23 December 2009
Sir While checking purchases i have noticed that the company has purchased spares for a welding machine over a value of 10000 Rs. The servicing was also done for this machine by the same party for an amt of Rs 5000/- Quotation shows sale of spare and service of Welding Machine. As per this quataion the party has even charged Vat and Service Tax in the bill. The company acccounted it as a job wrk charge and deducted TDS on it. Now my question is firstly whether it should be treated as job work or it should be captalise since the machine forms part of PM. Wat should be the exact treatment. Pls help me so that i can report it.
27 December 2009
Hope your confusion is on the accounting treatment as revenue and capitalisation. The TDS & Service tax applicability doent have any ambiguity.
As per my understanding a particular maintenance should be capitalized if such repalcement/repair will increase the production capacity / usefull life of the machinery. Any other repair due to breakdown or routine maintenance should not be capitalised.
CAclubindia
