capital or revenue expenditure
This query is : Open
CA Amit K. Ganar
(Querist)
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?
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
(Expert)
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.
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
(Expert)
17 September 2009
Agree.
It is a capital expenditure.
It is a capital expenditure.
17 September 2009
agree
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
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
(Querist)
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?
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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