Exp incurred on furniture......

Can a pvt ltd co lawfully claim deduction of substantial amount of expenses (say 50 lacs) incurred on Furniture & Fixtures provided at the residence of its director? if allowed, under which section it will be allowed i.e. u/s 37 as a general deduction or it needs to be capitalized and then claim the benefit of depreciation?

 

Replies (1)

Dear Sir,

First whether any will be capitalised or not depends upon the nature of work done & the quatum is not the criteria to determine.

 Quantum of expenditure is not decisive to find whether repairs to machinery are capital or revenue - It cannot be taken as a matter of assumption that merely because a large sum is expended on repairs to machinery it must necessarily amount to reconstruction making the expenditure capital in nature - C.R. Corera & Bros. v. CIT

Second, the above expenditure cant be capitalized in the Books of the Company (since for company it is a one time expenditure which will not give any future benefit)

Now the main issue whether it can be claimed as deduction by the company or not - It may go unnoticed if remains burried under other expenses but once detected then AO will surely raise doubt if not directly then under 40A(2)(b) further I don't see any big purpose being achieved by doing this unless it involves any losses to be setoff since the amount of expenditure will form part of the salary & taxable in the hands of Director as a peruisite.

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