Valuation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 July 2013 A builder plans to asset(building) of Value Rs 50 lakhs(market value).
The people residing in the building does not accept to vacate for which the builder pays Rs 20 lakhs as settlement.

How should Rs 20 lakhs be accounted for in the books? What kind of costs are they?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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06 July 2013 Rs 20 lakhs should be added as cost of acquasition.

Querist : Anonymous

Querist : Anonymous (Querist)

07 July 2013 How can the cost of Rs 20 lakhs be added to cost of asset?
As per AS 10, we need to add the cost which is directly attributable to the cost of asset. This settlement payment is not direct right.
Pls clarify.

CA SUMiT PATWARi

CA SUMiT PATWARi (Expert)
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07 July 2013 This payment is made to establish your ownership right and to gain possession over the property.
Such a payment is a capital outflow and hence should be added to the cost of acquisition.

Querist : Anonymous

Querist : Anonymous (Querist)

07 July 2013 Being practical, When the actual market value of the building is Rs 50 lakhs and buying from this buyer makes it Rs 70 lakhs, will the customer be willing to buy?

Will it affect the arms length?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 July 2013 Without making payment of Rs.20 lakhs can the person get the possession its near to direct exp for the buyer take it from practical view.

Querist : Anonymous

Querist : Anonymous (Querist)

07 July 2013 okay . Thanks a lot