does renovation cost are capital expenditure ??
Does renovation cost are capital expenditure ??
Ks (Ac) (138 Points)
13 June 2022
14 Replies
prasad Nilugal
( GST Practitioner & Accounts )
(14803 Points)
Replied 13 June 2022
Revenue Expenditure .........
CA Rashmi Gandhi
(Chartered Accountant)
(86323 Points)
Replied 13 June 2022
Same is capital in nature.
prasad Nilugal
( GST Practitioner & Accounts )
(14803 Points)
Replied 13 June 2022
Normally ,Whatever Expenditure we incurred towards Aseet before that Aseet put to an use , will be treated as capital expenditure .
CA Rashmi Gandhi
(Chartered Accountant)
(86323 Points)
Replied 13 June 2022
Yes but assets which will last for more than one year is also capital expenses. here renovation is not for one particular year, so same is required to be capitalised.
prasad Nilugal
( GST Practitioner & Accounts )
(14803 Points)
Replied 13 June 2022
But Accounting Standards 10 (AS10) , talks only about " expenditure we incurred up to Asset put to an use " will be Capitalise.
CA Rashmi Gandhi
(Chartered Accountant)
(86323 Points)
Replied 13 June 2022
As per AS 10, the cost of property, plant and equipment of a business entity may include the:
- initial cost to acquire or construct an item of property, plant and equipment
- Subsequent costs of adding, replacing or servicing the property, plant and equipment so acquired
prasad Nilugal
( GST Practitioner & Accounts )
(14803 Points)
Replied 13 June 2022
Some of the Case law .
1) Expenses for Renovation and Redecoration of Hotel Rooms , Constitute Revenue Expenditure - Honorable Madras High- Court in case of Pandian Hotels .
2) Repair or Renovation expenditure on Make up rooms is revenue expenditure , Maharashtra Film culture Development Corporation Vs JCIT - Honorable High court judgement
some more case laws wherein honorable court has decided as Renovation expenditure is Revenue in nature .
prasad Nilugal
( GST Practitioner & Accounts )
(14803 Points)
Replied 13 June 2022
In my opinion , Renovation Expenditure may be Capital Expenditure , however in Certain cases it may not if you refer above case laws .
CA Rashmi Gandhi
(Chartered Accountant)
(86323 Points)
Replied 13 June 2022
Yes same thing I want to say, depending on nature it may be capitalised or revenue. But generally building renovation is considered as capital expenses
prasad Nilugal
( GST Practitioner & Accounts )
(14803 Points)
Replied 13 June 2022
Respected Madam , but in query it is not clear for what purpose they have incurred Renovation Expenditure .
CA Rashmi Gandhi
(Chartered Accountant)
(86323 Points)
Replied 13 June 2022
Agreed with you, I just assumed it. We both are correct on our points.
CA Rashmi Gandhi
(Chartered Accountant)
(86323 Points)
Replied 13 June 2022
Quantum of transction and period of use
sabyasachi mukherjee
(27579 Points)
Replied 14 June 2022
The quantum of expenditure is not pertinent. It is necessary whether the expenditure increases the useful life of the asset and by how much. Different cases are there in various court of law citing
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