Disclosure of building constructed on land

Hi,

Could some one tell me the disclosure requirements regarding the building constructed over the leasehold land. Whether, building should be disclosed as leasehold improvement or will be included in buildings only.

Thanks

Replies (2)

explanation given in Section 32(1) of the Income-Tax Act is as follows:

Explanation 1.—Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee.

Hence as per the above you can show the building constructed as Buildings and also can claim depreciation ins respect of such buidlings.

Thanks Giridhar for sharing your view. However, my query here is in relation with the disclosure requirement under schedule VI vis-a-vis AS-6,19,10.

As per AS-19, assets taken on lease should be seperately disclosed from the assets owned. Further, depreciation rate should be same one, which company used to charge on self owned assets.

My concern is that in event of non renewal of lease by the lessor, property in building along with the land will transfer to the lessor and lessesee will not be having any right over the building. So considering this facts whether building should not be seperately disclosed under leasehold improvement in Notes to Accounts.

Whether there is any pronouncement from any statutory authority regarding this????

Thanks

 

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