Celebrate Freedom with 20% OFF on CAclubindia Pro Subscription. Use Code: FREEDOM20

Cenvat reduced from asset value after capitalisation

Stat Audit 557 views 1 replies

SUNILKUMAR WADHWANI

Chartered Accountant

320 Points Joined May 2012

I want confirm whether the below treatment is in line with the AS-10 & other AS.

Company capitalized factory building of Rs. 2 Crore on 31/03/2013 , afterwards on 30 Aug 2014 company received CENVAT credit of Rs. 4 lacs on the labour payments already added to the cost of asset. Now whether to treat this credit as a reduction from asset vaule or as other income. If we treat it as reduction from assets value then it means depreciation of 31-03-2013 was wrong.

thanks in advance

Replies (1)

Rajagopalakrishnan R

PARTNER

1422 Points Joined May 2010

The question is how the existence of cenvat credit was not known while finalising 2013. If it was a genuine error in estimates then you can rework the depreciation for 2013 this year and treat the diiference as a prior period item in any case cenvat credit has to be reduced from cost of asset