Regarding presentation of Land and WIP building

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This query is : Resolved

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This discussion clarifies the accounting treatment for land purchased and subsequent building construction. The land remains on the balance sheet as is. Construction expenses, including borewell costs, should be capitalised and presented under 'Capital Work In Progress' until the building is completed.

CA ANANT KUMAR

CA ANANT KUMAR (Querist)
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15 September 2022 Assessee had purchased Land of Rs 5 lacs last financial year which is shown in the Balance Sheet as Land. During current financial year, assessee has started constructing building on that Land which is still WIP. My query is as below:
1) Will Land continue to be remained in the books as it as?
2) Will all the construction related expenses be capitalized and shown under which head in the balance sheet?

Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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15 September 2022 1 Land continue to be remained in the books as it as.
2 Show it as building.

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CA ANANT KUMAR

CA ANANT KUMAR (Querist)
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19 September 2022 Thanks for the response sir. Shouldn't we show the building as WIP because building is still in WIP? Also should borewell expenses be also capitalized? Please confirm.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 September 2022 Yes, show it as capital work in progress.
Yes, capitalise bore well expenses.

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