Borewell expenses

We have fixed new Borewell at our Factory Premises.

We have paid Rs.77280 to Borewell Contractor and Rs.5000 to Water Diviner.

How should we account the same?? It should go under which head, Sundry Expenses or Current Assets.

Shall we get any Depreciation on this yearly?? If yes, how much % per year.

Is Borewell Contractor liable for any TDS Deduction??

Replies (3)
Quick Summary
Borewell expenses should be capitalized as plant and machinery and eligible for 15 percent depreciation. TDS under section 194C applies if payment exceeds threshold limits. Material and labor split does not avoid TDS if limits are crossed.

Hi Prasad according to me borewell expenses needs to be capitalised, it can be shown as plant (Borewell plant) as it can help in production activity & u can also claim Depreciation @ 15% on the same.

As far as TDS is concerned u should deduct TDS u/s 194C

Dear Gaurav,

 

Thank you very much for your reply and guidence.

In the Bill, he has charges Rs.65000 for Labour Job of digging Borewell.

Rs.10000 for Casing Pipe.

Rs.1000 as Batta for Workers for a day.

That's why we have not deducted TDS, since Rs.10000 is for material.

So less than Rs.75000 Labour Bill does not attract TDS.  Is it correct or not??

One more thing, For Rs.10000 material, they have not charged us any VAT amount.

Is that ok?? 

Hi Prasad Threshold limits are Rs 30000/- for a single payment i.e single bill OR aggreegate of Rs 75000 to that party in a financial year., since in ur case as it is Rs 65000/- i.e more than Rs 30000/- TDS needs to be deducted.

As far as VAT is concerned contractor might not be registered under VAT hence hv not charged vat so that will not be a issue.

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