Fixed Assets

This query is : Resolved

patel ishwarbhai harajibhai (Querist)
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10 April 2009 Pl. give legal opinion for my confusion.

We are working in co-op. dairy and we purchase cans for milk receiving from village level dairy of Rs. 2500/- per can.

So, we can above items treat as capital assets or revenue exp.

Pl. give me legal advise.

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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10 April 2009 There are three methods of accounting the transaction.

One method is since the value of each item is less ie 2500 you can directly write it off as expenditure.

Second method is since it will be used for 2 or 3 years, you can charge the regular rate of depreciation.

Third method is like stock method. Opening number of cans + purchases - closing cans the difference will be treated as expenditure for the year.

Depending on the size of the unit and administration possibilities you have to choose the depreciation method.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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10 April 2009 1st Method is not allowable as per income tax act.
As per Income Tax act they are capital assets to be depreciated at 15%(Machinery) in block of assets if their useful is more than 1 year.
As per your governing statute they should be treated as revenue or capital expenditure depending whether their expexted use is beyond 1 accounting period or not.