Muthu Aravind (Article) (188 Points)
27 June 2008Plzzzz....Guide me.....Whether Hire charges of machinery and Equipments for the purpose of construction should be capitalized or not? 
Amit Bajaj
(Employee)
(269 Points)
Replied 27 June 2008
It has to be, since it is a direct cost, however, what type of construction you are talking about, is it installaition of macinery or construction of facility???
Muthu Aravind
(Article)
(188 Points)
Replied 27 June 2008
it is for construction purpose..........................
Raj Patni
(Debt Snydication/ Project Finance)
(29 Points)
Replied 27 June 2008
it has to be capitalized
because as per AS 10 any expenditure which is related to assets to complte it should be capitalized
I'm into transport business and i arrenge vehicles to companies some times, if my own vehicles are not sufficient i hire vehicles from different parties. now the question is at what rates TDS to be deducted on vehicles taken on hire from others for particular works i.e., lifting of goods from ship to stock yard and from stock yard to customer place. and all these payments are being made on load basis and tonnage basis and also based on distance to cover. because my auditor and tax depatment have suggested different sections i.e., Sec- 194C and Sec-194I respectively. please clarify my doubt.
CA Ravish Trivedi
(The Possibilities are Infinite...)
(772 Points)
Replied 30 August 2008
It has to be capitalized only before the start of commercial production in case factory building. ther after it will be revenue expense.
Shubhankar Limaye
(B.Com.)
(174 Points)
Replied 30 August 2008
Dear Mr. Srinivasarao,
Section 194C refers to deduction of tax at source in respect of amount paid to contractors whereas section 194I is related to deduction of tax at source in respect of rent.
In your case applicability of the sections should be judged as follows
1. If you hire vehicles and use your own staff to run them, load and unload the carriage then it would be a case where you have taken vehicles on RENT and section 194I would apply.
OR
2. If you hire vehicles and the labour required to run them as well as to load and unload the carriage is also supplied by the parties from whom you hired the vehicles, then it would be treated as a contract (more specifically a sub-contract) and provisions of section 194C would apply.
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
CAclubindia
