Non profit organisation - capital or revenue?

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CHEZHIYAN (Querist)

08 September 2008 We buy boats . . Average life of the boats is 2 to 3 years. . We import that specially for sporting purpose . .
Boats are not usefull after 6 months for any championship tournaments. .
We can use that only for training purposes . .
That too cannot be used for practising for tournamets. .
We import every year . With concession of customs through yatching association of india . .
We are a registered society
Our bylaws silent about capitalization
Why cannot i take buying of boats as revenue expenditure
Depreciation rate prescribed by income tax department is not in logic
Please somebody solve this with reference
Whoever answers keep this as open query

CA. Amit Daga

CA. Amit Daga (Expert)

09 September 2008 Dear Chezhiyan,

Firstly you have to know the defination of capital expenditure and revenue expenditure.

Capital expenditures (CAPEX or capex) are expenditures creating future benefits.

Revenue Expenditure Outlay benefitting only the current year.This is lay man defination.

As you are saying boat average life is 2 to 3 years.So,according to the diffination boats is falling under the capital expenditure defination.

As you are saying boat is not usefull after 6 months and according to you after that its scrap ... so u need to give a documentary proof.. and you need to charge 100% depreciation but you cant use as a revenue expenditure.

Hope you are satisfied with my answer

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