30 May 2013
C.I Moulds are used in the manufacture of M S Ingots. The moulds have life of 4mths - 6 mths and than they are scrapped. In the Excise Laws, the moulds are capital items and CENVAT is accordingly available. I seek advice on the following issues: 1. Considering the above, is the mould a capital item or revenue expenses ? 2. If it is to be treated as capital item, what should be the depreciation charged in I.T Act as it has life of 6 mths approx.
Please advice preferably quoting ICAI Guidance note/ opinion (if any) and relavent case laws.
In the earlier year the unit has treated the same way you have suggested and in current year they are of opinion to transfer the moulds to FA and charge depreciation. I do not concur with this view.
I also understand that this would mean change in accounting policy.
I would appreciate if you can provide some light with reference to ICAI guidance/ opinions and other case laws to substantiate our view.
CAclubindia
