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Low value items

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)

27 June 2013

My client purchased a printer for rs 4500.generally we would write off in the same year as it does not exceed rs 5000.my doubt is wheather should it be written as revenue expenditure or first capitalise it and subsequently written off entire amount as depreciation in the year of purchase?

suggest me as which should be done in p&l a/c as per accounting? and as well as per income tax act 1956?

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5 Replies

sanjay singhal (CA) (987 Points)
Replied 27 June 2013

It is to be booked as revenue exp directly

CA Aditya (CA ) (527 Points)
Replied 27 June 2013

It will be treated as revenue exp..

1 Like

Basha (member) (44 Points)
Replied 27 June 2013

Hi nuli'

see there is two thing for sure firstly it is covered the defination of Fixed Asset as per AS 10 and it has one then one year life But at the same time it is less then Rs. 5,000 value and as per sch. XIV of companies Act it can be written of f 100% in the same year i.e. year of purchase.

As per best accounting practice firstly it should be capitalized and enter into FAR then it should be written off in the same year i.e. year of purchase of that asset.

The advantage of this practice is that it track the physical position of entity's fixed asset with the help of updated Fixed Asset Register (FAR). Otherwise it could not enter in FAR and unable to track it.

On the other hand , in taxation we have to capitlized these type of low value of asset even if the value of the asset is less than Rs. 5,000 and charge dep. according to specified rate under income tax Act.

Hope all experts agree with me !!!!!

2 Like

AKLESH KUMAR GOIT (article) (36 Points)
Replied 28 June 2013

agree with Basha

1 Like

Bhushan Jaju (Student) (970 Points)
Replied 28 June 2013

Originally posted by : Basha
	Hi nuli' see there is two thing for sure firstly it is covered the defination of Fixed Asset as per AS 10 and it has one then one year life But at the same time it is less then Rs. 5,000 value and as per sch. XIV of companies Act it can be written of f 100% in the same year i.e. year of purchase. As per best accounting practice firstly it should be capitalized and enter into FAR then it should be written off in the same year i.e. year of purchase of that asset. The advantage of this practice is that it track the physical position of entity's fixed asset with the help of updated Fixed Asset Register (FAR). Otherwise it could not enter in FAR and unable to track it. On the other hand , in taxation we have to capitlized these type of low value of asset even if the value of the asset is less than Rs. 5,000 and charge dep. according to specified rate under income tax Act. Hope all experts agree with me !!!!!