For Knowledge purpose:
A company or Businessman purchased Land. Whether it can be shown as Fixed Assets or Investment ??
Please suggest.
Also From Income taxpoint of view, please suggest tax implication as far as classification as above is concerned.
| Originally posted by : Hitesh Khanna | ||
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As per AS 10 , an item would be classified as Fixed asset if it has been purchased for the purpose of Earning Revenue.In case the Intention of the businessman is to Invest in land and sell it afterwards at a higher price - then it stands out as an Investment. |  |
I agree Hitesh.
As per my view, if the Fixed Asset (Land) is used to carry on the business and to earn revenue, it should form part of Fixed Assets.
On the other hand, If the intenetion is to generate additional income or extra income apart from main business and revenue, it may be classified as Investment.
And as far as Income Tax is concerned, I think there is no difference in treatment. If that land is sold, respective profit or loss shall be treated as Short term or long term Capital gain irrespective of Fixed Asset or Investment.
Other views are also welcome.
I give 3 situations - LAND:
Situation-1: Land is used for Plant Development for Business.
Situation-2: Land was used for agriculture for addition income or given on rent which is different from main business.
Situation-3: Land used for nothing but just for Value appreciation in future.
Likewise for example BUILDING:
Situation-1: Building used for office work or for employees residential purpose.
Situation-2: Building given on rent for additional income
Situation-3: Building used for nothing just for value appreciation in future if any.
PLEASE SUGGEST PROPER TREATMENT.
CAclubindia
