My client has recently started a consultancy service and took a building on rent .He incured nearly Rs.1 lakh for improvements of the said building like ceiling,construction and partition of walls etc.How should this be accounted? Wheather he can capitalize it or treat the same as expense?
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Improvements to a rented building
Replies (10)
Shown as an expense Or capaitalise it is your choice one out of two
Sir, How can he capitalize this amount when the building is not belongs to him? Since he just commenced his business its a preliminary expense.So write off entire expense is justifiable ?
Is there any standard or guidance note on the above mentioned situation?
If your expenditure fulfills the asset recognition criteria then capitalise the same. In my opinion it fails to satisfy asset recognition criteria. Hence charge to the profit and loss. Asset recognition criteria is mentioned in accounting standard.
There is no restriction on capitalising expenditure even if it is incurred on rental premises. Only the Asset recognition criteria must be met for capitalising expenditure.
Apply concept of deemed building and take depreciation on it.... it is allowable in income tax act
The answer of question depend on full fact of issue like
status of assesse
date of com of bus
date of incorp of bus
intention of holding property
whether lanlord reimburse your exp or not etc,.,,,,,
Can be capitalised as leasehold improvements.
Can be capitalised as leasehold improvements.
Capitalize the expenditure if it is of capital nature notwithstanding that building is rented and not owned.
Can be capitalized as leasehold improvements and expense it off according to the remaining rental period.
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