Capital Expenditure

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CA. Neha Gupta (Querist)
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24 April 2009 Plz tell me exp incurred on advertisement for inviting tendors for supply of captial asset to be capitalised or to be treated as revenue expenditure. Plz also refer some relevant case law on this.

K V Subba Rao

K V Subba Rao (Expert)
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24 April 2009 Advertisement expenditure in the query,being in relation to acquisition of asset and not for generating income on its own, has to be capitalised

Similar view is taken for interest on capital borrowed for acquisiton of asset

CA. Neha Gupta

CA. Neha Gupta (Querist)
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25 April 2009 If ultimately, required no of tendors are not received and capital assets are not purchased, then what should be done? IN other case if new advertisement for tendor is given in next financial year, old cost can be added in capital asset cost or not? Plz tell in both situations if asset is purchased or if asset is not purchased?

K V Subba Rao

K V Subba Rao (Expert)
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27 April 2009 Initially the amount may be debited to Suspense Account. If asset is purchased in next FY, the amount may be capitalised on purchase.

If a decision is taken not to purchase capital asset, there appears to be no alternative except to debit amount to expenditure account in the FY in which decision is taken not to purchase capital asset.

If there is any better solution, I shall be happy to take note of

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