Rahul Gupta (Asst Manager Controlling) (50 Points)
20 March 2015Can one time non-refundable water charges paid to water supply board for a connection be capitalised. It is not a new plant and is operational for last 25 yrs. Just laying of new additional pipes and charges for additional water intake.
Please give your feedback
CMA Poornima Madhava
(CMA)
(13112 Points)
Replied 20 March 2015
Capitalization generally depends on the future use and value. If the additional lines help to increase productivity in future and also if the value is significant, it is better to capitalize, provided the new lines are not replacement lines.
Rahul Gupta
(Asst Manager Controlling)
(50 Points)
Replied 23 March 2015
Thanks Poornima for the reply.
Yes, the amount is significant. Water will not directly increase the productivity.
The main issue as I assume is of ownership. The ownership of connection normally will be with water supply board. Can the capitalisation be questioned by auditors. Even I am in favour of capitalisation.
Could you please give clarification on ownership aspect
CMA Poornima Madhava
(CMA)
(13112 Points)
Replied 24 March 2015
It is paid to water supply board but on behalf of whom? You would be receiving receipt in your company name right? If so, it is your company's expenditure and hence I think it will be allowable
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