Accounts

the expenses can be taken as prio period exp and it can not be capitalised

Expenses incurred on demolishing the building has to be expended in the year of incurring the expenditure itself. If you want to capitalise you need to answer the question "does demolition lead to formation of a new asset or improve the utility of the asset" the answer being no you have to expend it .

demolisition exp. should be captilised along with new construction cost.

reason/logic is that without demolisition new construction is not possible hence this activity is part of new construction activity....

under income tax dep. allowable.

On this issue a case law also available in income tax act.

pravin is absolutely right