Construction of boundary wall on rented property

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2013 A boundary wall is constructed on rented property, involving expenditure of Rs. 10.00 Lacs. Can this expenditure be capitalised in books of accounts??

Dr. Rashid Mehmood, CPA, Ph.D

Dr. Rashid Mehmood, CPA, Ph.D (Expert)
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28 July 2013 yes, you can capitalize the same under leasehold improvements.

Querist : Anonymous

Querist : Anonymous (Querist)

30 July 2013 But the property is on "rent" under rent agreement, not leashold. Can this expenditure sill be capitalised??

Dr. Rashid Mehmood, CPA, Ph.D

Dr. Rashid Mehmood, CPA, Ph.D (Expert)
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30 July 2013 rented property means property under operating lease, you will not have ownership rights. for such expenditure there may be 2 scenarios:

1. you will spend money on boundary wall and will deduct your expenses from the rent payable to landlord. in such case you cannot capitalize the cost.

2. you will spend money on boundary wall and landlord will not pay you anything against this expense, in such case you can capitalise the expenses under "leasehold Improvements" dont be confused with the term lease it means rent.

hoping it will suffice your concerns.

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