Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Painting Expenses of Rs.2,00,000/- to Rented Office

Sidhardh (Sr. Manager - Accounts) (178 Points)

27 May 2011

Hai,

I am working in a Private Limited Company. The company is engaged in Real Estate Business. Our Company has taken an office for Rent on 5 year contract. The company incurred amount of 2Lacs towards painting for office. For Interior Decorations it is planning with 4Lacs.

Can anybody help me by providing under which head these expenses to be accounted and what is the ledger group and accounting entry?

Thanks in Advance..

Reply
Follow
Share

5 Replies

Harpreet (* * * * * *) (1670 Points)
Replied 27 May 2011

Either you can book the same under Repair & Maintainance or Office Maintainance Charges. Dont forget to deduct TDS also (Contractor 194C).

1 Like

CA. Rashi Goyal (Chartered Accountant) (512 Points)
Replied 30 June 2011

In this case the amount is in nature of capital expenditure as per section 30 of income Tax Act, and it should be capitalised and depreciation can be claimed over the period the office is taken on lease. Hen ce 6 lakhs can be capitalised and depreciation could be claimed.

X (student) (25 Points)
Replied 01 July 2011

If the expenditure on painting has been done for the first time , i.e making the asset usable then it is capital expenditure . Otherwise it can be treated as deffered revenue expenditure

Heavy expenditure on repairs to property should be treated as deffered revenue expense

source:

https://tinyurl.com/3es2b8v

but since this premises is not yours the expenditure can be claimed as solely for gaining business advantage and hence you can also take it to the revenue (according to the decision in CIT v. Hede Consultancy Pvt. Ltd. )

SAME GOES FOR INTERIOR DECORATION EXPENSE

In the previous year relevant to the A.Y. 1988-89, the assessee company had taken a godown on lease. It spent Rs.9,20,436/- for converting the godown into office by renovating it. Expenditure was incurred on interior decoration, replacement of floor with marble, plastering of walls and construction of bathrooms and W.C., etc. The assessee claimed deduction of Rs.9,20,436/- as revenue expenditure. The AO disallowed the claim treating it as capital expenditure. The Tribunal allowed the assessee’s claim.

On appeal, the Bombay High Court confirmed the decision of the Tribunal and held as under :

"Since the assets created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern business premises at a low rent, thus saving considerable revenue expenditure for a considerably long period, the Tribunal was perfectly justified in coming to the conclusion that the expenditure should be looked upon as revenue expenditure."