Respected Sir/Madam
The compny has recently just finished construction of a new unit and all expenses incured during construction has been debited to Pre-operative account and not P\L
While conductin audit of the company i came across an expense incurred for laying of electricity lines. The amount was paid to West Bengal State Electricity Board. I remember reading about a case law (Income Tax) where the court had ruled that since the ownership was not of the assessee (w.r.t. a transformer, the cost of which recovered from the assessee but ownership was of the electricity board) hence it would be construed as revenue expenditure.
My question is wether as per the Accounting Standards should we concider such expense to be capital or revenue in nature, the company does not have onwership of the said lines, but the economic benefits would be for the company itself, and it would be enjoyed over a period of years.
Thanking you
Tushar Singhania
CAclubindia
