AS-10 Query

AS 473 views 1 replies

In AS-10 it has been clearly written that PRIOR TO COMMERCIAL PRODUCTION COST includes (i)Expenditure incurred on start up and commissioning of project (ii)Expenditure incurred on test runs and experimental production.

These are capitalised.

So my first question is1.What is commissioning of project?

And my second question is 2.Suppose i have purchased a machinery costing Rs.45 lacs.,20% of the cost net of CENVAT credit is the subsidy component to be realised from a state gov for establishing industry in the backward area. The cost of Rs.45 lacs includes Excise Rs.5 lacs aginst which CENVAT credit can be claimed. Now If I have incurred an expenditure of Rs.25,000 for expenditure on experimental production then it will be included in the historical cost(4500000-500000-800000+25000=32,25,000).Now if in this particular case if the experimental production which i had done of Rs.25,000 is sold at Rs.22,000.So should i less it from 32,25,000 or not? And if i have sold that experimental production in Rs.32,000 then should i less it from 32,25,000 or not?

Replies (1)

For your 2nd Question:

Actually the capitalised amount 32,25k must not get changed irrespective of the fact you sell the experimented production or not.

If you sell those production subsequently, then it is like normal sale and so pass sale entry for Rs.22,000 or Rs.32,000 respectively with related tax adjustments. 


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