capital or revenue expenditure

This query is : Open

CA Amit K. Ganar (Querist)
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17 September 2009 Dear All,

One of my client (Individual) had paid for installation of electricity transformers, ownership of which was transfer to mseb immigiatly. Now the subject matter is that, whether is it treated as capital or revenue expenditure?

If it is treated as capital expenditure at what rate depreciation is to be charged?

Ratan Sharma

Ratan Sharma (Expert)
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17 September 2009 It is a capital expenditure and not the revenue expenditure. The transformers has been transferred to the mseb therefore there is no asset on which depreciation can be provided.
The transformers must have been installed for running some machinery. This capital expenditure is to be debited to plant and machinery account for which the transformers were required to be installed. Claim the depreciation accordingly on the increased cost of plant and machinery.

Ankur Garg

Ankur Garg (Expert)
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17 September 2009 Agree.

It is a capital expenditure.

CA Devanshi Gandhi (Ajani)

CA Devanshi Gandhi (Ajani) (Expert)
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17 September 2009 agree

Rajeev

Rajeev (Expert)
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17 September 2009 i think its a revenue expenditure , how can u claim depreciation when ownership of asset is not vested in you , treating the expense as revenue would be correct i believe

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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18 September 2009 It seems that the ownership of the assets has been transferred and the same is not reversible. As such, the expense is revenue in nature.

CA Amit K. Ganar

CA Amit K. Ganar (Querist)
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19 September 2009 To all who agree to Ratan Sharma

My claim is that the expenditure you capitalised to plant & machinary is only which is incurred to bring machine in working condition (installation charges, check up charges, etc). Unit was already running thats why query arises.

Can Depreciation be claimes as it is asset of which assessee does not have ownership.

Shall anyone give me case reference please?

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