Tax Consultation (US and India)
2970 Points
Joined September 2011
"Painting of walls and ceiling as contended by them will help to maintain and improve the life of the building from exterior wear and tear."
Most buildings do have expected life span and if it is evident that painting it can INCREASE the life span then in books of accounts you should capitalize
Since its a rented premises management should hold opinion (if possible) that because of rennovation future economic benefits are expected and that way they could take all the expense to the cost of building
For eg. more customers are expected due to rennovation, and depending upon the facts of the case expense may or may not be capitalized
If building is used like warehouse then more money can be expected from customer as now rennovated so less chances of damage to goods lying in warehouse
Alternatively or in combination the management may hold opinion that painting WILL EXTEND the life span of the building, there are some paints which do extend the life for eg Neosilica 21C is claimed to have capability of extending life span or other using other products providing high grime resistance etc which WILL extend the life
First time rennovation is added in cost but time period in this case is substantially long, this point needs consideration
IF for maintaining the life, economic future benefits of the property then its usually considered as revenue but if future economic benefits are expected then it can be capitalized.
For income tax purpose this expense or any other expense it shall be treated as revenue ONLY whether it brings fututre economic benefits or not
Do not want to bring in the concept of deffered revenue exp. ( "expenses is expected to be realised over a period of time.")