dear
my company has paid sum Rs.21 lakh for one N G O for infrastructur of our industrial area road,can we capitalised this amount or not?
mail me on pandjaideep @ gmail.com
nidhi
(student)
(58 Points)
Replied 20 May 2010
for an expenditure to be treates as capital or Reveur u need to check d ownership status. If ownership of asset is not created then it has to be treated as revenue else capital exp.
CA Mallika Chaudhary
(CWA Final and CA)
(418 Points)
Replied 20 May 2010
Dear Nidhi,
Capital expenditure includes all payments made to acquire/extend/improve fixed assets....
no where is it written that the asset should be acquired for calling it a capital exp.
Kindly correct me if Im wrong
CA Mallika Chaudhary
(CWA Final and CA)
(418 Points)
Replied 20 May 2010
According to me, the amt paid to NGO should be capitalised because :-
1) it is a "one-time" payment
2) can be amortized year by year.
3) It is for development of road,
4) the Principle of MATERIALITY says that if an expenditure is quite heavy, then its burden need not be put on a year's profit. Hence, it may be capitalized and amortized over the years.
It is just like "DEFERRED REVENUE EXPENDITURE"...
nidhi
(student)
(58 Points)
Replied 20 May 2010
mallika u r right bt frm tax point of view such expenses incurred by assessee but not owned r treated as revenue exp.
For eg: construction of road as it shall b owned n maintained by Govt.
Frm accounting pnt any one time payment which carries any enduring benefit shall be treated as capital exp
Gopal G
(CA Final )
(44 Points)
Replied 21 May 2010
In the absence of ownership, any expenditure on property or rights cannot be considered as capital expenditure, since there is nothing to identify as asset. This expenditure can only be treated as revenue expenditure. However, if the benefit of this expenditure is expected to be continuing for future certain period or periods, the proportionate expenditure can be deferred as deferred revenue expenditure to be written of proportionately with expected future benefit over the period of time.
Analysis of 20 GST Notices (including 2 Appeals) and Practise on Drafting(with recording)
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
CAclubindia
