My client has recently started a consultancy service and took a building on rent .He incured nearly Rs.1 lakh for improvements of the said building like ceiling,construction and partition of walls etc.How should this be accounted? Wheather he can capitalize it or treat the same as expense?
10 Replies
CA Mohit Kumar
(accounts,taxation)
(855 Points)
Replied 28 November 2015
Shown as an expense Or capaitalise it is your choice one out of two
Sachin
(Student)
(42 Points)
Replied 28 November 2015
Sir, How can he capitalize this amount when the building is not belongs to him? Since he just commenced his business its a preliminary expense.So write off entire expense is justifiable ?
Is there any standard or guidance note on the above mentioned situation?
CA Raj Doshi
(Practising CA)
(8924 Points)
Replied 29 November 2015
If your expenditure fulfills the asset recognition criteria then capitalise the same. In my opinion it fails to satisfy asset recognition criteria. Hence charge to the profit and loss. Asset recognition criteria is mentioned in accounting standard.
CA Raj Doshi
(Practising CA)
(8924 Points)
Replied 29 November 2015
There is no restriction on capitalising expenditure even if it is incurred on rental premises. Only the Asset recognition criteria must be met for capitalising expenditure.
sahil
(final)
(130 Points)
Replied 29 November 2015
Apply concept of deemed building and take depreciation on it.... it is allowable in income tax act
CA Mohit Kumar
(accounts,taxation)
(855 Points)
Replied 29 November 2015
The answer of question depend on full fact of issue like
status of assesse
date of com of bus
date of incorp of bus
intention of holding property
whether lanlord reimburse your exp or not etc,.,,,,,
CA Vivekanand Pote
(Service)
(356 Points)
Replied 29 November 2015
Can be capitalised as leasehold improvements.
CA Vivekanand Pote
(Service)
(356 Points)
Replied 29 November 2015
Can be capitalised as leasehold improvements.
CA Prateek Garg
(CA in Practice)
(1447 Points)
Replied 29 November 2015
Capitalize the expenditure if it is of capital nature notwithstanding that building is rented and not owned.
Rakesh
(Account Executive)
(26 Points)
Replied 29 November 2015
Can be capitalized as leasehold improvements and expense it off according to the remaining rental period.
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