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Prepaid expenses for housing project

Nityananda (proprietor) (24 Points)

03 November 2011

Hi,

I have purchased a reisedental plot as on 14 March 2008 by paying Rs.200000.00

Work starteted as on 5/04/2008 and 1st registration with granpanchayat as on 12/03/2009 after completion of 2nd floor by spending amount 1200000/-

and 2nd and final registration with grampanchayat as on 21/03/2010 by speending rs. 800000/-

and i'm staying there from 21/03/2010

total amount i have spend rs. 22,000,00/- (twenty two lak)

is all above amount atat i can take as my asset lor can you tell me how do i take these in my balancesheet and capital account.

Regards

Nityananda

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2 Replies

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 16 November 2011

You can take the whole of the amount of Rs.22lacs as an asset in your business.

you can show it in your business by way of capital contribution by posting the below entry.

Building A/c Dr 22lcas

to- Capital A/c 22lacs

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Z ( ) (2965 Points)
Replied 16 November 2011

Consider this also for tax purpose

The cost of acquisation will not be 22 lacs for tax purposes

Cost of land and building should be seggregated for the purpose of depriciation (as depriciation is only allowed on building) and the Cost of building will be reduced by the notional depriciation as if it was in use in business.

Say for eg. cost of land (inclusive of all taxes stamp value etc.) is 10,00,000 and construction of building (10,00,000 + other charges)

The notional depriciation will be charged till the year the asset is bought into business (afterwards depriciation on WDV will be allowed)

sec 43(1) explanation no.5

Where a building previously the property of the assessee is brought into use for the purpose of the business or profession after the 28th day of February, 1946,the actual cost to the assessee shall be the actual cost of the building to the assessee, as reduced by an amount equal to the depreciation calculated at the rate in force on that date that would have been allowable had the building been used for the aforesaid purposes since the date of its acquisition by the assessee.