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Treating purchase of asset as an expense

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Mohan Kale

401 Points Posted on 16 November 2021

Can a business treat it's purchase of fixed asset (say a laptop) as an expense or fixed asset must be treated as fixed asset only? Whether assessees have right to do so? Which section of which Act or AS prohibits in clear terms from doing so?

Replies (2)

Quick Summary

This discussion explores whether a business can treat the purchase of a fixed asset, like a laptop, as an immediate expense. It clarifies that capital expenses, including fixed assets, are not directly deductible under Section 37(1) of the Income-tax Act. Instead, businesses can claim depreciation on eligible assets as per Section 32, with specific exclusions like goodwill and freehold land. All capital assets must be capitalised, not expensed, as per Accounting Standard 10.

JGM

Knowledge Sharer

443 Points Posted on 16 November 2021

Section 37(1) of the Income-tax Act does not allow dleduction of capital expense. Since fixed asset falls under capital expense, the same is not a deductible item. However, in terms of section 32, depreciation on such asset may be claimed. You need to check whether the asset is a depreciable asset or not (for eg., depreciation is not available on goodwill, freehold land etc.)