V. REDDY RAJESH KUMAR (TAX CONSULTANT) (55 Points)
23 July 2010Whether charges payable on letter of credit for purchase of new machinery is to be capitalized or not ?
Please mention the reasons according to relevant AS.
JITENDRA KUMAR DHINGRA
(Executive)
(93 Points)
Replied 23 July 2010
As per AS-10,that expenditure which is directly attributable to the purchase of assets shall be included in the cost of asset. Where the expenditure can be avoided by avoidance of such an event shall not be included in the cost of that asset.So where the expenditure on L/c made is directly related to purchase of machinery is included in the cost.Otherwise charged from P&l as finance charges.
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