08 July 2012
Sir/ Madam, My query is, In case where the condition is that, the control & ownership of electrical lines including cost of transformer & poles are to be transferred to the Electricity Board of the state after one year of laying of electrical lines, whether the expenditure on laying of electrical cables including cost of transformer & poles can be treated as Fixed Asset or only the Capital Expenditure? And Please let me know the tax treatment of the same. As I am of the view that,since after one the ownership & control will not with the entity incurring expenses, the same may be treated as capital expenditure for accounting purposes and can be written off 1/5th each year for tax purposes. Please help me to resolve the issue. Thanking You,
22 July 2012
In my opinion the ownership is not transferred but the end user is transferred. Suppose after one year you want to shut down and withdraw the connection then can your transformer be owned by the Electricity Board? The cost of the drawing of line and conversion of HT to LT is to be born by you and is to be accounted as assets and depreciation is to be claimed.
CAclubindia
