Capitalisation of salary cost

In my opinion, it cant be capitalised as it has been incurred for obtaining a contract and not for project development. The two terms are very different technically and obtaining contracts is a part of regular business fuctioning.

Regards

CA Shivani Mittal

Shivani & Associates

I agree with Miss Shivani,

As the cost of such employee was not for developing any asset rather it is of a revenue nature so it cannot be capitalise. The company's source of revenue is software development therefore the expenses shall be treated as a revenue expense. It will be better as you will be getting a loss to set off with the next years business profit.

Thanks your your reply. But the problem is transfer pricing is applicable to the company and the revenue in the current year is only from parent company. So showing losses will be a problem.