DISA DIRM Manish J. Agrawal



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