my client entered into agreement in FY 17-18 for construction and expense incurred which was capitalised now client abandoned the contract .
now can I transfer all capitalised amount to profit and loss account
please refer section or judgment too if possible
thank you
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Allowability of exp on contract assets abandoned
Replies (4)
Hi - just because project is abandoned does not mean that nature of expense should change from capital to revenue. also, your client would have started claiming depreciation. there are many case laws on abandoned projects including by SC which says that intent of expense is important rather than abandonment. not sure if accounting treatment would allow you to shift the expense to revenue. my suggestion is to keep claiming depreciation.
The entire cost incurred on assets has to be capitalized.
No depreciation claimed...no question of capitalization when assets abandoned...earlier it was shown as wip
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