co. paid huge sum to demolish building. new one be contructed on the same site. can demolition exp. be capitalised with new bal. b\d ?????? i need ans with explnation
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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 .
Demolition expenses cant be capitalized due to extent of no new formation of asset nor improvement in the efficiency of the asset.
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.
Demolishing expenses should not be included in New Building Construction Capitalizaction.
pravin is absolutely right
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