08 September 2008
We buy boats . . Average life of the boats is 2 to 3 years. . We import that specially for sporting purpose . . Boats are not usefull after 6 months for any championship tournaments. . We can use that only for training purposes . . That too cannot be used for practising for tournamets. . We import every year . With concession of customs through yatching association of india . . We are a registered society Our bylaws silent about capitalization Why cannot i take buying of boats as revenue expenditure Depreciation rate prescribed by income tax department is not in logic Please somebody solve this with reference Whoever answers keep this as open query Also mention if there is any caselaw regarding this
08 September 2008
You are mentionong that the Boats have an average life of two to three years, but at the same time saying that the boats are not useful after six months. Are these statements not contradictoing?
Mpreover, there is nothing like holding some thing as capital or revenue. A thing which is a capital item may be revenue for some one else.
It is the nature of business that determines an item as capital or revenue.
Firstly you have to know the defination of capital expenditure and revenue expenditure.
Capital expenditures (CAPEX or capex) are expenditures creating future benefits.
Revenue Expenditure Outlay benefitting only the current year.This is lay man defination.
As you are saying boat average life is 2 to 3 years.So,according to the diffination boats is falling under the capital expenditure defination.
As you are saying boat is not usefull after 6 months and according to you after that its scrap ... so u need to give a documentary proof.. and you need to charge 100% depreciation but you cant use as a revenue expenditure.
Firstly you have to know the defination of capital expenditure and revenue expenditure.
Capital expenditures (CAPEX or capex) are expenditures creating future benefits.
Revenue Expenditure Outlay benefitting only the current year.This is lay man defination.
As you are saying boat average life is 2 to 3 years.So,according to the diffination boats is falling under the capital expenditure defination.
As you are saying boat is not usefull after 6 months and according to you after that its scrap ... so u need to give a documentary proof.. and you need to charge 100% depreciation but you cant use as a revenue expenditure.
15 November 2008
whether you capitalise or not it does not make any difference because for taxation of trust the amount spent on buying assets are taken part of 85% expenditure
CAclubindia
