HUF Queries

HUF

1. Yes

2.. Yes, but onus that the borrowing was for house property lies with the claimant

3. What is the nature of expenditure?

4. I do not think a running account will be closed prematurely. 

Ans. for No.3

As it appears from your query expense is in the nature of capital exp. beacause use of property is changed permanently and benefits will arise for whole of life i.e. it will be capitalized.

@ Mr. S. Srinivasaraghavan

This expense pertains to commercialization tax. And after paying this tax the property shall be converted from Residential to commercial nature permanently.

@ ALL. Thanks for the suggestions.

Ms.Bajpai,

From the question I am not able to make out  whether you want to treat that expenditure as Deferred Revenue (DR) expenditure or you are asking whether the IT people would treat it as DR expenditure.

However, the Income Tax  Act (IT Act) primafacie does not recognise a DR expenditure. It only recognises an expenditure as capex or revenue. If  an expenditure is recognised as capex by IT Act provisions, only depreciation is allowed. To treat an expenditure as capex, there has to be a recognisable capital asset comoing into existance on account of that expenditure. If not, but, the expenditure is incurred wholly for the business, then the expenditure could be classified as revenue only, no matter how you treat the expenditure in your books purely due to your accounting perception.