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Part capitalisation of capital work in progress
Major Capital work which is inhouse developed by company taking services of its various internal department.
In such case asset is ready to use & also put to use but still work which was part of that scheme (say 10% in value) is pending & will be completed in future.
Questions:
(1) In such scenario, can company capitalize 90% of its total scheme in one financial year & claim depreciation? remaining 10% will be capitalized in next fy?? or
(2) must wait for scheme to be completed fully, then only capitalize & claim depreciation.??
Pls give reference for Accounting Standard or Guidance note or any other law.
Replies (1)
As per Section 32 of the Income Tax Act, depreciation shall be allowed only when the asset is put to use.
In this case, the Company can capitalise 90% of the total scheme in one FY and claim depreciation. The remaining 10 % can be shown as an addition to the asset and depreciation can be claimed on it from the next FY onwards.
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