capialisation and applicable depreciation

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shweta bombe (Querist)
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05 August 2010 This is regarding the material purchased by our company and will be used for construction at site for our project.We are in construction business.

The material purchased is from ' doka , The formwork Experts ' consisting wall systems, out side walls , beams , slabs, scaffolders , plates , rods,
clamps etc. of metal . In the construction business for centering , slabs and concreting the pillars wooden planks and metal sheets are used and the ' doka ' is a substitute to the same wooden scaffoldings , planks and metal sheets.

The cost of this material is approximately Rs. 70.00 lakhs. The life of the same is based on number of usage i.e. can be used for 4 times. Hence this material will be used 4 times in the same project.

We are of the opinion that instead capitalising the expenditure , the same should be charged to expense and differed for 4 years .

Please let us have your opinion about :
a ) Capitalised as Fixed Assets or Expense Out
b ) If capitalised - Applicable Rate of depreciation as per Company Act and Income Tax act.

Parveen Bansal

Parveen Bansal (Expert)
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06 August 2010 In case the 4 times usage is spread over more than 1 financial year, you can capitalize the cost. Depreciation on SLM method is 25%. You are permitted to charge depreciation rate higher than the Schedule XIV rate

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