TREATMENT OF EXPENDITURES

[S.C. WADHWA]

A company developed cyclinders for getting packing materials. These cyclinders costs us ₹ 70000/- These cyclinders are in possession of suppliers.

As and when will order supplier for packing materials, he will supply the packing materials made using  such cyclinders.

Query is

In which head we should book such cyclinders, keeping in mind that such cyclinders has not entered the premises of company i.e. same is in posession of supplier.

[DR.MARIAPPAN GOVINDARAJAN]

For which purpose the query is raised? For income tax purpose or central excise purpose?

[S.C. WADHWA]

Dear Experts,

For Income tax purpose.

Regards,

WADHWA

AI Summary

Treatment of expenditure on supplier held production tooling may affect income tax classification and accounting treatment. Issue: classification for income tax of expenditure on cylinders used by a supplier to produce packing materials while the cylinders remain in the supplier's possession. The core question is whether to capitalise or expense the cost and how ownership, control and nexus to production affect the accounting head when the asset does not enter the purchaser's premises but is used to make goods supplied to the purchaser on order.