Accounting treatment of stampduty in mergers

[RAJESH SANGHVI]

Company A is merged with Company B in 2017. The Maharashtra Stamp duty authorities have determined the Stamp duty (SD) of Rs. 1 cr on 16-3-21. Company B has gone in appeal in April 21 against this SD and matter is subjudice. Question is CAN Company B book this Rs. 1 cr as revenue expense in its P & L a/c for the FY 20-21 or 21-22 or its can be capitalised and if yes then against what Fixed assets and what about depreciation and rate of depr. Or no accounting treatment has to be passed and merely a note on Contingent liability (of Rs. 1 cr demand of SD) be passed in the audited accounts ?

AI Summary

Company B's Rs. 1 crore stamp duty: Revenue expense, capitalized, or contingent liability? Accounting guidance sought. Company B is involved in a merger with Company A, and the Maharashtra Stamp Duty authorities have assessed a stamp duty of Rs. 1 crore, determined on March 16, 2021. Company B has appealed this assessment, and the matter is currently sub judice. The query seeks guidance on whether Company B can record this Rs. 1 crore as a revenue expense in its Profit & Loss account for fiscal years 2020-21 or 2021-22, or if it should be capitalized against fixed assets, including considerations for depreciation. Alternatively, it questions if no accounting entry should be made, with only a note on contingent liability in the audited accounts.