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Treating purchase of asset as an expense
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)
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.)
Any capital asset, irrespective whether it depreciate or not, needs to capitalized and cannot be expensed. Refer AS10 for more clarification.
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