Bharti Airtel
1623 Points
Joined October 2007
I think the query is that for a bill of Rs 100+ST 12.36 in 2007-08, Rs 100 had been capitalized in 2007-08. Now, issue is whether to capitalize Rs 12.36, or take 50% Cenvat on that, or take 1000% Cenvat on that.
AS-10 allows us to avoid capitalizing taxes subsequently recoverable from the tax authorities(service tax credit definately is under that).
Both Section 32 of IT Act 1961 & Cenvat Credit Rules 2004 prohibit dual claim of depreciation & Cenvat Credit.
However(and this is the crux), there is no accounting or taxation bar on capitalizing Rs 100 and taking Cenvat credit of Rs 12.36
By the way, 50% Cenvat credit is only for EXCISE dutry on capital goods and never for service tax(even if it results into a capital asset-pl note the distinction b/w capital goods & capital assets).
CONCLUSION: Without any hassles, you can take 100% Cenvat credit in 2008-09 w/o changing ur accounting/tax records. Pass the entry as
Cenvat Credit Receivable A/c Dr...12.36
to Bank A/c.........................................12.36