my client has incurred a cost of 178000+58000 rs towards AMC charges in the current year. whether it should be treated as revenue or capital expenditure..? please state with the reason. and also tell me that in last year the same was treated as fixed assets, than what will be the treatment of the same,.???? ans asap please
thanks in advance
kindly let us know you question in details specially assests on which these AMC charges is being incurred
TELL ME THE NATURE OF ASSETS OF WHICH THE AMC DONE.
ALSO TELL ME THE FOR WHAT PERIOD THEY CHARGED AMC. LIKE 1 YR OR MORE.
AMC charges are incurred annually and they are to be treated as revenue expence and not to be capitalised if in the previous year it is been capitalised adjust such capitalised amount against accumulated reserves
@ Tax Pandit : The AMC charges are related to an accounting software purchased by my client.
@ Hem @ nt g @ rg : The AMC charges are charged annually.
| Originally posted by : Himanshu | ||
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@ Tax Pandit : The AMC charges are related to an accounting software purchased by my client. |  |
hI HIMANSHU
any expenditure which is being incurred to maintain the existing assets would be treated as revenue expenditure hence charges to profit and loss account.
AS per AS 10 - Accounting for Fixed Assets
Subsequent expenditures related to an item of fixed asset should
be added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of
performance.
And the expenditure incurred not be regular nature.
So it is good to treate AMC as revenue nature not capital.
AMC Charges on software is a revenue Expenditure
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