capitalisation of expenditure

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Ravikumar R C (Querist)

04 February 2008 Dear all
"Expenditure incurred on construction of additional floor on rented premise"
how do i account this expenditure in the books of account?

Regards

Ravikumar r c
ravikumarrc@gmail.com

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

04 February 2008 What are your rental terms?
How did you construct additional floor in a building that does not belong to you?

Ravikumar R C

Ravikumar R C (Querist)

04 February 2008 Dear sir
Rental term says what ever the expenditure incurred to this building it can not be claim from the owner or cannot be adjusted from the rent.
Why i should not construct with my own risk?

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

05 February 2008 If as a lessee you costruct a floor without that being permissible or under the terms of lease, it becomes a costruction cost at your risk. You can account it in any manner you like if it is the 'account' of an individual.

This will not, however, qualify as expenditure to be claimed in your tax reurn, against income from any source.

If you are a company, then in addition to the disallowance of claim as expenditure in tax return, you will also have to write it off as intangible item if the lease doesn't permit you and therefore enduring benefit is not there

CA. Kirti S. Ganatra

CA. Kirti S. Ganatra (Expert)

26 February 2008 It can be claimed as expenditure assuming that premises is used for business. Onus is on you to prove that additional floor is for business baneficial.

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