Capitalisation of expenses in cost of fixed assets

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CA Rohit Rathor (Querist)
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24 September 2012 If a company taken a Premises( Building ) on operating lease and incurred a huge amount on office renovation and office renovation is completes in 6 months from date of taken Premises on lease.The permises is put to use after 6 months from the date of lease .so my question is we capialise cost of Rent along with Office renovation cost in value of fixed assets. Its Urgent

Amol S Joglekar

Amol S Joglekar (Expert)
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24 September 2012 Since the premises is taken on OPERATING LEASE, show rennovation cost separately. Under income tax, however, you can claim the full rennovation cost as revenue since premises is not owned by you. Under Accountancy, show it separately, do not club it with COST of RENT.

CS, Deepak Pratap Singh

CS, Deepak Pratap Singh (Expert)
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24 September 2012 Dear Friend, since the premises has been taken on operative lease and hence the right of possession has not been transferred to you at the end of lease period. So it is right to show the all expenditure as current expenditure and claim it through p/l rather capitalized it. Thanks and agreed with Joglekar sir

CA Rohit Rathor

CA Rohit Rathor (Querist)
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25 September 2012 sir ,As per Sec 30 of income tax act any heavy repairs done on leased premises by tenants than tenants should capitalise the cost of repairs and claim Depreciation on it.

Amol S Joglekar

Amol S Joglekar (Expert)
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25 September 2012 you have to take the call. When the expenditure is allowed as REVENUE, you can always claim as CAPITAL. The revenue authorities may not object to that. " Huge amount" seems to be quite significant and material in your case. Please take the call accordingly.

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