CAPITALISTION OF BUILDING

[PANKAJ GUPTA]

Dear Sir,

Our unit (manufacturing Company) is under construction on newly land purchased and we have constructed the substantial part (70 percent ) of Building and obtained Occupancy Certificate from concerned department for this part of area in F.Y ended 31.03.2014. Now, our balance area is under construction and this time we have not installed any plant & machinery and planning to purchase machines in current F.Y. 2014-15.

We have incurred many expenses in F.Y. 2013-14 and transferred to preliminary expenses.

We want to shown our Building construction cost in Capital work in process in B. sheet as at 31.03.14, since we have to capitalized preliminary expenses in Plant & Mach. and Building at the time of Commencement of production and our building to be fully completed till time.

Is this mandatory to capitalized Building cost in B. sheet as at 31.03.14 because we have taken Occupancy certificate for that part or we can differed this for next F.Y.

Please give suitable reply as per latest changes in depreciation rules in company act.

Thanks & Regards

Pankaj Gupta

Faridabad

M-09212401641

AI Summary

Manufacturing Firm Must Capitalize Building Costs Once Ready for Use, Not Just on Occupancy Certificate Basis A manufacturing company has partially completed its building construction, obtaining an occupancy certificate for 70% of the structure by the fiscal year ending March 31, 2014. The remaining construction is ongoing, and the company plans to purchase machinery in the fiscal year 2014-15. They have categorized expenses from 2013-14 as preliminary expenses and wish to list the building cost as capital work in progress on the balance sheet. They seek advice on whether it's mandatory to capitalize the building cost due to the occupancy certificate. The response clarifies that preliminary expenses cannot be carried forward per AS-26, and the building should be capitalized when ready for use.