Assets or expense

374 views 4 replies

Rahul jain

LEARNING & TEACHING

435 Points Joined January 2014

hii frnds....

A Association made a pipe line for flowing out of poluted water of various industries. the pipe line cost is approx 3-4 cr.and the companies using the pipe line paid the amt. as per their quantity of poluted water.

one of my client company paid the 90 lac rs. under this.

No one can sold that pipe line as all comapany use this for flowing out of poluted water ..and all companies are giving that amt. as they are using the pipe line...

now what will be the treatment of that pipe line in companies book.

is this is a asset?? if yes than under what defination...

if no than can company claim the amt. as expenses and debit this in their account???

or any service tax is applicable???

plz give me ans...under proper rule and act.....

Replies (4)

CA and CMA Ravinder Singh

CA and CMA

853 Points Joined January 2010

refer to as-10 on fixed assets. i think it will not be considered as an asset as the co. doesnt have direct control over it. so it can be claimed as an expense.

Sumathy Sundararajan

CA Job

25 Points Joined February 2014

Hi,

Almost on the same lines, how do we treat the money spent on laying internet cables , in a leasehold property. Do we treat this as leasehold improvements and amortise over the period of lease? Advise

CA and CMA Ravinder Singh

CA and CMA

853 Points Joined January 2010

i think it depends whether the lease is operating or financial and the nature of cables. whether they are in the nature of replacement or first time installation...?

you should refer to as-19 for treatment of financial and operating lease in books and if it is in the nature of replacement then it will be expensed in the same year otherwise it will be capitalised.