Capitalisation of salary cost

Save Share

This query is : Open

Monil Shah (Querist)

18 May 2009 Ours is a manufactring company and is developing a project ie(Purchased land and started to develop a building for its own use). Can we capitalise salary cost of Our MD, CFO and Other corporate staff on some % basis to the new project as they are attending the sites for some work.

Whether the expenses to be capitalised are to be treated as development cost and AS-26 Intangible Assets would be applicable.

OR

Whether the capitalisation of preoperative expenses would be covered under AS-10 Fixed Assets.

PLease confirm.

Deepak Agrawal

Deepak Agrawal (Expert)

19 May 2009 Be sure that these top people contribute someting in making the building. If they visit just to see how work is going on, then it is not right to capitalise it. Keep proof / basis for the capitalizing as auditors will require it.

This will be capitalised under AS10.

Message likes : 1 times

Monil Shah

Monil Shah (Querist)

11 July 2009 We capitalised the salary cost.The salary cost capitalised is taken to Capital work in Progress in 08-09.

Due to capitalisation book profit have increased.Hence the tax as per income tax have also increase for 08-09.

Is there any provision in Income tax under which we can offer the salary cost capitalised for taxation in the 08-09 though capitalised.

For eg. If salary capitalised-20 Book profit after capitalisation-100.Can we take the salary cost as allowable(even though capitalised)for 08-09 and reduce the profit from the Rs.100 to Rs.80

We shall disallow the salary cost in the year of bringing the same under asset
head say in year 09-10 or 10-11.

Please let me know if there is any provsion under Income Tax Act.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now